10-QPeriod: Q1 FY2008

SPDR GOLD TRUST Quarterly Report for Q1 Ended Dec 31, 2007

Filed February 7, 2008For Securities:GLD

Summary

SPDR Gold Trust (GLD) reported a strong financial performance for the quarter ending December 31, 2007. The Trust saw a significant increase in its investment in gold, growing from $10.64 billion to $12.04 billion, reflecting the rising market value of gold. This growth was primarily driven by substantial inflows of gold through share creations, indicating strong investor demand. The Trust's net gain from operations was $114.5 million, a significant turnaround from a net loss of $3.18 million in the same period of the previous year, resulting in a positive gain per share of $0.59. Investors should note the Trust's operational model where gold is sold to cover expenses, leading to zero cash flow from operations and consistently zero cash balances. The Trust's value is intrinsically linked to the price of gold, which experienced a notable surge during the quarter, closing at $836.50 per ounce, up from $743.00 at the end of the previous fiscal year. The market value of the Trust's gold holdings significantly exceeded its cost basis, highlighting unrealized gains. Despite the positive performance, investors should remain aware of the inherent risks associated with gold price volatility and the gradual decline in the amount of gold represented by each share due to expense coverage.

Key Highlights

  • 1Investment in gold increased by approximately $1.4 billion to $12.04 billion as of December 31, 2007, driven by rising gold prices and share creations.
  • 2Net gain from operations for the quarter was $114.5 million, a substantial improvement from a net loss of $3.18 million in the prior year's comparable quarter.
  • 3Gain per share was $0.59 for the quarter, compared to a loss of $0.02 in the same period of the previous year.
  • 4The Trust experienced significant share creations, with 204.3 million shares outstanding at year-end, up from 187.9 million at the end of the previous fiscal quarter.
  • 5The market value of gold holdings stood at $16.89 billion, significantly higher than the cost value of $12.04 billion, reflecting unrealized gains.
  • 6The Trust reported zero cash flow from operations, consistent with its strategy of selling gold to cover expenses.
  • 7The price of gold saw a strong upward trend, closing at $836.50 per ounce on December 31, 2007, an increase from $743.00 at the end of the prior fiscal year.

Frequently Asked Questions

The primary driver of GLD's financial performance is the price of gold bullion. The Trust's investment objective is for its shares to reflect the performance of the price of gold, less the Trust's expenses. Therefore, fluctuations in the global gold market directly impact the Trust's Net Asset Value (NAV) and the value of its shares.

GLD covers its operational expenses by selling a portion of the gold it holds. This strategy means the Trust does not generate cash from operations and typically maintains zero cash balances. The sale of gold to pay expenses can lead to a gradual decline in the amount of gold represented by each share over time, irrespective of gold price movements.

The filing shows a significant difference between the market value and the cost basis of the Trust's gold holdings. As of December 31, 2007, the market value was approximately $16.89 billion, while the cost basis was approximately $12.04 billion. This difference represents unrealized gains, indicating that the market value of the gold held has appreciated significantly since it was acquired at its average cost.

The increase in the number of outstanding shares, from 187.9 million to 204.3 million during the quarter, indicates strong investor demand for GLD shares. These new shares were created in exchange for deposits of gold into the Trust, reflecting a net inflow of gold.