The Trust's gold bars are stored as London Good Delivery gold bars (400 oz). A fundamental limitation was to keep new investors in gold bullion away, and this was the form of the product that was professionally traded: Good Delivery Bar gold bars. These funds are more complex than conventional gold ETFs because they don't physically hold the asset in trust. The custodian has no obligation to insure such gold against loss, theft or damage and the Company has no intention of insuring against such risks.
However, the amount of gold each share represents decreases slightly over time, as the ETF charges investors an annual fee of 0.4%. The weight of gold that supports each unit decreases steadily, through the daily extraction of the management charge; it is usually equivalent to 0.4% per annum. VelocityShares' long gold ETN (UGLD) aims to provide three times the return of the S%26P GSCI Gold ER Index in a single day. We believe that ETFs offer a good service and a service that is much better for gold buyers than futures (which are not backed by gold ingots and therefore expose their holders to unknown risks of default during a crisis).
In the case of the GLD, in a London vault, although the prospectus indicates that there may be periods when sub-custodians hold some gold elsewhere. In addition, the trust's sponsor, TheWorld Gold Trust, can also visit the vaults up to twice a year to inspect the gold. It is important to understand that a trading price below one tenth of a nominal ounce does not represent a discount in the value of the assets, but almost always reflects the reduction in the gold backing of an ETF unit. The GLD prospectus states that gold deposited in the account assigned to the Trust is owned by the Trust and is not traded, leased or lent under any circumstances.
It is not owned by the bank that stores the gold, nor can it be used as part of a bank's reserve. Reverse gold funds have expected negative long-term returns because the price of gold generally rises in a fiat monetary system. In both cases, you have the right to withdraw gold, paying a fee, but in both cases you should use the services when you don't expect to withdraw gold, except in case of emergency.