# GOLD ETFs?



## jargey3000 (Jan 25, 2011)

what are the "best" gold ETFs out there? any of them look attractive at all now?


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## dogcom (May 23, 2009)

XGD for gold producing companies.

CEF.A for bullion investment.

Both for Canadian investors.


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## james4beach (Nov 15, 2012)

I agree with the two dogcom mentioned. I hold CEF.A but keep in mind it also contains silver, which in recent years has dragged down the returns.

I'm also interested in *MNT* which are shares/receipts in the Royal Canadian Mint's gold reserves. My concern with MNT however is there are talks of the Mint getting privatized and I have no idea how that would affect the units. Any thoughts from others on this?

Note there is a big difference between gold miners and gold bullion. I personally think the better long term investment is bullion and I think CEF.A does look attractive. I bought shares throughout 2015.


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## mf4361 (Apr 11, 2015)

CGL.C hold gold bullion only and is not hedged. This is the one you want if you were to get into gold. At this point I don't think any commodity is attractive to put money in. But I might be wrong. Remember while buying gold ETF, you are buying physical golds. Not the managing company.

I don't think privatization of the Mint will affect the ownership of your gold.


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## Soils4Peace (Mar 14, 2010)

Two American domiciled ETFs of interest are GLD (MER 0.40%) and IAU (MER 0.25%). They are tied to the price of gold. They trade in USD.


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## james4beach (Nov 15, 2012)

Here is a list of the Canadian pure bullion funds traded on the TSX. Many of them trade with multiple ticker symbols, in both CAD and USD. For each, I've included the year it was founded and the current fund size in CAD.


 CEF.A (1961) $4,156 million
 GTU.UN (2003) $1,092 million
 PHY.U (2010) $1,798 million
 MNT (2011) $495 million
 CGL.C (2011) $62 million

The giants are CEF.A ($4 billion), GTU.UN ($1 billion), and Sprott's PHY.U (nearly $2 billion). The first two are run by the same people, the Spicer family. Sprott has been competing with the others for business by offering swapping of GTU.UN shares and also some harassment of CEF.A through frivolous lawsuits to gain voting rights. These top 3 are the big contenders and they are all well-run, high quality operations.

What makes these top 3 unique and particularly attractive are that the gold is allocated and segregated. This means the gold backing the shares are explicitly marked and separated. This is a huge safety and it's why these 3 funds have attracted all the money.

MNT is relatively recent, and is an offering from the Royal Canadian Mint. Shares are backed by gold in the vault, but they are unallocated meaning they are not specifically separated for the shares.

CGL.C is from iShares but it's so tiny that it almost doesn't matter. It's hard to have much confidence in such a small fund.


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## Moneytoo (Mar 26, 2014)

Soils4Peace said:


> Two American domiciled ETFs of interest are GLD (MER 0.40%) and IAU (MER 0.25%). They are tied to the price of gold. They trade in USD.


There's also IGT which is "a cross-listing of the iShares Gold Trust (IAU), that’s why it isn’t included on the iShares Canada site" (I read about it on the Canadian Couch Potato website out of all places: http://canadiancouchpotato.com/2011/07/25/ask-the-spud-ishares-gold-trust/ - and the only thing I don't like about it is low volume, but didn't have a problem selling some of it recently)


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## Soils4Peace (Mar 14, 2010)

I wonder how the operating costs of CEF.A/GTU.UN/PHY.U compare to IAU/IGT's 0.25% MER.

EDIT:
Here we are:

*CEF.A *is in the neighbourhood of 0.32% to 0.38%:
"Expenses as a percentage of the average of the month-end net assets (the “expense ratio”) for the year
ended October 31, 2015 were 0.38% compared to 0.32% for the year ended October 31, 2014. The
increase in the expense ratio was a direct result of costs incurred to address issues related to Class A
Shareholders’ Proceedings. If not for these costs, the expense ratio would have remained unchanged
at 0.32% for the year ended October 31, 2015."
http://www.centralfund.com/annualreport/CFOC 2015 AR 10 DEC 15 - FINAL.pdf

*GTU.UN:*
"For the twelve-month period ended September 30, 2015 the expense ratio was 0.97% compared to 0.36% for the twelve-month period ended September 30, 2014." 
http://www.gold-trust.com/MD&A/2015/CGT MDA Q3 30 SEPT 15.pdf

*PHY.U:* 0.45%-ish?
"Operating expenses for the year ended December 31, 2014 amounted to 0.13% of the average net assets during the year, compared to 0.07% for the same period in 2013.
...
The Trust pays the Manager, Sprott Asset Management LP, a monthly management fee equal to 1 /12 of 0.35% of the value of the net assets of the Trust (determined in accordance with the trust agreement), plus any applicable Canadian taxes."
http://sprottphysicalbullion.com/media/15768/phys-q4-2014.pdf


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## jargey3000 (Jan 25, 2011)

thank you people. good info.


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## james4beach (Nov 15, 2012)

For long term investment I think it's also important to consider the overall size of the fund and its ability to retain investors money over the years. Same goes for any ETF. Has management successfully kept the fund's size and grown the fund, or are investors fleeing and pulling money? If people are fleeing, it means they don't have much confidence in the management and that's very important.

This is especially useful to consider now since gold has been in a bear market in the last few years. You want to find a fund that has retained investors and which has not shrank due to investors pulling out money.

Here, there are warning signs from Sprott's fund (PHYS/PHY.U). The fund has lost 29% of its units since the 2012 high in gold popularity. I'm not talking price, but rather the number of outstanding shares. Investors pulled out 29% of their investment.

In comparison, MNT only shrank 7%.

CEF and GTU did not shrink at all. No investors pulled their money out by redeeming shares.

Based on that inability to keep the fund size during a bear market, I'm not very confident in Sprott's fund (and obviously neither are their investors). Add to that the smear campaign by Sprott against its competitors, and that worries me that Sprott is not managing their fund well and is engaging in smear campaigns out of desperation:

http://www.marketwired.com/press-re...er-condition-goldtrust-tsx-gtu.un-2070208.htm

Based on this (which I discovered last night) I'd reorder my list and my top ones for Canadian-domiciled, TSX investments:

1. CEF.A
2. GTU.UN
3. MNT
4. PHY.U


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## dogcom (May 23, 2009)

What is your opinion on GLD James? Do you think it has the actual amount of gold it says it does? Would you trust it over the long term?


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## james4beach (Nov 15, 2012)

dogcom, I am suspicious of GLD. The basis for my suspicion is the apparent efficiency with which they constantly move large amounts of physical gold into and out of the fund. You can see from the NAV history that they frequently claim there are days where the number of shares outstanding changes by 5 or 6 million shares.

Those are daily changes of around $600 million in the fund assets!

Now you tell me, how are they moving $600 million worth of gold bars on a daily basis into and out of segregated storage and maintaining confidence in which bars belong to whom? Compare to Central Fund of Canada and Central Gold Trust. These guys audit the segregated bars, including bringing in external auditors to view the vaults. They have a static number of bars that does not change for many years... they're literally just sitting in corners of the vault. Those kinds of bars can definitely be identifiable as allocated. That's believable.

GLD cannot possibly be maintaining a high standard of tracking of allocated/segregated bars when they claim to be moving so much gold in and out on a DAILY basis. My opinion is that GLD cannot maintain such proper allocation and segregation with the insanely high daily changes in "physical bars". So I'm skeptical, and I don't invest in them.

I also prefer a Canadian domiciled fund because I can sue their management and administrators, in case there's fraud.


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## dogcom (May 23, 2009)

Thanks for your thoughts and analysis on this James. I have heard that one of the reasons for setting up such a fund was so it could be sourced for physical down the road. Of course you can't say for sure so it is better to stay in Canada and buy the Central Fund of Canada.


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## james4beach (Nov 15, 2012)

dogcom, I am obviously biased as I have been a long term holder of CEF.

But there's something that can be said for the 55 year track record, and the fact that we know the owners are the Spicer family. Talk about transparency and personal accountability. Their family name is on the line, and they have made a solid, long term respectable business by managing CEF and now GTU. They have a huge incentive to maintain high quality management, and they have no incentive to engage in any kind of fraud.

