SPDR GOLD TRUST - Quarter Report: 2019 June (Form 10-Q)

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

 

for the quarterly period ended

001-32356

 

(Exact Name of Registrant as Specified in Its Charter)

 

c/o World Gold Trust Services, LLC

685 Third Ave. 27 Floor

New York, New York 10017

(Address of Principal Executive Offices)

317-3800

(Registrant’s Telephone Number, Including Area Code)

 

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PART I—FINANCIAL INFORMATION:

Statements of Financial Condition

 

See notes to the unaudited financial statements.

1

Schedules of Investment

(Amounts in 000’s except for percentages)

June 30, 2019

See notes to the unaudited financial statements.

2

Unaudited Statements of Operations

See notes to the unaudited financial statements.

3

For the three and nine months ended June 30, 2019 and 2018

 

 

For the three and nine months ended June 30, 2019 and 2018

 

 

The Shares trade on the NYSE Arca, Inc. (“NYSE Arca”) under the symbol “GLD”, providing investors with an efficient means to obtain market exposure to the price of gold bullion. The Shares are also listed on the Hong Kong Exchanges and Clearing Limited, the Mexican Stock Exchange (Bolsa Mexicana de Valores), the Singapore Exchange Limited, and the Tokyo Stock Exchange.

The Trustee does not actively manage the gold held by the Trust. This means that the Trustee does not sell gold at times when its price is high, or acquire gold at low prices in the expectation of future price increases. It also means that the Trustee does not make use of any of the hedging techniques available to professional gold investors to attempt to reduce the risk of losses resulting from price decreases. Any losses sustained by the Trust will adversely affect the value of the Shares.

The statement of financial condition and schedule of investment at June 30, 2019, and the statements of operations, changes in net assets and cash flows for the three and nine months ended June 30, 2019 and 2018 have been prepared on behalf of the Trust without audit. In the opinion of management of the Sponsor of the Trust, all adjustments (which include normal recurring adjustments) necessary to present fairly the financial position, results of operations and cash flows as of and for the three and nine months ended June 30, 2019 and for all periods presented have been made.

10-K

The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) requires those responsible for preparing financial statements to make estimates and assumptions that affect the reported amounts and disclosures. Actual results could differ from those estimates. The following is a summary of significant accounting policies followed by the Trust.

The Trust is an investment company and, therefore, applies the specialized accounting and reporting guidance in Financial Accounting Standards Board (“FASB”) Accounting Standards Codification Topic 946 Financial Services—Investment Companies.

 

FASB Accounting Standards Codification Topic 820, Fair Value Measurements and Disclosures, provides a single definition of fair value, a hierarchy for measuring fair value and expanded disclosures about fair value adjustments.

The Trust does not hold any derivative instruments, and its assets only consist of allocated gold bullion and, from time to time, (i) gold receivable, representing gold covered by contractually binding orders for the creation of Shares where the gold has not yet been transferred to the Trust’s account and (ii) cash, which is used to pay expenses.

U.S. GAAP defines fair value as the price the Trust would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date. The Trust’s policy is to value its investments at fair value.

Various inputs are used in determining the fair value of assets and liabilities. Inputs may be based on independent market data (“observable inputs”) or they may be internally developed (“unobservable inputs”). These inputs are categorized into a disclosure hierarchy consisting of three broad levels for financial reporting purposes. The level of a value determined for an asset or liability within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement in its entirety. The three levels of the fair value hierarchy are as follows:

Level 1 – Unadjusted quoted prices in active markets for identical assets or liabilities;

Level 2 – Inputs other than quoted prices included within Level 1 that are observable for the asset or liability either directly or indirectly, including quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not considered to be active, inputs other than quoted prices that are observable for the asset or liability and inputs that are derived principally from or corroborated by observable market data by correlation or other means; and

Level 3 – Inputs that are unobservable for the asset or liability, including the Trust’s assumptions used in determining the fair value of investments.

The following table summarizes the Trust’s investments at fair value:

There were no transfers between Level 1 and other Levels for the period ended June 30, 2019 or for the year ended September 30, 2018.

