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SPDR Gold Shares Message Board

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  • bristolfarm99 bristolfarm99 Feb 27, 2008 4:24 PM Flag

    GLD=paper, CEF=Physical

    What is cef? Is this a gold fund? Help me out here guys.

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    • Geeze, may I introduce you to my friend, Yahoo quotes?

      CEF -> Central Fund of Canada

      Is an ETF, similar to GLD. But there are differences:
      a) Tries to hold a 60:1 ounce ratio of silver to gold, so is affected by changes in both.
      b) Actually has the bullion stored in a bank vault, audited twice annually, with no ability to loan/short/do anything other than collect dust. GLD -> who the heck knows? Some collection of depositories, with a history of duplicate serial numbers and a lot of head scratching.
      c) CEF will periodically issue new batches of shares, when the stock is trading at a good premium. They use the shares to buy more bullion. Since they sell shares at the premium price, and can buy at the spot price, existing shares actually end up owning more bullion over time. GLD gets new shares when Authorized Dealers request the issuance of a new "basket", or a collection of 100,000 shares. Dealers then make a market in the shares to interested parties. Net result is easier to create shares on demand with GLD, harder to do with CEF, thus CEF will often trade at a premium to the underlay NAV.
      d) GLD liquidates a portion of the holdings annually to pay expense. Is a set percentage, which means they rake it in when the holdings get big. CEF generally manages expenses out of the selling of shares at a premium from new issues.

      My other friend Google, if you try "cef vs gld taxes", will give you stuff like:

      Which I'll paste a quote from here:

      e) CEF, like other mutual funds, gets capital-gains treatment, so long-term gains are taxed at a maximum of 15% by Uncle Sam. The ETFs are taxed as collectibles, which means a rate as high as 28%.

      If you're a conspiracy theory type, then finally,

      f) GLD is thought by many to be a vehicle for manipulating the Gold price, an insider's playground, or even a long term ploy towards re basing the national currency.


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