Given my scathing criticism of most (so called) “bullion ETFs,” I frequently get reader questions about the “prospectus” of one fund or another. I freely confess to not having read these documents. My (stated) reasons for not doing so are that I do not, and would not hold such investments, and that I have already provided enough reasons to doubt the legitimacy of these investment vehicles that such an analysis would be moot.

However, at the persistent urging of one reader, I finally caved in and went through the prospectus of The Mother of all Bullion Scams: GLD. It was at this point I had to deal with my third, unstated reason for avoiding these documents – they make your head hurt. This is especially true for those with a background in law, as we have been trained to attempt to discern the “intent” of every word of such documents, which means attempting to reconstruct the thinking of the lawyer(s) at the time the document was drafted.

At first glance, the SPDR Gold Trust (GLD) is the epitome of simplicity. In the first paragraph of the Prospectus Summary, it states:

The Trust holds gold bars…

Then, a few paragraphs later, is a section titled “Trust’s Gold Holdings as of March 31, 2010.” It lists the total holdings as approximately 36.5 million ounces, almost all of it in “allocated” gold bars. So far, so good … The problem is that as soon as one scratches the surface, to attempt to verify that this ETF-behemoth is actually the straightforward “trust” that is presented, we immediately encounter one serious issue after another, which I am labeling the “seven sins” of GLD.

….read 1-7 of the Seven Sins HERE