I am a critical investor and I have studied every financial statement they have put out. Their financials are always clear and transparent and they don't play tricky games about the allocated gold storage. After 55 years of proven solid management, I've got to trust them.

The Spicer family has managed the Central Fund for longer than I have been alive. I can't argue with the excellent results.


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## dant (Jan 10, 2016)

I have both, CEF and GTU. I have no complaints about the integrity of their management. However, GTU has been quite a headache for me because of the Sprott people. As mentioned in this thread, Sprott has launched a hostile takeover for GTU. They have been at it since May 2015, and they have harassed us shareholders from the start. This is not what I had in mind when I bought the fund. Specifically, Sprott hired a firm that did some data mining (as opposed to gold mining) and obtained one of our unlisted telephone numbers. Then, they kept calling all times of the day and in the evening (yes, dinner time and after). Mind you, my shares are registered in the brokerage's street name, so that should have buffered me from the assaults. They also bombarded me with their junk mail, probably 5-10 kgs of it so far. Sprott has chiseled away, and there is a chance that they might get their hands on GTU very soon, January 15, 2016. If they do, I will bail out, as I don't do business with firms like that.

There is a lot you should know before buying a gold/silver ETF. Study the difference between closed-end funds like GTU/CEF and, say GLD or IAU. There is a peculiar artifact of the closed end funds like GTU and CEF which makes the NAV (net asset value) be below or above the price of the share. In a bull market, a share will cost more than its NAV. In a bear market (for gold/silver), the opposite is true. For example, CEF is currently trading at a significant discount to NAV (almost 10%). If you think that gold and silver will turn the corner and take off, then buying CEF now would be a good move from that standpoint. It is this discount that allowed Sprott to entice some of the shareholders into supporting the takeover.

If I had to do this again, I would stay away from all of the funds because people like Sprott can come along and turn a low maintenance investment into months of reading really convoluted legal documents with all kinds of disclaimers and countless paragraphs that inevitably advise you to seek help from your tax accountant. If you want to put money into gold, I would suggest buying coins from the Mint and storing them in a safe deposit box. That will cost a lot less than the management fees at a fund and you will sleep a lot better. The only reason I can see for buying an ETF would be if you are speculator and you have no long term interest in gold. Then, I would go with something that is very liquid. That's what ETFs like GLD are good for. BTW, I too am puzzled about the nature of their gold holdings. They never really explained the details in their prospectus. Anyway, the idea there is that you would be out of the fund long before the world finds out if they actually have the bars or just claims on some bars that are elsewhere.


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## zylon (Oct 27, 2010)

*Movement of GLD physical gold*

Far as I can tell, transferring gold in and out of GLD is a ledger entry at the end of the day.

From FAQ #18 here: http://www.spdrgoldshares.com/usa/faqs/#q4fa24b4ed8f8f

Quoting:
*How is gold transferred to or withdrawn from the Trust?*

The Bank of New York Mellon, as trustee of the Trust, or the Trustee, and the Custodian have entered into agreements which establish the Trust's unallocated account and the Trust's allocated account, which are described in more detail in FAQs 20 and 21. The Trust's unallocated account is principally used to facilitate the transfer of gold between Authorized Participants and the Trust in connection with the creation and redemption of Baskets (a "Basket" equals a block of 100,000 SPDR® Gold Shares). The Trust's unallocated account is also used to facilitate the transfer of gold from the Trust for the payment of the Trust's monthly expenses. The Trust's Authorized Participants are the only persons that may place orders to create and redeem Baskets and, in connection with the creation of Baskets, are solely responsible for the purchase and delivery of London Good Delivery Gold Bars (described in FAQ 24) to the Trust. All gold transferred in and out of, and held by, the Trust must comply with the rules, regulations, practices and customs of the LBMA. Except when gold is transferred in and out of the Trust, gold is held in the Trust's allocated account in bar form. When Baskets are created, the Custodian transfers gold into the unallocated account of the Trust maintained by the Custodian from the unallocated accounts it maintains for each Authorized Participant and then transfers gold from the Trust’s unallocated account to the Trust’s allocated gold account it maintains for the Trust. More specifically, after gold has been first credited to an Authorized Participant's unallocated account in connection with the creation of a Basket, the Custodian transfers the credited amount from the Authorized Participant's unallocated account to the Trust's unallocated account. The Custodian then allocates specific bars of gold from unallocated bars which the Custodian holds, or instructs a subcustodian to allocate specific bars of gold from unallocated bars held by or for the subcustodian, so that the total of the allocated gold bars represents the amount of gold credited to the Trust's unallocated account. The amount of gold represented by the allocated gold bars is debited from the Trust's unallocated account and the allocated gold bars are credited to and held in the Trust's allocated account. The process of withdrawing gold from the Trust for a redemption of a Basket follows the same general procedure as for transferring gold to the Trust for a creation of a Basket, only in reverse.

The Custodian makes available to the Trust's unallocated account up to 430 fine ounces of gold in order to permit the Custodian, by the end of each business day, to fully allocate to the Trust's allocated account all gold that has been credited during that day to the Trust's unallocated account. As a result, at the end of each business day, all of the Trust's gold is held in the Trust's allocated account.

The Custodian updates its records at the end of each business day (London time) to identify the specific bars of gold held in the Trust’s allocated account and provides the Trustee with regular reports detailing the gold transfers in and out of the Trust's unallocated account and the Trust's allocated account. The Trust's website includes a list of the gold bars held in the Trust's allocated account. The list identifies each bar by bar number, refiner, gross weight, assay or fineness and fine weight and is updated once a week.


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## james4beach (Nov 15, 2012)

Right, so with GLD, which bars are "allocated" is a matter of which electronic ledger changes were made that day. If the ledger says it's allocated, then everyone believes it's allocated. They are not moving or tagging any physical items.

Compare that with what Central Fund and Central Gold Trust do: they have a block of allocated bars. Their auditors come and count them, and make sure they are physically identifiable and allocated. This group of bars does not change often ... in fact it's very rare for these closed end funds to acquire new bars. That's why they are closed end funds.

It's also why you get the premium and discount to NAV: it's because the number of gold bars is static over time.

I think there's a huge difference between GLD and CEF/GTU. Look at the above processes and think of which is more prone to errors or possible fraud/misreporting. Clearly GLD is far more vulnerable to those pitfalls. Such an "error" could be made *daily*. With CEF/GTU, the error can only be made at the time bars and acquired and sold (once every few years), and there are many audits in between each of those actions.


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## james4beach (Nov 15, 2012)

Sprott physical fund, PHYS has acquired Central Gold Trust in its entirety
http://sprottphysicalbullion.com/sp...st/press-releases/press-release/?prId=2129926

This increases the Sprott fund from $1 billion to $2 billion and I presume it means that all the physical gold from GTU will be moved to Sprott's custodian, the Royal Canadian Mint in Ottawa.

Basically we just had a $1 billion M&A deal in Canada that nobody noticed


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## james4beach (Nov 15, 2012)

Moneytoo said:


> There's also IGT which is "a cross-listing of the iShares Gold Trust (IAU), that’s why it isn’t included on the iShares Canada site" (I read about it on the Canadian Couch Potato website out of all places: http://canadiancouchpotato.com/2011/07/25/ask-the-spud-ishares-gold-trust/ - and the only thing I don't like about it is low volume, but didn't have a problem selling some of it recently)


Yes IGT is another option. Remember though, it's a US-domiciled bullion fund. The gold is held in the USA. This means it's at the whims of changes in US tax laws surrounding commodities and gold. Given the nature of this kind of holding, I'm only comfortable with Canadian-domiciled funds.

My two favourites continue to be *CEF.A and MNT* which are both Canadian-domiciled, CAD-traded large funds with reasonably good daily liquidity. As MNT is run by a Crown corporation it's also immune to shenanigans from Sprott.


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## Moneytoo (Mar 26, 2014)

james4beach said:


> Yes IGT is another option. Remember though, it's a US-domiciled bullion fund... My two favourites continue to be *CEF.A and MNT*


Yeah I sold the remaining shares of IGT on Feb 11th (when gold reached its latest peak in CAD) and added CEF.A to the watchlist (was paying attention to your recommendations) But don't think I'll be buying gold ETFs anytime soon - even my husband would rather short volatility when it spikes, not to mention a perma-bull like me...


