SPDR Gold Trust (GLD), the largest and most popular gold ETF, is an investment fund that holds physical gold to support its shares. The stock price follows the price of gold and is traded like a stock, but the vast majority of investors are not entitled to claim the underlying gold. Even if you own enough shares, the GLD ETF reserves the right to settle your request for cash delivery. This makes the repayment of GLD shares for physical metals extremely difficult or impossible for ordinary HNW investors or for modest-sized institutions.
For those looking to invest in physical gold, it may be beneficial to consult with Gold IRA brokers who can provide guidance on how to best invest in gold. Fortunately for investors, there are now online platforms that make buying gold as easy and convenient as trading GLD ETFs. The custodian is responsible for assigning specific gold ingots to the account assigned to GLDM (the “Account Assigned to the Fund”). GLD claims to be a liquid, easily accessible, reasonably cost-effective, transparent, flexible and secure solution for the needs of institutional and private investors. It's clear that gold funds, such as the GLD ETF, don't offer the level of security that people expect, especially during times of economic recession or other financial turmoil.
In addition, the Custodian and the Trust do not require that any sub-custodian be insured or in conditions of bond with respect to their custodial activities or with respect to gold ingots held in their possession on behalf of GLDM. The custodian facilitates the transfer of gold bullion to and from GLDM through the unassigned gold bullion accounts that you can maintain for each authorized participant or the unallocated gold accounts you may hold for an authorized participant by another London Precious Metals Clearing Limited clearing bank, and through the unassigned and assigned gold bullion accounts you maintain for GLDM. Like GLDM, the gold's custodian is ICBC Standard Bank Plc, and physical gold is stored in the custodian's vault in London. In terms of structure, even though the BAR is much smaller than the GLD and the GLDM, all other operational aspects are the same.
The custodian is instructed to assign all gold ingots deposited in GLDM to the account allocated to the fund before the close of trading on each day when the New York Stock Exchange Arca or another major national stock exchange in the United States where the shares are listed is open to the public. As a grantor trust and not as an investment fund, if an investor buys shares of GLD and holds them for more than a year, they are taxed at the collectible asset rate of 28% and not as a long-term capital gain at a marginal rate of 15%. See the GLDM prospectus for a more detailed analysis of the risks of investing in GLDM stocks.
