As I feel this is still an outstanding issue of GLD, I will repost this here:
Did anyone try reaching out to State Street Global Advisors and asking if GLD's physical assets are insured? I've personally called them at 866-320-4053 to ask about the state of GLD's insurance. They said that there is no insurance but at the same time they claimed HSBC bank do have insurance policies on their holdings. I could not get them to elaborate on this 'claim'.
There are not many ways for the average investor to validate GLD's physical assets. Even the prospectus is full of legal writing removing liability. On top of everything, the GLD manager - State Street, has been shown to be less than trustworthy (Carina CDO, multiple instances of forex fraud). Where is the credibility in GLD?
As far as I know, GLD never had any proper insurance at all. Even though GLD is advertised as "SPDR Gold Shares are intended to lower a large number of the barriers preventing investors from using gold as an asset allocation and trading tool. These barriers have included the logistics of buying, storing and insuring gold." So much for that "insuring gold" part.
when i looked into holding GLD, i wasn't bother by insurance on the gold. what really bothered me was that i couldn't figure out whether the gold they held was encumbered (e.g., loaned out to others, short, etc.)
These two events may not be mutually exclusive. In fact, if GLD was insured, 'loaning' the gold out might be quite a bit more difficult when they have an insurance company breathing down their necks.
Just a careful reading of the prspectus raises so many red flags, that holding GLD for any period beyond a week is foolish.
Just read the part where the custodian subcontracts to subcustodians, but has no right to audit or visit the subcustodians' vaults, only to require third-party audits!!! So we can have the custodian own or pay off the third-part auditor to give a clean audit, while knowing that the subcustodian leases out the gold into the market. If GLD shareholders suspect so, and ask custodian to prove otherwise, custodian can simply say, we have no right to check the subcustodians, see the pospectus, but here is a clean audit result, however laughably compromised or incredible.
Insurance is just one of its weaknesses. I doubt that there is insurance on the gold stash, for it would open a can of worms that State Street would avoid. The insurer, of course, would want to know about safety, access, audits, claims on it, etc to even come up with a premium for the insurance. Now, State Street would never accept such intrusion, in part because the gold stash is probably used for all kinds of shady purposes, including backing shorts.
If GLD or State Street goes bust, no holder of GLD has any claim to any gold. GLD holders simply become unsecured creditors along with all other creditors, with no precedence, in bankruptcy court.