Currency Risk, Debt and Gold

This is an interview of one great mind talking with another. They are James Turk, interviewer, and Jim Sinclair, interviewed. This interview took place following Sinclair's presentaion at GATA's Gold Rush 2011 conference in London on August 5, 2011.



Jim Sinclair interviewed by James Turk

GLD May Not Be Good as Gold

The question of whether an investor in GLD owns rights to gold bullion held for shareholders of GLD is relevant. In an old post I asked the question to myself, should I stay or should I go as an owner of GLD shares then. I came to the conclusion that the water is too murky for me to see through and that was perhaps done by design. It is not necessary to be so opaque though and I suspected the big-bank custodians might be being less than honest by providing the appearance of access to bullion for retail investors. I raise this topic still again to point to a legal review of the question initiated by Catherine Austin Fitts. She is an attorney with securities background who hired her attorney to work with her and others to get to the bottom of the question. One paragraph from the summary of their paper, GLD and SLV - Disclosure in the Precious Metals Puzzle Palace, does a great job of describing what I suspected but could not document, as they have.

They wrote: "As we outlined above in the section on exchange traded funds, many of the ETF risks are disclosed in their prospectuses and in the Trust documents filed with the SEC that are available to investors if they look hard enough on the SEC’s EDGAR site. However, we think the complexity of the structure of these funds and the extent of their departure from the usual and expected duties to shareholders make much of the disclosure too complex for the average investor to understand at best and misleading even to experts at worst. We remind readers that market investors thought they understood mortgage-backed securities like CDOs before the financial and housing crises of 2007 and 2008. Since that time, we are assured that few understood what they were getting into."

This paper is easy to read and is thoroughly documented. Recommended.

Do You Own Gold - A Follow Up

A couple of months ago, I spent some time reviewing the prospectus for the iShares Gold Bullion Trust. This is an exchange traded fund (ETF) with the ticker symbol GLD. In my interest of owning exposure to gold and owning it to protect myself from the possibility of a currency problem, GLD was convenient. Then came the popularity of GLD and some other ETF's, followed soon after by various writer's claiming expertise, who were sounding alarms about an environment where misrepresentations or fraud could exist. I could not prove or disprove these claims but I felt I could review the prospectus in the light of these claims and come to a conclusion, will I stay or will I go. Am I a trader or an investor?