NEW YORK (
) -- The
SPDR Gold Shares
is a large bet among some big named investors giving them power over the
In the first quarter of 2009, the GLD added a record 400 tons as investors bought the gold ETF as a portfolio diversifier when the financial crisis ballooned. As the above six-month comparison chart shows, the GLD tracks and even outperforms gold's spot price giving an investor exposure to gold without having to buy and store gold bullion.
Risky Investment: Gold ETFs
For investors who own blocks of 100,000 shares, called a basket, the GLD's trustee, Bank of New York, can help redeem their shares for physical gold. Investors who own less than the required amount must work with their individual broker to access the physical gold. The GLD holds $41 billion in net assets and currently has 1,141 tons of gold. Gold ETFs gained a lot of buzz since the GLD's inception in 2004 and since then two more have hit the market,
iShares Comex Gold Trust
ETFS Gold Trust
One share of the GLD equals one-tenth an ounce of gold. An investor who owns 100,000 shares, owns 10,000 ounces or 0.31 tons of gold. When an investor sells his or her shares and there are no buyers, the physical gold eventually makes its way back into the open market. Michael Crook, vice president and strategist at Barclays Wealth, estimates that once the crisis premium comes out of the GLD there will be "2-5 years of excess gold supply" in circulation. Many analysts expect the gold price to come under pressure if major GLD shareholders sell their stakes.
Here's a look at the top 5 owners of the GLD for a snapshot of the power they hold for the future of gold prices.
Paulson & Co.
, the hedge fund started by John Paulson, is the largest holder of the GLD with 31.5 million shares. As of Dec. 31, its funds were valued at $19.5 billion with the GLD accounting for 17.34% of its main portfolio. Paulson's position is unchanged through 2010 and equals $3.5 billion.
Paulson & Co. was recently caught in the battle between the
Securities and Exchange Commission
. The SEC states that Paulson & Co. was instrumental in picking the mortgage bonds that comprised the CDO, ABACUS, and then bet on its failure. Paulson & Co. has not been brought up on charges, rather its Goldman's failure to disclose Paulson's involvement that's in the spotlight, but investors panicked nonetheless. The gold price plummeted over $20 Friday after the charges were announced as investors worried in part that Paulson would sell his gold position. The amount of shares Paulson owns equals 98.44 tons. To put this number in perspective, mainland China bought 347 tons of gold jewelry in 2009. An inflow of almost 100 tons into the open market, depending on how it was sold, could pressure the gold price.
Bank of America
Bank of America is the second largest holder of the GLD with 6.4 million shares. In the fourth quarter of 2009, Bank of America added 4.9 million shares bringing its investment to $715.78 million or 20.1 tons. Bank of America bought shares as the gold price hit a new high of $1,227 an ounce.
Blackrock Advisors is the third largest holder of the GLD with 6.4 million shares. In the fourth quarter of 2009, Blackrock sold 8,600 shares brining their investment to $708.36 million or 19.9 tons.
Soros Fund Management
Soros Fund Management, founded by
, is the fourth largest holder of the GLD with 6.2 million shares. In the fourth quarter of 2009, Soros almost tripled his holdings increasing his position from 2.5 million to 6.2 million shares as the gold price soared over $1,200 an ounce. Soros' position in the ETF is worth $686 million or 19.3 tons.
Morgan Stanley is the fifth largest holder of the GLD with 6.1 million shares. In the fourth quarter, the firm took some profits and sold 339,298 shares. Its total investment is $680.85 million or 19.1 tons.
Written by Alix Steel in New York
Alix joined TheStreet.com TV in February 2007. Previously, she held positions in film and theater production, management, and legal administration. Alix has a degree in communications and theater from Northwestern University.