Commodities Experts Discuss The First U.S.-Traded Gold ETF Turning Ten Years Old

By Trang Ho

SPDR Gold Trust ETF (GLD) revolutionized gold trading when it launched ten years ago. It paved the way for all other precious metals exchange-traded funds and their leveraged varieties. Before GLD debuted, exposure to gold came in bars, coins, certificates, savings plans or shares in gold-mining companies. The ETF put precious metals investing into the mainstream and eliminated headaches from insurance, shipping and storage vaults.

The ETF amassed more than $1 billion in assets in its first three days, starting November 18, 2004, which sealed its place in history as the fastest an ETF has ever attracted that level of assets. Within 15 months, it had raked in $5 billion, and within three years, it had $10 billion.

Terry Sacka AAMS: chief strategist of Cornerstone Asset Metals

Terry Sacka believes gold’s price would be much higher without the advent of gold ETFs, which offer a means of paper trading a physical commodity.

“We believe the current derivative naked-short position in ETF and futures markets for gold to be in the area of 90 ounces of paper sold for every one real ounce in the registered vaults,” Sacka writes in an e-mail. “Mind you, most deep physical professionals are skeptical the real gold is there to back up the ETF, as it is claimed to be.”

Dennis Gartman: Commodities Analyst

“It broadened the market,” he says. “It made it far more transparent. It made it easier for the public to get in and to get out.”

Thomas Winmill: Precious metals specialist

“GLD probably boosted bullion prices and increased market volatility by making gold a legitimate asset class held in pension funds and retirement accounts. Pools of capital that would not otherwise consider using gold in a portfolio now do. It’s a mixed blessing to have. There are greater numbers of buyers, but there could also be greater number of sellers when there’s a panic.”

Miguel Perez-Santalla: Sales and marketing manager of Heraeus Metals New York

“Gold is a store of value because gold will never go to zero. All other financial instruments can. It is not a classical investment; it is more of an insurance policy.”

CONCLUSION:

Gold represents a hard, tangible asset with intrinsic value, unlike currencies and stocks, which on occasion have become worthless. Central banks cannot create more gold by firing up the printing presses, as they do fiat currencies.

Whereas those distrustful of paper currencies see it as a currency that’s been used for centuries, the Internal Revenue Service treats GLD as a collectible.

Gold offers asset diversification in a portfolio as it moves independently from stocks and bonds. Over the past ten years, it has a correlation ratio of 0.09 with SPY and iShares 20-Year Treasury Bond ETF (TLT).

Source: Institutional Investor