The Trustee values the gold held by the Trust on the basis of the price of an ounce of gold as determined by the ICE Benchmark Administration Limited (“IBA”), a benchmark administrator, which provides an independently administered auction process as well as the overall administration and governance for the London Bullion Market Association (“LBMA”). In determining the net asset value (“NAV”) of the Trust, the Trustee values the gold held

 

by the Trust on the basis of the price of an ounce of gold determined by the IBA 3:00 PM auction process (“LBMA Gold Price PM”), which is an electronic auction, with the imbalance calculated, and the price adjusted in rounds (30 seconds in duration). The auction runs twice daily at 10:30 AM and 3:00 PM London time. The Trustee determines the NAV of the Trust on each day the NYSE Arca is open for regular trading, at the earlier of the LBMA Gold Price PM for the day or 12:00 PM New York time. If no LBMA Gold Price is made on a particular evaluation day or if the LBMA Gold Price has not been announced by 12:00 PM New York time on a particular evaluation day, the next most recent LBMA Gold Price (AM or PM) is used in the determination of the NAV of the Trust, unless the Trustee, in consultation with the Sponsor, determines that such a price is inappropriate to use as the basis for such determination.

Gold is held by HSBC Bank plc, on behalf of the Trust. During the year ended September 30, 2018 and the nine months ended June 30, 2019, no gold was held by a subcustodian.

Gold receivable represents the quantity of gold covered by contractually binding orders for the creation of Shares where the gold has not yet been transferred to the Trust’s account. Generally, ownership of the gold is transferred within business days of the trade date.

Gold payable represents the quantity of gold covered by contractually binding orders for the redemption of Shares where the gold has not yet been transferred out of the Trust’s account. Generally, ownership of the gold is transferred within two business days of the trade date.

The Trust creates and redeems Shares from time to time, but only in one or more Baskets (a Basket equals a block of 100,000 Shares). The Trust issues Shares in Baskets to certain authorized participants (“Authorized Participants”) on an ongoing basis. The creation and redemption of Baskets is only made in exchange for the delivery to the Trust or the distribution by the Trust of the amount of gold and any cash represented by the Baskets being created or redeemed, the amount of which will be based on the combined net asset value of the number of Shares included in the Baskets being created or redeemed determined on the day the order to create or redeem Baskets is properly received.

 

As the Shares of the Trust are redeemable in Baskets at the option of the Authorized Participants, the Trust has classified the Shares as Net Assets for financial reporting purposes. Activity in the number of Shares created and redeemed for the nine months ended June 30, 2019 and June 30, 2018 are as follows:

The Trustee will, at the direction of the Sponsor or in its own discretion, sell the Trust’s gold as necessary to pay the Trust’s expenses. When selling gold to pay expenses, the Trustee will endeavor to sell the smallest amount of gold needed to pay expenses in order to minimize the Trust’s holdings of assets other than gold. Unless otherwise directed by the Sponsor, the Trustee will sell gold to the Custodian at the next LBMA Gold Price PM following the sale order. A gain or loss is recognized based on the difference between the selling price and the average cost of the gold sold, and such amounts are reported as net realized gain/(loss) from investment in gold sold to pay expenses on the Statement of Operations.

The Trust’s net realized and change in unrealized gain/(loss) on investment in gold for the nine months ended June 30, 2019 of $5,466,979 is made up of a realized gain of $1,199 from the sale of gold to pay expenses, a realized gain of $181,451 from gold distributed for the redemption of Shares, and a change in unrealized appreciation of $5,284,329 on investment in gold.

The Trust’s net realized and change in unrealized gain/(loss) on investment in gold for the nine months ended June 30, 2018 of ($887,989) is made up of a realized gain of $4,014 from the sale of gold to pay expenses, a realized gain of $262,015 from gold distributed for the redemption of Shares, and a change in unrealized depreciation of ($1,154,045) on investment in gold.

The Trust is classified as a “grantor trust” for U.S. federal income tax purposes. As a result, the Trust itself will not be subject to U.S. federal income tax. Instead, the Trust’s income and expenses will “flow through” to the Shareholders, and the Trustee will report the Trust’s proceeds, income, deductions, gains, and losses to the Internal Revenue Service on that basis. The Sponsor of the Trust has evaluated whether or not there are uncertain tax positions that require financial statement recognition and has determined that reserves for uncertain tax positions are required as of June 30, 2019 or September 30, 2018.

