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Re: Best way to hold Gold in IRA?
Posted: Fri Aug 17, 2012 6:12 am
by steve
Re: Best way to hold Gold in IRA?
Posted: Fri Aug 17, 2012 10:41 am
by rickb
bronsuchecki wrote:
There is no problem calculating the NAV of IAU or GLD as the gold ounces backing each share is disclosed on their websites and just multiply this by the spot price (and no need to add cash as they are just 100% gold).
Yes APs deliver gold and get shares (and vice versa) for IAU and GLD but that is done at the oz/share backing so it does not complicate the NAV calculation. The oz/share only changes once a month when they use ounces to pay the management fee, but the revised oz/share is available on the website.
"significant premium or discount the custodian wouldn't tell anyone but the most favored authorized participants" - this doesn't happen as everyone knows what the oz/share backing is, it is completely transparent.
It is highly likely that HSBC and JPM are APs for both IAU and GLD as well as most of the major bullion banks. With that depth of market making and the ability to create/redeem shares there is no way any significant premium or discount can arise as it leaves the door open to the others to scalp the profits.
The market making create/redeem process is not a reason to not invest in IAU or GLD.
Good point, and I agree this is the theory. Rather than a fixed amount of gold and a fixed number of shares, there's a defined backing percentage with APs allowed to trade gold for shares or vice versa at this rate (and a variable amount of gold and variable number of shares). If all the books are straight, then there's no problem.
Re: Best way to hold Gold in IRA?
Posted: Fri Aug 17, 2012 11:39 am
by WildAboutHarry
Pointedstick wrote:
MediumTex wrote:
I hadn't noticed the premium expansion lately.
It might be time to move back into IAU.
I've always thought that a relatively easy "intra-asset" PP tweak would be to split the gold allocation 50/50 between GTU and IAU and "rebalance" the gold allocation once that 50/50 reached +/- 3% from the original allocation. In other words, when the GTU premium expands you would sell GTU and buy IAU, and when the GTU premium contracts you would sell IAU and buy GTU. The overall volatility of gold as an asset is irrelevant because you have already neutralized that risk through the overall design of the PP.
Wouldn't that trigger the wash sale rules?
In taxable, no wash sale rules on gains, only losses.
Re: Best way to hold Gold in IRA?
Posted: Sat Aug 18, 2012 3:44 pm
by sophie
Continuing our examination of GTU, it may be worth noting that it holds about $1 per share in cash. Not a huge deal, but it is there.
Thank you Wild, for pointing this out...I wasn't aware of that.
Surprised that no one has mentioned SGOL. I use that and IAU for tax-deferred accounts - GLD's disclaimers make it distinctly less attractive. With the long term effects of the expense ratios, together with the added counterparty risks, this is purely for rebalancing purposes, so I'm aspiring to make this no more than 1/3 of the total gold allocation. I had thought before about MT's idea of taking advantage of the premium spreads with GTU, but it would have to be in large enough amounts to surmount the trading fees. Good to keep in mind as a fun option for making some fairly safe profits.
I bought some GTU in taxable with the idea of using it as a taxable gold accumulator, but it increasingly seems not worth the trouble. I'm planning on cashing it out next time I buy gold coins.