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Behind Gold’s New Glister: Miners’ Big Bet on a Fund
By LIAM PLEVEN and CAROLYN CUI
The innovation that opened gold investing to the masses and helped spur this year’s record-breaking bull market was hatched in an act of desperation by a little-known gold-mining trade group.
The World Gold Council, created to promote gold, was fighting for survival. Its members—global gold-mining companies—were frustrated with the council’s inability to stem two decades of depressed prices and find buyers for a growing glut of the yellow metal. Eight years ago, they were considering withdrawing funding from the trade group, a move that would have effectively shut it down.
Chris Thompson, the group’s chairman, figured the council needed to expand the pool of gold buyers, particularly in the U.S. The idea of trading gold on an exchange had been floating around for years, but various hurdles had prevented it from taking off in America.
What the council eventually managed to create in those dark days surpassed its wildest dreams: SPDR Gold Shares, the exchange-traded fund launched in November 2004. The fund, known by its ticker symbol GLD, has ballooned into a $56.7 billion behemoth.
Today, GLD is the fastest-growing major investment fund ever, according to research company Lipper Inc., and one of the most active gold traders in the market. Its presence has helped gold—which settled down 0.33% in New York trading Wednesday, at $1,372.90 a troy ounce—triple in price in recent years to fresh all-time highs this month.
As the world’s largest private owner of bullion, GLD is soaking up $30 million of gold daily, stored in a London vault that now holds the equivalent of about six months’ worth of the world’s entire gold-mining production.
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If you want to know who has been manipulating the price of gold, you have to look no further than the dozens of companies and celebrities pushing people to buy it.