 

tax years are those years that are open for examination by the relevant income taxing authority. As of June 

,

, the

,

, and

tax years remain open for examination. There are no examinations in progress at period end.

2018-13,

2018-13”).

2018-13

The Trust’s only recurring fixed expense is the Sponsor’s fee which accrues daily at an annual rate equal to 0.40% of the daily NAV, in exchange for the Sponsor assuming the responsibility to pay all ordinary fees and expenses of the Trust.

Affiliates of the Trustee may from time to time act as Authorized Participants or purchase or sell gold or Shares for their own account, as agent for their customers and for accounts over which they exercise investment discretion.

The Trust’s sole business activity is the investment of gold. Several factors could affect the price of gold including: (i) global supply and demand, which is influenced by such factors as gold’s uses in jewelry, technology and industrial applications, purchases made by investors in the form of bars, coins and other gold products, forward selling by gold producers, purchases made by gold producers to unwind gold hedge positions, central bank purchases and sales, and production and cost levels in major gold-producing countries such as China, Australia, and the United States; (ii) investors’ expectations with respect to the rate of inflation; (iii) currency exchange rates; (iv) interest rates; (v) investment and trading activities of hedge funds and commodity funds; (vi) other economic variables such as income growth, economic output, and monetary policies; and (vii) global or regional political, economic or financial events and situations, especially those that are unexpected in nature. In addition, while gold is used to preserve wealth by investors around the world, there is no assurance that gold will maintain its long-term value in terms of purchasing power in the future. In the event that the price of gold declines, the Sponsor expects the value of an investment in the Shares to decline proportionately. Each of these events could have a material effect on the Trust’s financial position and results of operations.

The Sponsor, and its shareholders, members, directors, officers, employees, affiliates and subsidiaries, are indemnified by the Trust and held harmless against certain losses, liabilities or expenses incurred in the performance of their duties under the Trust Indenture without gross negligence, bad faith, willful misconduct, willful malfeasance or reckless disregard of the indemnified party’s obligations and duties under the Trust Indenture. Such indemnity includes payment by the Trust of the costs and expenses incurred in defending against any claim or liability under the Trust Indenture. Under the Trust Indenture, the Sponsor may be able to seek indemnification by the Trust for payments it makes in connection with the Sponsor’s activities under the Trust Indenture to the extent its conduct does not disqualify it from receiving such indemnification under the terms of the Trust Indenture. The Sponsor is also indemnified by the Trust and held harmless against any loss, liability or 

 

assets.

The Sponsor has agreed to indemnify certain parties against certain liabilities and to contribute to payments that such parties may be required to make in respect of those liabilities. The Trustee has agreed to reimburse such parties, solely from and to the extent of the Trust’s assets, for indemnification and contribution amounts due from the Sponsor in respect of such liabilities to the extent the Sponsor has not paid such amounts when due. The Sponsor has agreed that, to the extent the Trustee pays any amount in respect of the reimbursement obligations described in the preceding sentence, the Trustee, for the benefit of the Trust, will be subrogated to and will succeed to the rights of the party so reimbursed against the Sponsor.

The Trust is presenting the following financial highlights related to investment performance and operations of a Share outstanding for the three and nine month period ended June 30, 2019 and 2018, respectively. The total return at net asset value is based on the change in net asset value of a Share during the period and the total return at market value is based on the change in market value of a Share on the NYSE Arca during the period. An individual investor’s return and ratios may vary based on the timing of capital transactions.

 

SPDR Gold Trust is an investment trust that was formed on November 12, 2004 (“Date of Inception”). The Trust issues baskets of Shares, or Baskets, in exchange for deposits of gold and distributes gold in connection with the redemption of Baskets. The investment objective of the Trust is for the Shares to reflect the performance of the price of gold bullion, less the expenses of the Trust’s operations. The Shares are designed to provide investors with a cost effective and convenient way to invest in gold.

Gold is held by HSBC Bank plc (the “Custodian”) on behalf of the Trust.