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## jargey3000 (Jan 25, 2011)

what are the "best" gold ETFs out there? any of them look attractive at all now?


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## dogcom (May 23, 2009)

XGD for gold producing companies.

CEF.A for bullion investment.

Both for Canadian investors.


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## james4beach (Nov 15, 2012)

I agree with the two dogcom mentioned. I hold CEF.A but keep in mind it also contains silver, which in recent years has dragged down the returns.

I'm also interested in *MNT* which are shares/receipts in the Royal Canadian Mint's gold reserves. My concern with MNT however is there are talks of the Mint getting privatized and I have no idea how that would affect the units. Any thoughts from others on this?

Note there is a big difference between gold miners and gold bullion. I personally think the better long term investment is bullion and I think CEF.A does look attractive. I bought shares throughout 2015.


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## mf4361 (Apr 11, 2015)

CGL.C hold gold bullion only and is not hedged. This is the one you want if you were to get into gold. At this point I don't think any commodity is attractive to put money in. But I might be wrong. Remember while buying gold ETF, you are buying physical golds. Not the managing company.

I don't think privatization of the Mint will affect the ownership of your gold.


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## Soils4Peace (Mar 14, 2010)

Two American domiciled ETFs of interest are GLD (MER 0.40%) and IAU (MER 0.25%). They are tied to the price of gold. They trade in USD.


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## james4beach (Nov 15, 2012)

Here is a list of the Canadian pure bullion funds traded on the TSX. Many of them trade with multiple ticker symbols, in both CAD and USD. For each, I've included the year it was founded and the current fund size in CAD.


 CEF.A (1961) $4,156 million
 GTU.UN (2003) $1,092 million
 PHY.U (2010) $1,798 million
 MNT (2011) $495 million
 CGL.C (2011) $62 million

The giants are CEF.A ($4 billion), GTU.UN ($1 billion), and Sprott's PHY.U (nearly $2 billion). The first two are run by the same people, the Spicer family. Sprott has been competing with the others for business by offering swapping of GTU.UN shares and also some harassment of CEF.A through frivolous lawsuits to gain voting rights. These top 3 are the big contenders and they are all well-run, high quality operations.

What makes these top 3 unique and particularly attractive are that the gold is allocated and segregated. This means the gold backing the shares are explicitly marked and separated. This is a huge safety and it's why these 3 funds have attracted all the money.

MNT is relatively recent, and is an offering from the Royal Canadian Mint. Shares are backed by gold in the vault, but they are unallocated meaning they are not specifically separated for the shares.

CGL.C is from iShares but it's so tiny that it almost doesn't matter. It's hard to have much confidence in such a small fund.


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## Moneytoo (Mar 26, 2014)

Soils4Peace said:


> Two American domiciled ETFs of interest are GLD (MER 0.40%) and IAU (MER 0.25%). They are tied to the price of gold. They trade in USD.


There's also IGT which is "a cross-listing of the iShares Gold Trust (IAU), that’s why it isn’t included on the iShares Canada site" (I read about it on the Canadian Couch Potato website out of all places: http://canadiancouchpotato.com/2011/07/25/ask-the-spud-ishares-gold-trust/ - and the only thing I don't like about it is low volume, but didn't have a problem selling some of it recently)


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## Soils4Peace (Mar 14, 2010)

I wonder how the operating costs of CEF.A/GTU.UN/PHY.U compare to IAU/IGT's 0.25% MER.

EDIT:
Here we are:

*CEF.A *is in the neighbourhood of 0.32% to 0.38%:
"Expenses as a percentage of the average of the month-end net assets (the “expense ratio”) for the year
ended October 31, 2015 were 0.38% compared to 0.32% for the year ended October 31, 2014. The
increase in the expense ratio was a direct result of costs incurred to address issues related to Class A
Shareholders’ Proceedings. If not for these costs, the expense ratio would have remained unchanged
at 0.32% for the year ended October 31, 2015."
http://www.centralfund.com/annualreport/CFOC 2015 AR 10 DEC 15 - FINAL.pdf

*GTU.UN:*
"For the twelve-month period ended September 30, 2015 the expense ratio was 0.97% compared to 0.36% for the twelve-month period ended September 30, 2014." 
http://www.gold-trust.com/MD&A/2015/CGT MDA Q3 30 SEPT 15.pdf

*PHY.U:* 0.45%-ish?
"Operating expenses for the year ended December 31, 2014 amounted to 0.13% of the average net assets during the year, compared to 0.07% for the same period in 2013.
...
The Trust pays the Manager, Sprott Asset Management LP, a monthly management fee equal to 1 /12 of 0.35% of the value of the net assets of the Trust (determined in accordance with the trust agreement), plus any applicable Canadian taxes."
http://sprottphysicalbullion.com/media/15768/phys-q4-2014.pdf


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## jargey3000 (Jan 25, 2011)

thank you people. good info.


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## james4beach (Nov 15, 2012)

For long term investment I think it's also important to consider the overall size of the fund and its ability to retain investors money over the years. Same goes for any ETF. Has management successfully kept the fund's size and grown the fund, or are investors fleeing and pulling money? If people are fleeing, it means they don't have much confidence in the management and that's very important.

This is especially useful to consider now since gold has been in a bear market in the last few years. You want to find a fund that has retained investors and which has not shrank due to investors pulling out money.

Here, there are warning signs from Sprott's fund (PHYS/PHY.U). The fund has lost 29% of its units since the 2012 high in gold popularity. I'm not talking price, but rather the number of outstanding shares. Investors pulled out 29% of their investment.

In comparison, MNT only shrank 7%.

CEF and GTU did not shrink at all. No investors pulled their money out by redeeming shares.

Based on that inability to keep the fund size during a bear market, I'm not very confident in Sprott's fund (and obviously neither are their investors). Add to that the smear campaign by Sprott against its competitors, and that worries me that Sprott is not managing their fund well and is engaging in smear campaigns out of desperation:

http://www.marketwired.com/press-re...er-condition-goldtrust-tsx-gtu.un-2070208.htm

Based on this (which I discovered last night) I'd reorder my list and my top ones for Canadian-domiciled, TSX investments:

1. CEF.A
2. GTU.UN
3. MNT
4. PHY.U


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## dogcom (May 23, 2009)

What is your opinion on GLD James? Do you think it has the actual amount of gold it says it does? Would you trust it over the long term?


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## james4beach (Nov 15, 2012)

dogcom, I am suspicious of GLD. The basis for my suspicion is the apparent efficiency with which they constantly move large amounts of physical gold into and out of the fund. You can see from the NAV history that they frequently claim there are days where the number of shares outstanding changes by 5 or 6 million shares.

Those are daily changes of around $600 million in the fund assets!

Now you tell me, how are they moving $600 million worth of gold bars on a daily basis into and out of segregated storage and maintaining confidence in which bars belong to whom? Compare to Central Fund of Canada and Central Gold Trust. These guys audit the segregated bars, including bringing in external auditors to view the vaults. They have a static number of bars that does not change for many years... they're literally just sitting in corners of the vault. Those kinds of bars can definitely be identifiable as allocated. That's believable.

GLD cannot possibly be maintaining a high standard of tracking of allocated/segregated bars when they claim to be moving so much gold in and out on a DAILY basis. My opinion is that GLD cannot maintain such proper allocation and segregation with the insanely high daily changes in "physical bars". So I'm skeptical, and I don't invest in them.

I also prefer a Canadian domiciled fund because I can sue their management and administrators, in case there's fraud.


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## dogcom (May 23, 2009)

Thanks for your thoughts and analysis on this James. I have heard that one of the reasons for setting up such a fund was so it could be sourced for physical down the road. Of course you can't say for sure so it is better to stay in Canada and buy the Central Fund of Canada.


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## james4beach (Nov 15, 2012)

dogcom, I am obviously biased as I have been a long term holder of CEF.

But there's something that can be said for the 55 year track record, and the fact that we know the owners are the Spicer family. Talk about transparency and personal accountability. Their family name is on the line, and they have made a solid, long term respectable business by managing CEF and now GTU. They have a huge incentive to maintain high quality management, and they have no incentive to engage in any kind of fraud.

