Why SPDR Gold Shares Is Poised to Keep Plunging

Based on the aggregated intelligence of 180,000-plus investors participating in Motley Fool CAPS, the Fool's free investing community, the SPDR Gold Shares ETF (NYSE: GLD) has received a distressing two-star ranking.

With that in mind, let's take a closer look at GLD and see what CAPS investors are saying about the ETF right now.

GLD facts

   

Inception

Nov. 2004

Total Net Assets

$57.2 billion

Investment Approach

Seeks to replicate the performance, net of expenses, of the price of gold bullion. The trust holds gold, and is expected to issue baskets in exchange for deposits of gold, and to distribute gold in connection with redemption of baskets.

Expense Ratio

0.4%

1-Year / 3-Year / 5-Year Returns

(18.4%) / 4.9% / 7.5%

Alternatives

iShares Gold Trust 

ETFS Physical Swiss Gold Shares

Market Vectors Gold Miners 

Sources: S&P Capital IQ and Motley Fool CAPS.

On CAPS, 14% of the 3,506 members who have rated GLD believe the ETF will underperform the S&P 500 going forward.

Just last week, one of those Fools, Raphael1990, succinctly summed up GLD bear for our community:

Gold is only an inflation hedge and it is not even a good one! So why buy gold, if you might as well buy property as inflation hedge?

The only reason to buy gold is, if you believe it will go up, because people look for a safe haven, which was a reasonable investment thesis in 1999 and 2007. But by now you can assume that everyone knows about gold and everybody who wants to own gold, already owns it.

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  • Report this Comment On April 16, 2013, at 7:21 PM, JeanDavid wrote:

    "But by now you can assume that everyone knows about gold and everybody who wants to own gold, already owns it."

    I don't know about that. If I remember correctly, when I believe it was the International Monetary Fund threatened to sell 100 (or 400) tons of gold, the government of China offered to take it all, but the IMF refused to sell it to them. So the government of India offered to take 100 tons of it, and was refused also. I may be off on the numbers, but that was the gist of it. Did either of them ever get the gold they wanted?

    The view of the gold bugs I read was that it was the IMF's effort to depress the price of gold to hold up the US dollar, and they had no intent to sell it. Some more extreme gold bugs thought the IMF had already sold all or most of their gold already before the announcement.

    I am not saying this to suggest anyone buy gold. I mention it because the price of gold is so heavily manipulated by "very strong hands" that it is a very dangerous thing to invest in when you are betting against the government of the US and its agents. Who else can short enough gold to depress its price?

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