Summary
The SPDR Gold Trust (GLD), in its May 2005 10-Q filing, reported its financial condition as of March 31, 2005. Established in November 2004, the Trust's primary asset is gold, valued at over $2.25 billion. The Trust's objective is to mirror the performance of gold bullion prices, less operational expenses. For the first quarter of 2005, the Trust reported a net loss of $32.77 million, largely driven by unrealized losses on its gold holdings due to market fluctuations. Despite the net loss, the Trust's structure ensures that shares represent a direct investment in physical gold, with creations and redemptions facilitated by the exchange of gold for Trust shares. Investors should note that the Trust does not generate income and incurs ongoing expenses, which are paid by selling small amounts of its gold holdings. This gradual sale of gold to cover expenses means that the amount of gold backing each share will decrease over time, potentially leading to a gradual decline in the share price relative to the gold price if the price of gold does not increase sufficiently. The filing also disclosed a legal proceeding against the Sponsor, World Gold Trust Services, LLC, which is in the discovery phase and is believed by the Sponsor to have good defenses.
Key Highlights
- 1Total Assets: As of March 31, 2005, the Trust held over $2.25 billion worth of investment in gold.
- 2Net Loss: The Trust reported a net loss of $32.77 million for the three months ending March 31, 2005, primarily due to unrealized losses on its gold holdings.
- 3Share Structure: Shares are issued in exchange for gold deposits (creations) and redeemed for gold distributions, designed to track the price of gold bullion.
- 4Ongoing Expenses: The Trust incurs expenses (custody, trustee, sponsor, marketing fees) that are paid by selling small amounts of gold, leading to a gradual decrease in gold per share over time.
- 5Legal Proceedings: A civil lawsuit has been filed against the Sponsor and other parties, alleging breach of contract and misappropriation of trade secrets; the Sponsor believes it has strong defenses.
- 6No Cash Balances: The Trust had no cash balances as of March 31, 2005, as cash generated from gold sales for expenses was immediately used to cover those expenses.
- 7Investment Objective: The primary goal is for the Shares to reflect the performance of the price of gold bullion, less the Trust's expenses.