Gold ETF management fees

[herbgoat]

For GLD and IAU, a small portion of the gold is sold every year to pay for the storage and fund expenses to the tune of .40%/year for GLD. Why does this not mean that after 250 years, the fund will have zero gold left? Sorry if this is a stupid question.

[MediumTex]

For GLD and IAU, a small portion of the gold is sold every year to pay for the storage and fund expenses to the tune of .40%/year for GLD. Why does this not mean that after 250 years, the fund will have zero gold left? Sorry if this is a stupid question.

If gold were flat or declining in value for a long time, the decay would be noticeable, but in a rising gold market it should just lag the price of gold a bit over time.

In 250 years, I predict GLD will be long gone, but the gold it holds will still be around, probably having passed through countless hands in the interim.

I have some silver coins that my mother accumulated in the early 1960s when 90% coins were phased out.  I often think about how those coins have increased in value without the need to pay any management fees or taxes along the way.  They just sit there as the currency we use to measure their value slowly deteriorates.

[Pkg Man]

/The holdings per share will get smaller, but they will never go to zero.  For GLD, your shares represent a fractional holding of one ounce of gold less the accumulated management fees.  When the fund opened on day one, a share of GLD represented one-tenth of one ounce of gold.  After several years of fees, one share of GLD represents, say 9/100ths of an ounce of gold (I don't know the exact number).  As time goes by a share will represent a smaller and smaller portion of an ounce, but it will never reach zero.  It is an asymptotic relationship, if that makes any sense.  

In 250 years from the date of inception a share will represent 0.367 of a tenth of an ounce of gold (0.996)^250 = 0.367.  In a thousand years it will represent 0.018 of a tenth of an ounce, and so on.  It really doesn't matter how much a share represents, the price will reflect it, just like the recent 10 to 1 split in IAU gave me 10 times the amount of shares but the price fell ten-fold.

Edit: Corrected to say 9/100ths of an ounce of gold.