The SPDR Gold Shares (GLD) ETF tracks the price of gold bars on the OTC market. Its shares cost 40 basis points, are worth approximately one tenth the price of an ounce of gold and are backed by real gold ingots that are in a secure vault. Gold exchange-traded funds (ETFs) expose traders to movements in the price of gold without having to buy the underlying physical asset. If the trustee determines that keeping the gold with the custodian is not in the best interest of the Trust's shareholders, the trustee will let the Sponsor know.
Under the bullion allocation agreement, the custodian agreed to store all of the Trust's gold bars in his own London vault, except when the gold ingots had been allocated to a vault other than the custodian's headquarters and, in such cases, the custodian agreed that he will make every reasonable and commercial effort to transport the gold ingots to the custodian's vault, at the risk and expense of the custodian. VelocityShares' long gold ETN (UGLD) aims to provide three times the return of the S%26P GSCI Gold ER Index in a single day. GLD does not generate any revenue, and since GLD regularly sells gold to pay its current expenses, the amount of gold represented by each stock will decrease over time to that point. The account holder has the right to order the bullion dealer to deliver an amount of physical gold equal to the amount of gold outstanding in the account holder's credit.
The value of GLD shares is directly related to the value of the gold held by GLD (minus its expenses), and fluctuations in the price of gold could materially and negatively affect investment in stocks. The amount of gold involved in creation or redemption activities on any given day has, over the life of the Trust, generally been small compared to the Trust's total gold stocks. Under the gold bullion allocation agreement, the custodian agreed to keep all of the Trust's gold bars in their own vaults, except when the gold ingots have been assigned to a vault other than the headquarters of the custodian's vault and, in such cases, the custodian agreed that he will make every effort from a commercial and reasonable point of view to transporting the gold ingots to the custodian's vault, at the custodian's own risk. If any sub-custodian who temporarily holds gold does not act with due care in keeping the Trust's gold ingots, the ability of the trustee or custodian to recover damages against such sub-custodian can only be limited to resources, if any, under applicable English law or, if the sub-custodian is not in England, under other applicable law.