Gold

[Lego_Man]

But why would they deliver the gold to me? I'm just buying a share like I would in any share on the market. If telecom went bust they wouldn't send me a desk chair from their office.

Well if there was nuclear war then my ETF dollar amount in $NZD would be just as much as your physical gold in $NZD.

Can you please clarify in SIMPLE words and your way of thinking? I'm very confused. Thanks.

Ok, ive got 1,000 ounces of gold.

I run a backyard ETF OTC scheme. Send me a cheque for 1 million dollars and i will send you a piece of paper that says i owe you the gold.

Sound like a good deal?

[ENP]

Ahh right. I see now. Thanks for clarifying that.

How come the ETF wouldn't own all the gold. ie. If they issued $1,000,000 shares at $1 each. They would have $1,000,000 dollars. They buy $1,000,000 of gold.

Why would they not hold $1,000,000 of gold and why would they ever need to sell it? Aren't the buyers on the stock exhcange just buying off each other? They don't need to pay out dividends or anything and their management fee (I think it's 0.4% p/a) should cover the security, rent, electricity, wages, etc of the staff where they hold it.

[whatsup]

Ahh right. I see now. Thanks for clarifying that.

How come the ETF wouldn't own all the gold. ie. If they issued $1,000,000 shares at $1 each. They would have $1,000,000 dollars. They buy $1,000,000 of gold.

Why would they not hold $1,000,000 of gold and why would they ever need to sell it? Aren't the buyers on the stock exhcange just buying off each other? They don't need to pay out dividends or anything and their management fee (I think it's 0.4% p/a) should cover the security, rent, electricity, wages, etc of the staff where they hold it.

Guys all good points, In the 1980's Ray Smith I think ran a outfit called Goldcorp that sold lots of "investors" the same amount of gold on condition that he stored it in safe keeping for them, only problem was dozens and dozens of people bought the same piece of gold!!!

[Lego_Man]

Ahh right. I see now. Thanks for clarifying that.

How come the ETF wouldn't own all the gold. ie. If they issued $1,000,000 shares at $1 each. They would have $1,000,000 dollars. They buy $1,000,000 of gold.

Why would they not hold $1,000,000 of gold and why would they ever need to sell it? Aren't the buyers on the stock exhcange just buying off each other? They don't need to pay out dividends or anything and their management fee (I think it's 0.4% p/a) should cover the security, rent, electricity, wages, etc of the staff where they hold it.

In theory yes they do own the gold.

But you should always factor in the possibility of fraud or "run on the ETF". You dont know if they are running leverage or what - it is regulated but you never know.

And as for the nuclear war comment, most people see gold as a safe haven asset. From that point of view you want to be able to stash it under the bed. Redeeming your gold ETF would be impossible in a nuclear war because all the xchanges would be piles of rubble. But your gold in the closet would still be there.

[ENP]

Why wouldn't they own the same amount of gold in $ terms as the amount of shares that they issued?

Where did the rest of the money go. And how sure are you that this is what is happening with the ASX commodity ETF's?

[ENP]

So if you buy physical gold and you want to get out of the market quickly. Who do you sell it to? Are there gauranteed buyers to get out of the market quickly.

This is the only benefit of the ETF that I'm afraid physically holding it doesn't have.

Also is there any real difference in 1kg bars or small coins other than in terms of weight/price.

[Skol]

Hey ENP

You're wasting your time trying to fathom the dudes who horde gold or silver. I've never worked it out. Gold has no intrinsic value, it costs to store it, it can be stolen, burned, there's no interest on it and you can't eat it.
In the event of some catastrophe no one would want it anyway, the items of value then would be things you could use like cows, sheep, petrol, clothing etc., things that would be useful.

[ENP]

I'm just trying to get educated on these things as I like to know.

I've just been doing some research and it seems there isn't any real places to both buy and sell apart from trade me/sella and some mints that have rip off prices.

[Skol]

There are various ways to own physical gold but lots of people seem to like coins. Depending on the actual type of coin there is a premium you have pay, but you're right there's no liquidity and to sell it you can put it on Trademe and let people know you've got it or sell it through a dealer which means getting in the car and driving there.

[ENP]

Selling through a dealer. So when you go there, they have no choice but to buy it or can they turn you down?

And they must take their commission on top of it when you sell it, i.e. you won't get the spot price will you?