I am a critical investor and I have studied every financial statement they have put out. Their financials are always clear and transparent and they don't play tricky games about the allocated gold storage. After 55 years of proven solid management, I've got to trust them.

The Spicer family has managed the Central Fund for longer than I have been alive. I can't argue with the excellent results.


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## dant (Jan 10, 2016)

I have both, CEF and GTU. I have no complaints about the integrity of their management. However, GTU has been quite a headache for me because of the Sprott people. As mentioned in this thread, Sprott has launched a hostile takeover for GTU. They have been at it since May 2015, and they have harassed us shareholders from the start. This is not what I had in mind when I bought the fund. Specifically, Sprott hired a firm that did some data mining (as opposed to gold mining) and obtained one of our unlisted telephone numbers. Then, they kept calling all times of the day and in the evening (yes, dinner time and after). Mind you, my shares are registered in the brokerage's street name, so that should have buffered me from the assaults. They also bombarded me with their junk mail, probably 5-10 kgs of it so far. Sprott has chiseled away, and there is a chance that they might get their hands on GTU very soon, January 15, 2016. If they do, I will bail out, as I don't do business with firms like that.

There is a lot you should know before buying a gold/silver ETF. Study the difference between closed-end funds like GTU/CEF and, say GLD or IAU. There is a peculiar artifact of the closed end funds like GTU and CEF which makes the NAV (net asset value) be below or above the price of the share. In a bull market, a share will cost more than its NAV. In a bear market (for gold/silver), the opposite is true. For example, CEF is currently trading at a significant discount to NAV (almost 10%). If you think that gold and silver will turn the corner and take off, then buying CEF now would be a good move from that standpoint. It is this discount that allowed Sprott to entice some of the shareholders into supporting the takeover.

If I had to do this again, I would stay away from all of the funds because people like Sprott can come along and turn a low maintenance investment into months of reading really convoluted legal documents with all kinds of disclaimers and countless paragraphs that inevitably advise you to seek help from your tax accountant. If you want to put money into gold, I would suggest buying coins from the Mint and storing them in a safe deposit box. That will cost a lot less than the management fees at a fund and you will sleep a lot better. The only reason I can see for buying an ETF would be if you are speculator and you have no long term interest in gold. Then, I would go with something that is very liquid. That's what ETFs like GLD are good for. BTW, I too am puzzled about the nature of their gold holdings. They never really explained the details in their prospectus. Anyway, the idea there is that you would be out of the fund long before the world finds out if they actually have the bars or just claims on some bars that are elsewhere.


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## zylon (Oct 27, 2010)

*Movement of GLD physical gold*

Far as I can tell, transferring gold in and out of GLD is a ledger entry at the end of the day.

From FAQ #18 here: http://www.spdrgoldshares.com/usa/faqs/#q4fa24b4ed8f8f

Quoting:
*How is gold transferred to or withdrawn from the Trust?*

The Bank of New York Mellon, as trustee of the Trust, or the Trustee, and the Custodian have entered into agreements which establish the Trust's unallocated account and the Trust's allocated account, which are described in more detail in FAQs 20 and 21. The Trust's unallocated account is principally used to facilitate the transfer of gold between Authorized Participants and the Trust in connection with the creation and redemption of Baskets (a "Basket" equals a block of 100,000 SPDR® Gold Shares). The Trust's unallocated account is also used to facilitate the transfer of gold from the Trust for the payment of the Trust's monthly expenses. The Trust's Authorized Participants are the only persons that may place orders to create and redeem Baskets and, in connection with the creation of Baskets, are solely responsible for the purchase and delivery of London Good Delivery Gold Bars (described in FAQ 24) to the Trust. All gold transferred in and out of, and held by, the Trust must comply with the rules, regulations, practices and customs of the LBMA. Except when gold is transferred in and out of the Trust, gold is held in the Trust's allocated account in bar form. When Baskets are created, the Custodian transfers gold into the unallocated account of the Trust maintained by the Custodian from the unallocated accounts it maintains for each Authorized Participant and then transfers gold from the Trust’s unallocated account to the Trust’s allocated gold account it maintains for the Trust. More specifically, after gold has been first credited to an Authorized Participant's unallocated account in connection with the creation of a Basket, the Custodian transfers the credited amount from the Authorized Participant's unallocated account to the Trust's unallocated account. The Custodian then allocates specific bars of gold from unallocated bars which the Custodian holds, or instructs a subcustodian to allocate specific bars of gold from unallocated bars held by or for the subcustodian, so that the total of the allocated gold bars represents the amount of gold credited to the Trust's unallocated account. The amount of gold represented by the allocated gold bars is debited from the Trust's unallocated account and the allocated gold bars are credited to and held in the Trust's allocated account. The process of withdrawing gold from the Trust for a redemption of a Basket follows the same general procedure as for transferring gold to the Trust for a creation of a Basket, only in reverse.

The Custodian makes available to the Trust's unallocated account up to 430 fine ounces of gold in order to permit the Custodian, by the end of each business day, to fully allocate to the Trust's allocated account all gold that has been credited during that day to the Trust's unallocated account. As a result, at the end of each business day, all of the Trust's gold is held in the Trust's allocated account.

The Custodian updates its records at the end of each business day (London time) to identify the specific bars of gold held in the Trust’s allocated account and provides the Trustee with regular reports detailing the gold transfers in and out of the Trust's unallocated account and the Trust's allocated account. The Trust's website includes a list of the gold bars held in the Trust's allocated account. The list identifies each bar by bar number, refiner, gross weight, assay or fineness and fine weight and is updated once a week.


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## james4beach (Nov 15, 2012)

Right, so with GLD, which bars are "allocated" is a matter of which electronic ledger changes were made that day. If the ledger says it's allocated, then everyone believes it's allocated. They are not moving or tagging any physical items.

Compare that with what Central Fund and Central Gold Trust do: they have a block of allocated bars. Their auditors come and count them, and make sure they are physically identifiable and allocated. This group of bars does not change often ... in fact it's very rare for these closed end funds to acquire new bars. That's why they are closed end funds.

It's also why you get the premium and discount to NAV: it's because the number of gold bars is static over time.

I think there's a huge difference between GLD and CEF/GTU. Look at the above processes and think of which is more prone to errors or possible fraud/misreporting. Clearly GLD is far more vulnerable to those pitfalls. Such an "error" could be made *daily*. With CEF/GTU, the error can only be made at the time bars and acquired and sold (once every few years), and there are many audits in between each of those actions.


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## james4beach (Nov 15, 2012)

Sprott physical fund, PHYS has acquired Central Gold Trust in its entirety
http://sprottphysicalbullion.com/sp...st/press-releases/press-release/?prId=2129926

This increases the Sprott fund from $1 billion to $2 billion and I presume it means that all the physical gold from GTU will be moved to Sprott's custodian, the Royal Canadian Mint in Ottawa.

Basically we just had a $1 billion M&A deal in Canada that nobody noticed


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## james4beach (Nov 15, 2012)

Moneytoo said:


> There's also IGT which is "a cross-listing of the iShares Gold Trust (IAU), that’s why it isn’t included on the iShares Canada site" (I read about it on the Canadian Couch Potato website out of all places: http://canadiancouchpotato.com/2011/07/25/ask-the-spud-ishares-gold-trust/ - and the only thing I don't like about it is low volume, but didn't have a problem selling some of it recently)


Yes IGT is another option. Remember though, it's a US-domiciled bullion fund. The gold is held in the USA. This means it's at the whims of changes in US tax laws surrounding commodities and gold. Given the nature of this kind of holding, I'm only comfortable with Canadian-domiciled funds.

My two favourites continue to be *CEF.A and MNT* which are both Canadian-domiciled, CAD-traded large funds with reasonably good daily liquidity. As MNT is run by a Crown corporation it's also immune to shenanigans from Sprott.


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## Moneytoo (Mar 26, 2014)

james4beach said:


> Yes IGT is another option. Remember though, it's a US-domiciled bullion fund... My two favourites continue to be *CEF.A and MNT*


Yeah I sold the remaining shares of IGT on Feb 11th (when gold reached its latest peak in CAD) and added CEF.A to the watchlist (was paying attention to your recommendations) But don't think I'll be buying gold ETFs anytime soon - even my husband would rather short volatility when it spikes, not to mention a perma-bull like me...


