Gold

Performance Overview

The investment seeks to replicate the performance, net of expenses, of the price of gold bullion. The trust holds gold, and is expected to issue baskets in exchange for deposits of gold, and to distribute gold in connection with redemption of baskets. The gold held by the trust will only be sold on an as-needed basis to pay trust expenses, in the event the trust terminates and liquidates its assets, or as otherwise required by law or regulation.

Today, like most commodities, the price of gold is driven by supply and demand as well as speculation. However unlike most other commodities, saving and disposal plays a larger role in affecting its price than its consumption. Most of the gold ever mined still exists in accessible form, such as bullion and mass-produced jewelry, with little value over its fine weight — and is thus potentially able to come back onto the gold market for the right price.

  • Given the huge quantity of gold stored above-ground compared to the annual production, the price of gold is mainly affected by changes in sentiment (demand), rather than changes in annual production (supply).
  • Central banks and the International Monetary Fund play an important role in the gold price. It is generally accepted that interest rates are closely related to the price of gold. As interest rates rise the general tendency is for the gold price, which earns no interest, to fall, and as rates dip, for gold price to rise. As a result, gold price can be closely correlated to central banks via the monetary policy decisions made by them related to interest rates.
  • The price of gold is also affected by various well-documented mechanisms of artificial price suppression, arising from fractional reserve banking and naked short selling in gold, and particularly involving the London Bullion Market Association, the United States Federal Reserve System, and the banks HSBC and JPMorgan Chase
  • If people feared their bank would fail, a bank run might result. This happened in the USA during the Great Depression of the 1930s, leading President Roosevelt to impose a national emergency and issued Executive Order 6102 outlawing the “hoarding” of gold by US citizens
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