Thursday, June 30, 2005

Gold and Silver ETF

Post by Ron Lutka

What is REALLY DANGEROUS about these Gold and Silver ETFs in my opinion is that a certain class of entity is being inserted between the gold ans silver and the investing public. And that class of entity is registered broker-dealers (called "participants" in the silver and gold ETF) who can be associated with bullion banks, both of whom have historically been anti-gold and anti-silver and pro fiat and other paper.

From the Registration Statement

"The trust issues and redeems iShares only in blocks of 50,000 or integral multiples thereof. A block of 50,000 iShares called a "Basket". These transactions take place in exchange for silver. Only registered broker-dealers that become authorized participants by entering into a contract with the sponsor and the trustee may purchase or redeem Baskets. "

There are many items that are screaming flags as to potential evil intentions behind certain silver and gold ETFs and some of those screaming flags are:

1) players involved are in my opinion anti-gold and anti-silver;

2) the investing public is being eliminated from the physical gold and silver markets by way of these ETFs because the investing public CANNOT purchase a block of 50,000 iShares called a "Basket". They might not even have the right to buy or sell a Basket if they could afford to buy one as this might be a right solely of the "participants" whom are broker-dealers. Regardless, the affordability issue eliminates almost all of us.

The goal of these ETFs might be to replace the gold and silver futures exchanges as was hinted at by Lassonde a while back. If successful the investing public will not be part of the paper and physical gold and silver price discovery process as they presently are to a degree at the COMEX and CBOT. And if the COMEX and CBOT gold and silver trading is closed down the investing public will be excluded from accessing this physical source of metal which would likely be transferred to back the silve an gold ETF. Neat trick, huh?

3) the ETFs are far more complex than what they need to be to accomplish the stated effect for investors. Why not follow the simple Central Fund of Canada model? Answer: Because of 2) above.


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