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## jargey3000 (Jan 25, 2011)

what are the "best" gold ETFs out there? any of them look attractive at all now?


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## dogcom (May 23, 2009)

XGD for gold producing companies.

CEF.A for bullion investment.

Both for Canadian investors.


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## james4beach (Nov 15, 2012)

I agree with the two dogcom mentioned. I hold CEF.A but keep in mind it also contains silver, which in recent years has dragged down the returns.

I'm also interested in *MNT* which are shares/receipts in the Royal Canadian Mint's gold reserves. My concern with MNT however is there are talks of the Mint getting privatized and I have no idea how that would affect the units. Any thoughts from others on this?

Note there is a big difference between gold miners and gold bullion. I personally think the better long term investment is bullion and I think CEF.A does look attractive. I bought shares throughout 2015.


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## mf4361 (Apr 11, 2015)

CGL.C hold gold bullion only and is not hedged. This is the one you want if you were to get into gold. At this point I don't think any commodity is attractive to put money in. But I might be wrong. Remember while buying gold ETF, you are buying physical golds. Not the managing company.

I don't think privatization of the Mint will affect the ownership of your gold.


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## Soils4Peace (Mar 14, 2010)

Two American domiciled ETFs of interest are GLD (MER 0.40%) and IAU (MER 0.25%). They are tied to the price of gold. They trade in USD.


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## james4beach (Nov 15, 2012)

Here is a list of the Canadian pure bullion funds traded on the TSX. Many of them trade with multiple ticker symbols, in both CAD and USD. For each, I've included the year it was founded and the current fund size in CAD.


 CEF.A (1961) $4,156 million
 GTU.UN (2003) $1,092 million
 PHY.U (2010) $1,798 million
 MNT (2011) $495 million
 CGL.C (2011) $62 million

The giants are CEF.A ($4 billion), GTU.UN ($1 billion), and Sprott's PHY.U (nearly $2 billion). The first two are run by the same people, the Spicer family. Sprott has been competing with the others for business by offering swapping of GTU.UN shares and also some harassment of CEF.A through frivolous lawsuits to gain voting rights. These top 3 are the big contenders and they are all well-run, high quality operations.

What makes these top 3 unique and particularly attractive are that the gold is allocated and segregated. This means the gold backing the shares are explicitly marked and separated. This is a huge safety and it's why these 3 funds have attracted all the money.

MNT is relatively recent, and is an offering from the Royal Canadian Mint. Shares are backed by gold in the vault, but they are unallocated meaning they are not specifically separated for the shares.

CGL.C is from iShares but it's so tiny that it almost doesn't matter. It's hard to have much confidence in such a small fund.


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## Moneytoo (Mar 26, 2014)

Soils4Peace said:


> Two American domiciled ETFs of interest are GLD (MER 0.40%) and IAU (MER 0.25%). They are tied to the price of gold. They trade in USD.


There's also IGT which is "a cross-listing of the iShares Gold Trust (IAU), that’s why it isn’t included on the iShares Canada site" (I read about it on the Canadian Couch Potato website out of all places: http://canadiancouchpotato.com/2011/07/25/ask-the-spud-ishares-gold-trust/ - and the only thing I don't like about it is low volume, but didn't have a problem selling some of it recently)


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## Soils4Peace (Mar 14, 2010)

I wonder how the operating costs of CEF.A/GTU.UN/PHY.U compare to IAU/IGT's 0.25% MER.

EDIT:
Here we are:

*CEF.A *is in the neighbourhood of 0.32% to 0.38%:
"Expenses as a percentage of the average of the month-end net assets (the “expense ratio”) for the year
ended October 31, 2015 were 0.38% compared to 0.32% for the year ended October 31, 2014. The
increase in the expense ratio was a direct result of costs incurred to address issues related to Class A
Shareholders’ Proceedings. If not for these costs, the expense ratio would have remained unchanged
at 0.32% for the year ended October 31, 2015."
http://www.centralfund.com/annualreport/CFOC 2015 AR 10 DEC 15 - FINAL.pdf

*GTU.UN:*
"For the twelve-month period ended September 30, 2015 the expense ratio was 0.97% compared to 0.36% for the twelve-month period ended September 30, 2014." 
http://www.gold-trust.com/MD&A/2015/CGT MDA Q3 30 SEPT 15.pdf

*PHY.U:* 0.45%-ish?
"Operating expenses for the year ended December 31, 2014 amounted to 0.13% of the average net assets during the year, compared to 0.07% for the same period in 2013.
...
The Trust pays the Manager, Sprott Asset Management LP, a monthly management fee equal to 1 /12 of 0.35% of the value of the net assets of the Trust (determined in accordance with the trust agreement), plus any applicable Canadian taxes."
http://sprottphysicalbullion.com/media/15768/phys-q4-2014.pdf


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## jargey3000 (Jan 25, 2011)

thank you people. good info.


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## james4beach (Nov 15, 2012)

For long term investment I think it's also important to consider the overall size of the fund and its ability to retain investors money over the years. Same goes for any ETF. Has management successfully kept the fund's size and grown the fund, or are investors fleeing and pulling money? If people are fleeing, it means they don't have much confidence in the management and that's very important.

This is especially useful to consider now since gold has been in a bear market in the last few years. You want to find a fund that has retained investors and which has not shrank due to investors pulling out money.

Here, there are warning signs from Sprott's fund (PHYS/PHY.U). The fund has lost 29% of its units since the 2012 high in gold popularity. I'm not talking price, but rather the number of outstanding shares. Investors pulled out 29% of their investment.

In comparison, MNT only shrank 7%.

CEF and GTU did not shrink at all. No investors pulled their money out by redeeming shares.

Based on that inability to keep the fund size during a bear market, I'm not very confident in Sprott's fund (and obviously neither are their investors). Add to that the smear campaign by Sprott against its competitors, and that worries me that Sprott is not managing their fund well and is engaging in smear campaigns out of desperation:

http://www.marketwired.com/press-re...er-condition-goldtrust-tsx-gtu.un-2070208.htm

Based on this (which I discovered last night) I'd reorder my list and my top ones for Canadian-domiciled, TSX investments:

1. CEF.A
2. GTU.UN
3. MNT
4. PHY.U


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## dogcom (May 23, 2009)

What is your opinion on GLD James? Do you think it has the actual amount of gold it says it does? Would you trust it over the long term?


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## james4beach (Nov 15, 2012)

dogcom, I am suspicious of GLD. The basis for my suspicion is the apparent efficiency with which they constantly move large amounts of physical gold into and out of the fund. You can see from the NAV history that they frequently claim there are days where the number of shares outstanding changes by 5 or 6 million shares.

Those are daily changes of around $600 million in the fund assets!

Now you tell me, how are they moving $600 million worth of gold bars on a daily basis into and out of segregated storage and maintaining confidence in which bars belong to whom? Compare to Central Fund of Canada and Central Gold Trust. These guys audit the segregated bars, including bringing in external auditors to view the vaults. They have a static number of bars that does not change for many years... they're literally just sitting in corners of the vault. Those kinds of bars can definitely be identifiable as allocated. That's believable.

GLD cannot possibly be maintaining a high standard of tracking of allocated/segregated bars when they claim to be moving so much gold in and out on a DAILY basis. My opinion is that GLD cannot maintain such proper allocation and segregation with the insanely high daily changes in "physical bars". So I'm skeptical, and I don't invest in them.

I also prefer a Canadian domiciled fund because I can sue their management and administrators, in case there's fraud.


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## dogcom (May 23, 2009)

Thanks for your thoughts and analysis on this James. I have heard that one of the reasons for setting up such a fund was so it could be sourced for physical down the road. Of course you can't say for sure so it is better to stay in Canada and buy the Central Fund of Canada.


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## james4beach (Nov 15, 2012)

dogcom, I am obviously biased as I have been a long term holder of CEF.

But there's something that can be said for the 55 year track record, and the fact that we know the owners are the Spicer family. Talk about transparency and personal accountability. Their family name is on the line, and they have made a solid, long term respectable business by managing CEF and now GTU. They have a huge incentive to maintain high quality management, and they have no incentive to engage in any kind of fraud.

