Phantom gold haunts GLD vault tour

By Joe Morris
Financial Times, London
Thursday, September 1, 2011

http://www.ft.com/intl/cms/s/0/d90e9d80-d4ac-11e0-a7ac-00144feab49a.html

The SPDR Gold Trust (GLD) may have sought to defuse conspiracy theorists by opening up its massive London gold vault to CNBC, but instead it opened up a new line of inquiry.

In the segment --

http://video.cnbc.com/gallery/?video=3000043030

-- reporter Bob Pisani was forced to surrender his cell phone before being driven, not unlike a hostage, in what appears to be a cargo van with its windows sealed by black tarp. "We have no idea where we're going," he says over background music reminiscent of the "Mission Impossible" theme.

Once inside, Pisani holds up a random gold bar, its refiner's stamp clearly legible. (This occurs about 2:10 into the video segment.) As Zero Hedge points out in a blog post today --

http://www.zerohedge.com/news/some-observations-bob-pisanis-visit-glds-v...

-- the serial number on that bar, ZJ6752, does not appear on GLD's most recent bar list, dated August 31. Given that GLD tonnage stayed relatively flat over the previous week, when Mr Pisani's visit presumably occurred, few if any bars are likely to have been removed from the vault in the interim, Zero Hedge notes.

... Dispatch continues below ...

"Of course, Pisani may have well shot the documentary some three weeks ago, when gold peaked at 1310 [metric] tons, although we assume he would have then said 1,300 tons held by the warehouse, not 1,200 as he did," Zero Hedge says. "If that is the case, there is a small chance based purely on statistics that ZJ6752 was promptly moved out of the warehouse upon a redemption event. The chance is about 1 in 10,000 or so, but still. ..."

The question, or at least one question, is: When did Mr Pisani pay his visit?

Phantom gold conspiracies haven't seemed to dent demand for GLD, despite BlackRock's attempt a year ago to distinguish itself as the only US-listed gold ETF to be fully allocated daily. (Jeremy Charles, global head of precious metals at HSBC, which houses the vault, tells Pisani: "At no point in time is there a risk to the trust." But GLD's prospectus states that up to 430 ounces of gold can be held in the trust's unallocated account overnight, which would seem to constitute a type of risk.)

Still, the CNBC invite suggests GLD is at least somewhat bothered by the whispers. We could see this episode proving a PR tipping point, ushering in either a new era of openness and access or, alternately, even more secrecy.

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Joe Morris is a regular contributor to both FTfm and to ETF Central, the Alchemy forum where this post first appeared.

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