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Bloomberg notes but fails to question gold and silver ETF vaulting issues

Section: Daily Dispatches

Gold Fever in 2020 Means Exchange-Traded Funds

By Jack Farchy and Eddie Spence
Bloomberg News
Sunday, August 23, 2020

In the 19th century California gold rush, the surest way to a fortune, according to Mark Twain, was to be in the “pick and shovel business.”

If 2020 gold fever has an equivalent, it's the ETF business.

Exchange-traded funds backed by physical gold and silver accumulated more than $50 billion of bullion this year. ETFs now hold more gold than every central bank with the exception of the Federal Reserve.

... Dispatch continues below ...


Asante Gold Announces Kubi 3D Model
Extends Gold Mineralizing System

Company Announcement via Globe Newswire
Thursday, July 2, 2020

VANCOUVER, British Columbia, Canada -- Asante Gold Corp. (CSE:ASE / Frankfurt:1A9 / U.S.OTC: ASGOF) has received the results of 3D magnetic modeling completed over its Kubi mining lease in the Ashanti Gold Belt in Ghana.

The results show that the Kubi Main Zone gold resource is intimately associated with and interfingers the western sheared contact of a magnetic high feature that plunges to more than 2 kilometers in depth. Here is the 3D model video:

In Ghana, Africa's largest gold producer, many big mines are located along northeast-trending regional shear systems that exceed 250 kilometers in length. Studies indicate that the hydrothermal gold mineralizing system that generated the Ashanti Gold Belt deposits was "gigantic and extended to at least 10 to 15 kilometers in depth" (Schmidt Mumm et al., 1996). The Ashanti shear zone hosts the largest single gold resource in Ghana, the 66-million-ounce Obuasi mine. This major shear zone cuts Kubi 15 kilometers southwest of Obuasi. ...

... For the remainder of the announcement:

That's generated windfall fees for ETFs and has been a boon for everyone involved in the business of servicing those enormous hoards of shiny metal. That includes the financial firms that provide the funds to investors, through to the banks and security firms responsible for storing hundreds of billions of dollars worth of gold and silver beneath the streets of London. ...

GLD is delivering some $300 million of fees a year at current holdings and prices. That's good news for State Street and also for the World Gold Council -- a mining industry-backed group that helped create the ETF -- as both take a cut of those fees. ...

It's also benefited the few big banks -- principally JPMorgan Chase & Co. and HSBC Holdings Plc -- that hold gold and silver on behalf of the ETFs in underground vaults, behind foot-thick reinforced doors. For them it's a niche business, but as holdings have surged in value, it has become a solid earner.

GLD's gold is held in HSBC's vault in London. The last time the vaulting fees were disclosed, in 2015, they amounted to 10 basis points, or 0.1%, per year for the first 4.5 million ounces held, followed by 6 basis points thereafter. HSBC declined to comment. ...

The surge in demand has strained the system.

GLD's quarterly reports reveal that beginning in April, it owned some gold that was not held at HSBC's vault, but instead at the Bank of England, which trails only the Fed in its store of bullion.

As movements of gold were slowed down by social distancing during the coronavirus pandemic, the BOE couldn't transport the metal quickly enough to HSBC's own London vault to meet the ETF's demand, according to people familiar with the situation. ...

The custodian for the largest silver ETF, the iShares Silver Trust or SLV, is JPMorgan. For a long time, the fund's prospectus included a note explaining that if its holdings increased above 500 million ounces, it would seek an additional custodian. But in July, as SLV's holdings soared above that level, the clause was quietly dropped. ...

... For the remainder of the report:

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