I am a critical investor and I have studied every financial statement they have put out. Their financials are always clear and transparent and they don't play tricky games about the allocated gold storage. After 55 years of proven solid management, I've got to trust them.

The Spicer family has managed the Central Fund for longer than I have been alive. I can't argue with the excellent results.


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## dant (Jan 10, 2016)

I have both, CEF and GTU. I have no complaints about the integrity of their management. However, GTU has been quite a headache for me because of the Sprott people. As mentioned in this thread, Sprott has launched a hostile takeover for GTU. They have been at it since May 2015, and they have harassed us shareholders from the start. This is not what I had in mind when I bought the fund. Specifically, Sprott hired a firm that did some data mining (as opposed to gold mining) and obtained one of our unlisted telephone numbers. Then, they kept calling all times of the day and in the evening (yes, dinner time and after). Mind you, my shares are registered in the brokerage's street name, so that should have buffered me from the assaults. They also bombarded me with their junk mail, probably 5-10 kgs of it so far. Sprott has chiseled away, and there is a chance that they might get their hands on GTU very soon, January 15, 2016. If they do, I will bail out, as I don't do business with firms like that.

There is a lot you should know before buying a gold/silver ETF. Study the difference between closed-end funds like GTU/CEF and, say GLD or IAU. There is a peculiar artifact of the closed end funds like GTU and CEF which makes the NAV (net asset value) be below or above the price of the share. In a bull market, a share will cost more than its NAV. In a bear market (for gold/silver), the opposite is true. For example, CEF is currently trading at a significant discount to NAV (almost 10%). If you think that gold and silver will turn the corner and take off, then buying CEF now would be a good move from that standpoint. It is this discount that allowed Sprott to entice some of the shareholders into supporting the takeover.

If I had to do this again, I would stay away from all of the funds because people like Sprott can come along and turn a low maintenance investment into months of reading really convoluted legal documents with all kinds of disclaimers and countless paragraphs that inevitably advise you to seek help from your tax accountant. If you want to put money into gold, I would suggest buying coins from the Mint and storing them in a safe deposit box. That will cost a lot less than the management fees at a fund and you will sleep a lot better. The only reason I can see for buying an ETF would be if you are speculator and you have no long term interest in gold. Then, I would go with something that is very liquid. That's what ETFs like GLD are good for. BTW, I too am puzzled about the nature of their gold holdings. They never really explained the details in their prospectus. Anyway, the idea there is that you would be out of the fund long before the world finds out if they actually have the bars or just claims on some bars that are elsewhere.


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## zylon (Oct 27, 2010)

*Movement of GLD physical gold*

Far as I can tell, transferring gold in and out of GLD is a ledger entry at the end of the day.

From FAQ #18 here: http://www.spdrgoldshares.com/usa/faqs/#q4fa24b4ed8f8f

Quoting:
*How is gold transferred to or withdrawn from the Trust?*

The Bank of New York Mellon, as trustee of the Trust, or the Trustee, and the Custodian have entered into agreements which establish the Trust's unallocated account and the Trust's allocated account, which are described in more detail in FAQs 20 and 21. The Trust's unallocated account is principally used to facilitate the transfer of gold between Authorized Participants and the Trust in connection with the creation and redemption of Baskets (a "Basket" equals a block of 100,000 SPDR® Gold Shares). The Trust's unallocated account is also used to facilitate the transfer of gold from the Trust for the payment of the Trust's monthly expenses. The Trust's Authorized Participants are the only persons that may place orders to create and redeem Baskets and, in connection with the creation of Baskets, are solely responsible for the purchase and delivery of London Good Delivery Gold Bars (described in FAQ 24) to the Trust. All gold transferred in and out of, and held by, the Trust must comply with the rules, regulations, practices and customs of the LBMA. Except when gold is transferred in and out of the Trust, gold is held in the Trust's allocated account in bar form. When Baskets are created, the Custodian transfers gold into the unallocated account of the Trust maintained by the Custodian from the unallocated accounts it maintains for each Authorized Participant and then transfers gold from the Trust’s unallocated account to the Trust’s allocated gold account it maintains for the Trust. More specifically, after gold has been first credited to an Authorized Participant's unallocated account in connection with the creation of a Basket, the Custodian transfers the credited amount from the Authorized Participant's unallocated account to the Trust's unallocated account. The Custodian then allocates specific bars of gold from unallocated bars which the Custodian holds, or instructs a subcustodian to allocate specific bars of gold from unallocated bars held by or for the subcustodian, so that the total of the allocated gold bars represents the amount of gold credited to the Trust's unallocated account. The amount of gold represented by the allocated gold bars is debited from the Trust's unallocated account and the allocated gold bars are credited to and held in the Trust's allocated account. The process of withdrawing gold from the Trust for a redemption of a Basket follows the same general procedure as for transferring gold to the Trust for a creation of a Basket, only in reverse.

The Custodian makes available to the Trust's unallocated account up to 430 fine ounces of gold in order to permit the Custodian, by the end of each business day, to fully allocate to the Trust's allocated account all gold that has been credited during that day to the Trust's unallocated account. As a result, at the end of each business day, all of the Trust's gold is held in the Trust's allocated account.

The Custodian updates its records at the end of each business day (London time) to identify the specific bars of gold held in the Trust’s allocated account and provides the Trustee with regular reports detailing the gold transfers in and out of the Trust's unallocated account and the Trust's allocated account. The Trust's website includes a list of the gold bars held in the Trust's allocated account. The list identifies each bar by bar number, refiner, gross weight, assay or fineness and fine weight and is updated once a week.


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## james4beach (Nov 15, 2012)

Right, so with GLD, which bars are "allocated" is a matter of which electronic ledger changes were made that day. If the ledger says it's allocated, then everyone believes it's allocated. They are not moving or tagging any physical items.

Compare that with what Central Fund and Central Gold Trust do: they have a block of allocated bars. Their auditors come and count them, and make sure they are physically identifiable and allocated. This group of bars does not change often ... in fact it's very rare for these closed end funds to acquire new bars. That's why they are closed end funds.

It's also why you get the premium and discount to NAV: it's because the number of gold bars is static over time.

I think there's a huge difference between GLD and CEF/GTU. Look at the above processes and think of which is more prone to errors or possible fraud/misreporting. Clearly GLD is far more vulnerable to those pitfalls. Such an "error" could be made *daily*. With CEF/GTU, the error can only be made at the time bars and acquired and sold (once every few years), and there are many audits in between each of those actions.


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## james4beach (Nov 15, 2012)

Sprott physical fund, PHYS has acquired Central Gold Trust in its entirety
http://sprottphysicalbullion.com/sp...st/press-releases/press-release/?prId=2129926

This increases the Sprott fund from $1 billion to $2 billion and I presume it means that all the physical gold from GTU will be moved to Sprott's custodian, the Royal Canadian Mint in Ottawa.

Basically we just had a $1 billion M&A deal in Canada that nobody noticed


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## james4beach (Nov 15, 2012)

Moneytoo said:


> There's also IGT which is "a cross-listing of the iShares Gold Trust (IAU), that’s why it isn’t included on the iShares Canada site" (I read about it on the Canadian Couch Potato website out of all places: http://canadiancouchpotato.com/2011/07/25/ask-the-spud-ishares-gold-trust/ - and the only thing I don't like about it is low volume, but didn't have a problem selling some of it recently)


Yes IGT is another option. Remember though, it's a US-domiciled bullion fund. The gold is held in the USA. This means it's at the whims of changes in US tax laws surrounding commodities and gold. Given the nature of this kind of holding, I'm only comfortable with Canadian-domiciled funds.

My two favourites continue to be *CEF.A and MNT* which are both Canadian-domiciled, CAD-traded large funds with reasonably good daily liquidity. As MNT is run by a Crown corporation it's also immune to shenanigans from Sprott.


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## Moneytoo (Mar 26, 2014)

james4beach said:


> Yes IGT is another option. Remember though, it's a US-domiciled bullion fund... My two favourites continue to be *CEF.A and MNT*


Yeah I sold the remaining shares of IGT on Feb 11th (when gold reached its latest peak in CAD) and added CEF.A to the watchlist (was paying attention to your recommendations) But don't think I'll be buying gold ETFs anytime soon - even my husband would rather short volatility when it spikes, not to mention a perma-bull like me...