As of the date of this quarterly report, Credit Suisse Securities (USA) LLC, Goldman, Sachs & Co., Goldman Sachs Execution & Clearing, L.P., HSBC Securities (USA) Inc., J.P. Morgan Securities LLC, Merrill Lynch Professional Clearing Corp., Morgan Stanley & Co. LLC, RBC Capital Markets LLC, UBS Securities LLC, and Virtu Financial BD LLC are the only Authorized Participants. An updated list of Authorized Participants can be obtained from the Trustee or the Sponsor.

Investing in the Shares does not insulate the investor from certain risks, including price volatility. The following chart illustrates the movement in the price of the Shares and NAV of the Shares against the corresponding gold price (per 1/10 of an oz. of gold) since the day the Shares first began trading on the NYSE:

The divergence of the price of the Shares and NAV of the Shares from the gold price over time reflects the cumulative effect of the Trust expenses that arise if an investment had been held since inception.

The Trustee values the gold held by the Trust and determines the NAV of the Trust as of the LBMA Gold Price PM on each day that the NYSE Arca is open for regular trading unless there is no LBMA Gold Price on such day or the LBMA Gold Price has not been announced by 12:00 PM New York time on such day, or the Valuation Time.

 

 

At the Valuation Time, the Trustee values the Trust’s gold on the basis of that day’s LBMA Gold Price PM or, if no LBMA Gold Price PM is made on such day or has not been announced by the Valuation Time, the next most recent LBMA Gold Price (AM or PM) determined prior to the Valuation Time will be used, unless the Trustee, in consultation with the Sponsor, determines that such price is inappropriate as a basis for valuation. In the event the Trustee and the Sponsor determine that the LBMA Gold Price PM or last prior LBMA Gold Price (AM or PM) is not an appropriate basis for valuation of the Trust’s gold, they will identify an alternative basis for such valuation to be employed by the Trustee. While we believe that the LBMA Gold Price is an appropriate indicator of the value of gold, there are other indicators that are available that could be different than the LBMA Gold Price. The use of such an alternative indicator could result in materially different fair value pricing of the gold in the Trust which could result in different market adjustments or redemption value adjustments of our outstanding redeemable Shares.

Once the value of the gold has been determined, the Trustee subtracts all estimated accrued sponsor fees, expenses and other liabilities of the Trust from the total value of the gold and all other assets of the Trust. The resulting figure is the NAV of the Trust. The Trustee determines the NAV per Share by dividing the NAV of the Trust by the number of Shares outstanding as of the close of trading on NYSE Arca.

As movements in the price of gold are expected to directly affect the price of the Trust’s Shares, investors should understand what the recent movements in the price of gold have been. Investors, however, should also be aware that past movements in the gold price are not indicators of future movements. This section identifies recent trends in the movements of the gold price.

 

 

 

 

 

