Gold ETF Swells To Pass $50 Billion Milestone

The Gold ETF is an excellent conduit to redirect physical demand into paper. The Gold ETF is similar to a fractional reserve bank. As long as customers don't fear for their money, the bank can service the cash demands for a small percentage of its customers. A run on the bank develops when too many customers request their cash at once. A large ETF holder, fearing for the return of their gold, will demand delivery as stated in the prospectus at some point. If the fear spreads beyond a small group, a run on the ETF will occur. Unfortunately, unlike banks, there's no such thing an ETF holiday, or Federal Deposit Insurance Corporation. The market price and revised investors expectations towards its holdings will be quickly discounted into the share price.

Amid all the market doom and gloom, the world’s largest gold fund is quietly celebrating another major milestone: SPDR Gold Shares, an exchange-traded fund backed by physical bullion, has recently surpassed $50 billion in assets.

Source: blogs.wsj.com