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## jargey3000 (Jan 25, 2011)

what are the "best" gold ETFs out there? any of them look attractive at all now?


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## dogcom (May 23, 2009)

XGD for gold producing companies.

CEF.A for bullion investment.

Both for Canadian investors.


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## james4beach (Nov 15, 2012)

I agree with the two dogcom mentioned. I hold CEF.A but keep in mind it also contains silver, which in recent years has dragged down the returns.

I'm also interested in *MNT* which are shares/receipts in the Royal Canadian Mint's gold reserves. My concern with MNT however is there are talks of the Mint getting privatized and I have no idea how that would affect the units. Any thoughts from others on this?

Note there is a big difference between gold miners and gold bullion. I personally think the better long term investment is bullion and I think CEF.A does look attractive. I bought shares throughout 2015.


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## mf4361 (Apr 11, 2015)

CGL.C hold gold bullion only and is not hedged. This is the one you want if you were to get into gold. At this point I don't think any commodity is attractive to put money in. But I might be wrong. Remember while buying gold ETF, you are buying physical golds. Not the managing company.

I don't think privatization of the Mint will affect the ownership of your gold.


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## Soils4Peace (Mar 14, 2010)

Two American domiciled ETFs of interest are GLD (MER 0.40%) and IAU (MER 0.25%). They are tied to the price of gold. They trade in USD.


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## james4beach (Nov 15, 2012)

Here is a list of the Canadian pure bullion funds traded on the TSX. Many of them trade with multiple ticker symbols, in both CAD and USD. For each, I've included the year it was founded and the current fund size in CAD.


 CEF.A (1961) $4,156 million
 GTU.UN (2003) $1,092 million
 PHY.U (2010) $1,798 million
 MNT (2011) $495 million
 CGL.C (2011) $62 million

The giants are CEF.A ($4 billion), GTU.UN ($1 billion), and Sprott's PHY.U (nearly $2 billion). The first two are run by the same people, the Spicer family. Sprott has been competing with the others for business by offering swapping of GTU.UN shares and also some harassment of CEF.A through frivolous lawsuits to gain voting rights. These top 3 are the big contenders and they are all well-run, high quality operations.

What makes these top 3 unique and particularly attractive are that the gold is allocated and segregated. This means the gold backing the shares are explicitly marked and separated. This is a huge safety and it's why these 3 funds have attracted all the money.

MNT is relatively recent, and is an offering from the Royal Canadian Mint. Shares are backed by gold in the vault, but they are unallocated meaning they are not specifically separated for the shares.

CGL.C is from iShares but it's so tiny that it almost doesn't matter. It's hard to have much confidence in such a small fund.


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## Moneytoo (Mar 26, 2014)

Soils4Peace said:


> Two American domiciled ETFs of interest are GLD (MER 0.40%) and IAU (MER 0.25%). They are tied to the price of gold. They trade in USD.


There's also IGT which is "a cross-listing of the iShares Gold Trust (IAU), that’s why it isn’t included on the iShares Canada site" (I read about it on the Canadian Couch Potato website out of all places: http://canadiancouchpotato.com/2011/07/25/ask-the-spud-ishares-gold-trust/ - and the only thing I don't like about it is low volume, but didn't have a problem selling some of it recently)


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## Soils4Peace (Mar 14, 2010)

I wonder how the operating costs of CEF.A/GTU.UN/PHY.U compare to IAU/IGT's 0.25% MER.

EDIT:
Here we are:

*CEF.A *is in the neighbourhood of 0.32% to 0.38%:
"Expenses as a percentage of the average of the month-end net assets (the “expense ratio”) for the year
ended October 31, 2015 were 0.38% compared to 0.32% for the year ended October 31, 2014. The
increase in the expense ratio was a direct result of costs incurred to address issues related to Class A
Shareholders’ Proceedings. If not for these costs, the expense ratio would have remained unchanged
at 0.32% for the year ended October 31, 2015."
http://www.centralfund.com/annualreport/CFOC 2015 AR 10 DEC 15 - FINAL.pdf

*GTU.UN:*
"For the twelve-month period ended September 30, 2015 the expense ratio was 0.97% compared to 0.36% for the twelve-month period ended September 30, 2014." 
http://www.gold-trust.com/MD&A/2015/CGT MDA Q3 30 SEPT 15.pdf

*PHY.U:* 0.45%-ish?
"Operating expenses for the year ended December 31, 2014 amounted to 0.13% of the average net assets during the year, compared to 0.07% for the same period in 2013.
...
The Trust pays the Manager, Sprott Asset Management LP, a monthly management fee equal to 1 /12 of 0.35% of the value of the net assets of the Trust (determined in accordance with the trust agreement), plus any applicable Canadian taxes."
http://sprottphysicalbullion.com/media/15768/phys-q4-2014.pdf


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## jargey3000 (Jan 25, 2011)

thank you people. good info.


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## james4beach (Nov 15, 2012)

For long term investment I think it's also important to consider the overall size of the fund and its ability to retain investors money over the years. Same goes for any ETF. Has management successfully kept the fund's size and grown the fund, or are investors fleeing and pulling money? If people are fleeing, it means they don't have much confidence in the management and that's very important.

This is especially useful to consider now since gold has been in a bear market in the last few years. You want to find a fund that has retained investors and which has not shrank due to investors pulling out money.

Here, there are warning signs from Sprott's fund (PHYS/PHY.U). The fund has lost 29% of its units since the 2012 high in gold popularity. I'm not talking price, but rather the number of outstanding shares. Investors pulled out 29% of their investment.

In comparison, MNT only shrank 7%.

CEF and GTU did not shrink at all. No investors pulled their money out by redeeming shares.

Based on that inability to keep the fund size during a bear market, I'm not very confident in Sprott's fund (and obviously neither are their investors). Add to that the smear campaign by Sprott against its competitors, and that worries me that Sprott is not managing their fund well and is engaging in smear campaigns out of desperation:

http://www.marketwired.com/press-re...er-condition-goldtrust-tsx-gtu.un-2070208.htm

Based on this (which I discovered last night) I'd reorder my list and my top ones for Canadian-domiciled, TSX investments:

1. CEF.A
2. GTU.UN
3. MNT
4. PHY.U


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## dogcom (May 23, 2009)

What is your opinion on GLD James? Do you think it has the actual amount of gold it says it does? Would you trust it over the long term?


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## james4beach (Nov 15, 2012)

dogcom, I am suspicious of GLD. The basis for my suspicion is the apparent efficiency with which they constantly move large amounts of physical gold into and out of the fund. You can see from the NAV history that they frequently claim there are days where the number of shares outstanding changes by 5 or 6 million shares.

Those are daily changes of around $600 million in the fund assets!

Now you tell me, how are they moving $600 million worth of gold bars on a daily basis into and out of segregated storage and maintaining confidence in which bars belong to whom? Compare to Central Fund of Canada and Central Gold Trust. These guys audit the segregated bars, including bringing in external auditors to view the vaults. They have a static number of bars that does not change for many years... they're literally just sitting in corners of the vault. Those kinds of bars can definitely be identifiable as allocated. That's believable.

GLD cannot possibly be maintaining a high standard of tracking of allocated/segregated bars when they claim to be moving so much gold in and out on a DAILY basis. My opinion is that GLD cannot maintain such proper allocation and segregation with the insanely high daily changes in "physical bars". So I'm skeptical, and I don't invest in them.

I also prefer a Canadian domiciled fund because I can sue their management and administrators, in case there's fraud.


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## dogcom (May 23, 2009)

Thanks for your thoughts and analysis on this James. I have heard that one of the reasons for setting up such a fund was so it could be sourced for physical down the road. Of course you can't say for sure so it is better to stay in Canada and buy the Central Fund of Canada.


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## james4beach (Nov 15, 2012)

dogcom, I am obviously biased as I have been a long term holder of CEF.

But there's something that can be said for the 55 year track record, and the fact that we know the owners are the Spicer family. Talk about transparency and personal accountability. Their family name is on the line, and they have made a solid, long term respectable business by managing CEF and now GTU. They have a huge incentive to maintain high quality management, and they have no incentive to engage in any kind of fraud.

