Giving Up on Gold

Townhall.com ^ | May 22, 2013 | Mike Shedlock

[Sirius Lee]

Since the ETFs hold physical gold, why would the price change at all?

ETFs no more hold physical gold than banks hold the physical cash of their depositors. Sure, if you go down and exchange your ETF individually you can get your gold, but if a lot of people decided to get physical they'd find out they were holding nothing but an empty bag of unkept promises.

http://seekingalpha.com/article/1362291-the-end-of-fractional-reserve-gold-is-nigh

[Toddsterpatriot]

ETFs no more hold physical gold than banks hold the physical cash of their depositors.

Investors in the Gold ETF - GLD liquidated 300 tons of the metal this year.

The above sentence was from the original post. As far as I know, GLD holds enough gold to redeem every share.

[Sirius Lee]

As far as I know, GLD holds enough gold to redeem every share.

It doesn't. Every share of GLD can be sold twice, long and short, so... twice as many shares as there is of the physical that is supposed to be backing it.

[Toddsterpatriot]

It doesn't. Every share of GLD can be sold twice, long and short

If you sell it short, you have to borrow it. The person you borrow from can't redeem it until you return his shares.