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Hedge fund Hinde: Precious metals ETFs should not be owned by serious professional investors

Monday, August 16, 2010
Opalesque Industry Update - Precious Metal Exchange Traded Funds (ETFs) have become a popular way to invest in gold and silver. In a presentation published on Thursday, Hinde Capital discuss many of the important issues investors should be aware of before buying these products.

Comparing the State Street managed SPDR Gold Shares trust (GLD), which is the largest precious metals ETF (market cap of almost US$50bn) with physical ownership, Hinde Capital conclude that

  • ETFs should not be owned by serious professional investors
  • ETFs offer none of the benefits of physical bullion ownership
  • ETFs are no cheaper than owning physical allocated bullion stored and insured in secure vaults
  • ETFs are not as secure as owning physical allocated bullion either via a bullion fund or an allocated bullion account
  • ETFs provide no returns above the bullion price, only the likelihood of tracking at a discount or potentially failing to track the bullion price at all
  • ETFs do not provide 24 hour liquidity, unlike the bullion market itself

Instead, Hinde recommend opening an allocated bullion account with a Swiss private bank or bullion bank excluding custodians of GLD and SLV or investing with a bullion fund.

Hinde Capital's investor presentation 'Precious Metals ETF Alchemy GLD - the new CDO in disguise?' can be downloaded from the firm's website: Source
Florian Guldner

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