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Thread: iShares COMEX Gold Trust (IAU)

  1. #1
    Banned Katrine's Avatar
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    Default iShares COMEX Gold Trust (IAU)

    Forgive me if this has been discussed before, but I don't feel like searching. Melonie and crew, what is your opinion in regards to this security?

    I am actually looking to integrate a few shares of this etf into a socially responsible porfolio, but am not really sure if this is right, or would even qualify as socially responsible in my clients eyes. I am trying to increase their overall return with the same level of risk, and its tough because there are so many stocks/funds that I cannot recommend, per client request.

    I'm at home right now and can't log into my morningstar. Any feeback?

    "Have you ever been to American wedding? Where is the vodka, where's marinated herring?" - GB
    "And do the cats give a shit? No, they do not. Why? Because they're cats."-from The Onion

    Quote Originally Posted by Mia M
    If a cupcake was tossed at me... well, I'd only be upset if it missed my mouth

  2. #2
    Banned Melonie's Avatar
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    Default Re: iShares COMEX Gold Trust (IAU)

    luckily for you, IAU is probably one of the only precious metals based stocks or ETF's or mutual funds that could qualify as being 'socially responsible'. Most of the mining stocks are of course at risk of 'slave labor' accusations re South African or South American mining operations.

    To the best of my knowledge, and in accordance with all of the info I could dredge up at IShares and from investor sites, IAU merely acts as a 'gold warehouse'. When an order comes in for IAU shares, the ETF buys a commeasurate amount of gold on the COMEX / spot market, puts the gold bars in its bonded warehouse, and then the ETF issues out share certificates representing a claim on that amount of gold. As the COMEX / spot price of gold varies from day to day in the future, the dollar value of those IAU share certificates varies proportionately.

    The only caveat with IAU or any other 'gold warehouse' ETF is the fact that 'service charges' get inserted by one means or another. As an ETF, the primary means of inserting 'service charges' is via a de-facto markup in the share price of something like 1/2% per year ... which creates a de-facto 'spread' in prices which will continue to widen as time goes by. From that standpoint, competing 'gold warehouse' ETF StreetTracks GLD is a bit more open about their 'service charges'.

    As to the merits of buying IAU or GLD or any of the other gold tracking investment vehicles, there are several schools of thought. On the one hand, the buyer doesn't have to worry about the physical shipping or storage or security issues when he buys IAU versus actual gold bars. On the other hand, if an outright financial panic were ever to come along, instead of having gold bars in hand the buyer is actually holding a piece of paper which must be processed through the US financial system in order to do anything besides wiping their butt with it. In other words, IAU shares are in effect a banker's promise to pay US$ cash to the holder of the piece of paper upon 'redemption', not a promise to trade their paper in for physical gold.

    The 'tin foil hat' crowd would argue that this fact reduces the supposed financial security factors of owning physical gold down to a potentially worthless banker's promise no different from a stock certificate or a bond or a non-FICA backed investment contract.

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    Banned Katrine's Avatar
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    Default Re: iShares COMEX Gold Trust (IAU)

    I'm just looking for some commodities diversification really, with an emphasis on social responsibility. These clients don't have enough for me to play with where I would put more than 5% of their portfolio here, probably even less. I looked at GLD for another client some months ago, but I don't remember why I didn't like it. Perhaps its the volatility...not sure now, sick and tired of analyzing funds this week....

    "Have you ever been to American wedding? Where is the vodka, where's marinated herring?" - GB
    "And do the cats give a shit? No, they do not. Why? Because they're cats."-from The Onion

    Quote Originally Posted by Mia M
    If a cupcake was tossed at me... well, I'd only be upset if it missed my mouth

  4. #4
    Sitri
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    Default Re: iShares COMEX Gold Trust (IAU)

    Well, it may be volitile, but what is the covariance with the other portfolio elements. For a say 2% play, it may increase the overall portfolio return while actually reducing risk.
    which portfolio diversification model are you using?

    Out of curiosity, what do they define as "socially responsible"? I think we can all think of the obvious examples, but what are the "grey" areas? And sense everyone defines social responsibility differently, what type of questionaire do you use to determine what their morals are..

    i.e. Republican social responsibility may be buying the defense contractors while staying away from any drug company that does the morning after pill.
    Democratic social responsibility may be ....
    Green Peace....
    PETA....
    Retired Strippers....


    You have a lot to work.

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    Banned Melonie's Avatar
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    Default Re: iShares COMEX Gold Trust (IAU)

    Retired Strippers....
    LOL ... I'm still waiting for the gov't to approve a breast implant 'depletion allowance' !

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    Banned Katrine's Avatar
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    Default Re: iShares COMEX Gold Trust (IAU)

    I use MPT.

    This is Austin baby, socially responsible tends to be liberal. I will add both to the hypothetical and see what it does...

    What about recommendations for socially responsible Mid-Cap and Small-Cap companies? All of the SC mutual funds I can hold suck the big one. Their porfolio isn't really large enough to hold individual stock, IMHO, but I'd be willing to try it out. I have forces at work with recommendations locally, any suggestions here?

    "Have you ever been to American wedding? Where is the vodka, where's marinated herring?" - GB
    "And do the cats give a shit? No, they do not. Why? Because they're cats."-from The Onion

    Quote Originally Posted by Mia M
    If a cupcake was tossed at me... well, I'd only be upset if it missed my mouth

  7. #7
    Sitri
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    Default Re: iShares COMEX Gold Trust (IAU)

    Yea that does suck. Unless the mutual fund specifically says it is doing only socially acceptable investing, they could add chicken farms, loggers, and prison guard companies and then you would have to monitor them constantly.

    If you go by an index is that removed enough that they will accept the return without feeling they are directly investing in a specific stock?

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    Banned Katrine's Avatar
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    Default Re: iShares COMEX Gold Trust (IAU)

    As long as I can hold the security, I can recommend it. I have a badass global allocation ETF in there already. They are not averse to individual stocks, I am not comfortable with anything at the moment until I look at the fundamentals.

    "Have you ever been to American wedding? Where is the vodka, where's marinated herring?" - GB
    "And do the cats give a shit? No, they do not. Why? Because they're cats."-from The Onion

    Quote Originally Posted by Mia M
    If a cupcake was tossed at me... well, I'd only be upset if it missed my mouth

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