Readers who have followed my work for several years know that I have been quite vocal about the illegitimacy of the GLD gold ETF.   James Turk was the first analyst in 2004 to bring attention to flagrant legal loopholes which enable the GLD custodian (HSBC) to play the “shell game” with GLD’s gold bars.

Certainly highly illegal activities by HSBC are de rigueur, as evidenced by its conviction for laundering drug money – for which a $1.9 billion settlement with the Justice Department failed to deter HSBC’s money laundering activities – LINK. What the heck, $1.9 billion is merely the cost of conducting a high-margin business endeavor.  Just ask the big banks funding Hillary Clinton’s Presidential campaign.

In 2009 I published an extension of Turk’s 2004 GLD evisceration – one which Turk actually helped me edit – in which I concluded:

I have no problem with the concept of using GLD for daytrading to make directional bets, long or short, on the short term swings in the price of gold. But if you invest in GLD with the intent of making a long term investment in gold, please be aware that GLD is NOT an investment in actual physical gold. GLD is nothing more than a piece of paper which proclaims, but does not promise, to have gold on the other side of its highly structured legal barriers. Furthermore, for the reasons shown above, there is the possibility that you might wake up one day to find out that the price of GLD has suddenly dropped well below the spot price of gold and that GLD could even end up worthless.

At some point I will update this research piece because GLD has made some changes to the prospectus which widened the legal loopholes into  legal sewage holes.

The bottom line is that GLD (and SLV) was created to “trap” billions of institutional cash that might otherwise have been used to purchase actual physical bars.  It was a tool to enhance the price manipulation of gold using paper derivatives.  I have no doubt that at some point in time GLD held a lot gold bars in its vault.  But I think it’s also pretty clear to anyone who has been through the prospectus with fine-tooth comb that GLD was set up as a “holding pen” of sorts for gold bars that would eventually be used to put out physical demand fires once the Central Banks ran low on or out of gold bars used in Central Bank leasing activities.

I mentioned to a colleague yesterday that the information about the economy and the markets published by “official” sources is not interesting.  The Government and big banks report the information they want us to see.  It’s the information content “behind” the official reports that is of interest.

Unfortunately we end up having to connect a lot of “dotted lines” in order to draw reasonable inferences about the truth that lies beneath the surface.   With GLD, the prospectus itself is a treasure trove of “dotted lines.”  So too is the fact  that the Bank of England is now a vault “sub”- custodian for GLD.  Yes, the Bank of England that is one of the original participants in the development of the gold leasing market.  My GLD research piece explains why the “sub-custodian” mechanism in the GLD legal structure readily enables gold bar leasing.

Adding to the intrigue is the fact that GLD’s “Sponsor,” World Gold Trust Services – a subsidiary of the World Gold Council – has had four different CEO’s in less than three years from 2013-2016.  The CEO previous to these three CEOs had been in place for four years, from 2009-2013.  BullionStar’s Ronan Manly is the first to report this strange event – LINK.

While I laud Manly for his diligent research of the events, I find his rationale for the CEO revolving door at GLD to be circumspect.   For me the dotted lines connecting the CEO revolving door at GLD are threefold – all of which point to the accelerated use of GLD as a source for leasing and hypothecating gold bars since 2012 in order to manipulate the price of gold:  1) the 2012 alteration of the prospectus which further loosened the already tenuous degree of legal accountability of the custodial vaults;  2) the massive draw-down and subsequent “replenishment” of gold bars reported to be in held by the ETF;  3) the inclusion of the Bank of England as one of the highly unaccountable vault sub-custodians.

My “dotted line” view is that each CEO was in the position long enough to understand the true nature of GLD’s dealings and decided they were not getting paid enough to hang around long enough to go down with the ship.

The final  conclusion for me is that GLD (and SLV) is the precious metals market’s equivalent of Enron or MF Global.  The 3-yr CEO revolving door at GLD since 2012 likely reinforces this viewpoint.   When the real scramble for physical gold that can be possessed immediately takes place – an eventuality we all know is coming sooner or later – the truth about GLD will be revealed and the clueless, hope-strangled GLD shareholders will be helpless as they watch the value of GLD plummet while the market price of gold goes parabolic.