I am a critical investor and I have studied every financial statement they have put out. Their financials are always clear and transparent and they don't play tricky games about the allocated gold storage. After 55 years of proven solid management, I've got to trust them.

The Spicer family has managed the Central Fund for longer than I have been alive. I can't argue with the excellent results.


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## dant (Jan 10, 2016)

I have both, CEF and GTU. I have no complaints about the integrity of their management. However, GTU has been quite a headache for me because of the Sprott people. As mentioned in this thread, Sprott has launched a hostile takeover for GTU. They have been at it since May 2015, and they have harassed us shareholders from the start. This is not what I had in mind when I bought the fund. Specifically, Sprott hired a firm that did some data mining (as opposed to gold mining) and obtained one of our unlisted telephone numbers. Then, they kept calling all times of the day and in the evening (yes, dinner time and after). Mind you, my shares are registered in the brokerage's street name, so that should have buffered me from the assaults. They also bombarded me with their junk mail, probably 5-10 kgs of it so far. Sprott has chiseled away, and there is a chance that they might get their hands on GTU very soon, January 15, 2016. If they do, I will bail out, as I don't do business with firms like that.

There is a lot you should know before buying a gold/silver ETF. Study the difference between closed-end funds like GTU/CEF and, say GLD or IAU. There is a peculiar artifact of the closed end funds like GTU and CEF which makes the NAV (net asset value) be below or above the price of the share. In a bull market, a share will cost more than its NAV. In a bear market (for gold/silver), the opposite is true. For example, CEF is currently trading at a significant discount to NAV (almost 10%). If you think that gold and silver will turn the corner and take off, then buying CEF now would be a good move from that standpoint. It is this discount that allowed Sprott to entice some of the shareholders into supporting the takeover.

If I had to do this again, I would stay away from all of the funds because people like Sprott can come along and turn a low maintenance investment into months of reading really convoluted legal documents with all kinds of disclaimers and countless paragraphs that inevitably advise you to seek help from your tax accountant. If you want to put money into gold, I would suggest buying coins from the Mint and storing them in a safe deposit box. That will cost a lot less than the management fees at a fund and you will sleep a lot better. The only reason I can see for buying an ETF would be if you are speculator and you have no long term interest in gold. Then, I would go with something that is very liquid. That's what ETFs like GLD are good for. BTW, I too am puzzled about the nature of their gold holdings. They never really explained the details in their prospectus. Anyway, the idea there is that you would be out of the fund long before the world finds out if they actually have the bars or just claims on some bars that are elsewhere.


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## zylon (Oct 27, 2010)

*Movement of GLD physical gold*

Far as I can tell, transferring gold in and out of GLD is a ledger entry at the end of the day.

From FAQ #18 here: http://www.spdrgoldshares.com/usa/faqs/#q4fa24b4ed8f8f

Quoting:
*How is gold transferred to or withdrawn from the Trust?*

The Bank of New York Mellon, as trustee of the Trust, or the Trustee, and the Custodian have entered into agreements which establish the Trust's unallocated account and the Trust's allocated account, which are described in more detail in FAQs 20 and 21. The Trust's unallocated account is principally used to facilitate the transfer of gold between Authorized Participants and the Trust in connection with the creation and redemption of Baskets (a "Basket" equals a block of 100,000 SPDR® Gold Shares). The Trust's unallocated account is also used to facilitate the transfer of gold from the Trust for the payment of the Trust's monthly expenses. The Trust's Authorized Participants are the only persons that may place orders to create and redeem Baskets and, in connection with the creation of Baskets, are solely responsible for the purchase and delivery of London Good Delivery Gold Bars (described in FAQ 24) to the Trust. All gold transferred in and out of, and held by, the Trust must comply with the rules, regulations, practices and customs of the LBMA. Except when gold is transferred in and out of the Trust, gold is held in the Trust's allocated account in bar form. When Baskets are created, the Custodian transfers gold into the unallocated account of the Trust maintained by the Custodian from the unallocated accounts it maintains for each Authorized Participant and then transfers gold from the Trust’s unallocated account to the Trust’s allocated gold account it maintains for the Trust. More specifically, after gold has been first credited to an Authorized Participant's unallocated account in connection with the creation of a Basket, the Custodian transfers the credited amount from the Authorized Participant's unallocated account to the Trust's unallocated account. The Custodian then allocates specific bars of gold from unallocated bars which the Custodian holds, or instructs a subcustodian to allocate specific bars of gold from unallocated bars held by or for the subcustodian, so that the total of the allocated gold bars represents the amount of gold credited to the Trust's unallocated account. The amount of gold represented by the allocated gold bars is debited from the Trust's unallocated account and the allocated gold bars are credited to and held in the Trust's allocated account. The process of withdrawing gold from the Trust for a redemption of a Basket follows the same general procedure as for transferring gold to the Trust for a creation of a Basket, only in reverse.

The Custodian makes available to the Trust's unallocated account up to 430 fine ounces of gold in order to permit the Custodian, by the end of each business day, to fully allocate to the Trust's allocated account all gold that has been credited during that day to the Trust's unallocated account. As a result, at the end of each business day, all of the Trust's gold is held in the Trust's allocated account.

The Custodian updates its records at the end of each business day (London time) to identify the specific bars of gold held in the Trust’s allocated account and provides the Trustee with regular reports detailing the gold transfers in and out of the Trust's unallocated account and the Trust's allocated account. The Trust's website includes a list of the gold bars held in the Trust's allocated account. The list identifies each bar by bar number, refiner, gross weight, assay or fineness and fine weight and is updated once a week.


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## james4beach (Nov 15, 2012)

Right, so with GLD, which bars are "allocated" is a matter of which electronic ledger changes were made that day. If the ledger says it's allocated, then everyone believes it's allocated. They are not moving or tagging any physical items.

Compare that with what Central Fund and Central Gold Trust do: they have a block of allocated bars. Their auditors come and count them, and make sure they are physically identifiable and allocated. This group of bars does not change often ... in fact it's very rare for these closed end funds to acquire new bars. That's why they are closed end funds.

It's also why you get the premium and discount to NAV: it's because the number of gold bars is static over time.

I think there's a huge difference between GLD and CEF/GTU. Look at the above processes and think of which is more prone to errors or possible fraud/misreporting. Clearly GLD is far more vulnerable to those pitfalls. Such an "error" could be made *daily*. With CEF/GTU, the error can only be made at the time bars and acquired and sold (once every few years), and there are many audits in between each of those actions.


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## james4beach (Nov 15, 2012)

Sprott physical fund, PHYS has acquired Central Gold Trust in its entirety
http://sprottphysicalbullion.com/sp...st/press-releases/press-release/?prId=2129926

This increases the Sprott fund from $1 billion to $2 billion and I presume it means that all the physical gold from GTU will be moved to Sprott's custodian, the Royal Canadian Mint in Ottawa.

Basically we just had a $1 billion M&A deal in Canada that nobody noticed


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## james4beach (Nov 15, 2012)

Moneytoo said:


> There's also IGT which is "a cross-listing of the iShares Gold Trust (IAU), that’s why it isn’t included on the iShares Canada site" (I read about it on the Canadian Couch Potato website out of all places: http://canadiancouchpotato.com/2011/07/25/ask-the-spud-ishares-gold-trust/ - and the only thing I don't like about it is low volume, but didn't have a problem selling some of it recently)


Yes IGT is another option. Remember though, it's a US-domiciled bullion fund. The gold is held in the USA. This means it's at the whims of changes in US tax laws surrounding commodities and gold. Given the nature of this kind of holding, I'm only comfortable with Canadian-domiciled funds.

My two favourites continue to be *CEF.A and MNT* which are both Canadian-domiciled, CAD-traded large funds with reasonably good daily liquidity. As MNT is run by a Crown corporation it's also immune to shenanigans from Sprott.


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## Moneytoo (Mar 26, 2014)

james4beach said:


> Yes IGT is another option. Remember though, it's a US-domiciled bullion fund... My two favourites continue to be *CEF.A and MNT*


Yeah I sold the remaining shares of IGT on Feb 11th (when gold reached its latest peak in CAD) and added CEF.A to the watchlist (was paying attention to your recommendations) But don't think I'll be buying gold ETFs anytime soon - even my husband would rather short volatility when it spikes, not to mention a perma-bull like me...


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