Period		Average				High				Date				Low				Date				End of period				Last business day (1)
Three months to June 30, 2016		$	1,260.03			$	1,324.55				June 27, 2016			$	1,212.10				May 31, 2016			$	1,320.75				June 30, 2016
Three months to September 30, 2016		$	1,323.40			$	1,366.25				July 6, 2016			$	1,308.35				Sep 16, 2016			$	1,322.50				Sep 30, 2016
Three months to December 31, 2016		$	1,218.75			$	1,313.30				Oct 3, 2016			$	1,125.70				Dec 20, 2016			$	1,159.10				Dec 30, 2016	(2)
Three months to March 31, 2017		$	1,219.47			$	1,257.55				Mar 27, 2017			$	1,151.00				Jan 3, 2017			$	1,244.85				Mar 31, 2017
Three months to June 30, 2017		$	1,256.59			$	1,293.50				June 6, 2017			$	1,220.40				May 9, 2017			$	1,242.25				June 30, 2017
Three months to September 30, 2017		$	1,277.91			$	1,346.25				Sep 08, 2017			$	1,211.05				July 11, 2017			$	1,283.10				Sep 29, 2017
Three months to December 31, 2017		$	1,275.42			$	1,303.30				Oct 16, 2017			$	1,240.90				Dec 12, 2017			$	1,296.50				Dec 29, 2017	(2)
Three months to March 31, 2018		$	1,329.29			$	1,354.95				Jan 25, 2018			$	1,307.75				Mar 1, 2018			$	1,323.85				Mar 29, 2018
Three months to June 30, 2018		$	1,305.99			$	1,351.45				Apr 18, 2018			$	1,250.45				June 29, 2018			$	1,250.45				June 29, 2018
Three months to September 30, 2018		$	1,213.19			$	1,262.05				July 9, 2018			$	1,178.40				Aug 17, 2018			$	1,187.25				Sep 28, 2018
Three months to December 31, 2018		$	1,226.28			$	1,279.00				Dec 28, 2018			$	1,185.55				Oct 9, 2018			$	1,281.65				Dec 31, 2018	(2)
Three months to March 31, 2019		$	1,303.79			$	1,343.75				Feb 20, 2019			$	1,279.55				Jan 21, 2019			$	1,295.40				Mar 29, 2019
Three months to June 30, 2019		$	1,309.39			$	1,431.40				June 25, 2019			$	1,269.50				April 23, 2019			$	1,409.00				June 28, 2019
Twelve months ended June 30, 2017		$	1,257.77			$	1,366.25				July 6, 2016			$	1,125.70				Dec 20, 2016			$	1,242.25				June 30, 2017
Twelve months ended June 30, 2018		$	1,297.21			$	1,354.95				Jan 25, 2018			$	1,211.05				July 11, 2017			$	1,250.45				June 29, 2018
Twelve months ended June 30, 2019		$	1,262.74			$	1,431.40				June 25, 2019			$	1,178.40				Aug 17, 2018			$	1,409.00				June 28, 2019
November 12, 2004 to June 30, 2019		$	1,119.34			$	1,895.00				Sep 5, 2011			$	411.10				Feb 8, 2005			$	1,409.00				June 28, 2019

(1)	The end of period gold price is the LBMA Gold Price PM on the last business day of the period. This is in accordance with the Trust Indenture and the basis used for calculating the Net Asset Value of the Trust.

(2)

There was no LBMA Gold Price PM on the last business day of December 2018, 2017 or 2016. The LBMA Gold Price AM on the last business day of December 2018, 2017 and 2016 was $1,281.65, $1,296.50 and $1,159.10, respectively. The Net Asset Value of the Trust on December 31, 2018, 2017 and 2016 was calculated using the LBMA Gold Price AM, in accordance with the Trust Indenture.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

There has been no change in the internal control over financial reporting that occurred during our most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Trust’s internal control over financial reporting.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

You should carefully consider the factors discussed in Part I, Item 1A. “Risk Factors” in our Annual Report on Form for the year ended September 30, 2018, which could materially affect our business, financial condition or future results. There have been no material changes in our risk factors from those disclosed in our 2018 Annual Report on Form

The risks described in our Annual Report on Form are not the only risks facing the Trust. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

c)

As of the date of the formation of the Trust on November 12, 2004, the NAV of the Trust, which represents the value of the gold deposited in the Trust, was $13,081,500, and the NAV per Share was $43.60. Since formation and through June 30, 2019, 14,022 Baskets (1,402,200,000 Shares) have been created and 11,317 Baskets (1,131,700,000 Shares) have been redeemed.

Period		Total Number of Shares Redeemed				Average Ounces of Gold Per Share
04/01/19 to 04/30/19			13,500,000				.09442
05/01/19 to 05/31/19			7,100,000				.09439
06/01/19 to 06/30/19			3,800,000				.09435
Total			24,400,000				.09431

Item 3.

Defaults Upon Senior Securities

Item 4.

Mine Safety Disclosures.

Item 5.

Other Information

Item 6.

Exhibits

Exhibit No.				Description of Exhibit
	31.1			Certification of Principal Executive Officer pursuant to Rule 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as amended, with respect to the Trust’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2019.
	31.2			Certification of Principal Financial Officer pursuant to Rule 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as amended, with respect to the Trust’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2019.
	32.1			Certification of Principal Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, with respect to the Trust’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2019.
	32.2			Certification of Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, with respect to the Trust’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2019.
	101.INS*			XBRL Instance Document
	101.SCH*			XBRL Taxonomy Extension Schema Document
	101.CAL*			XBRL Taxonomy Extension Calculation Linkbase Document
	101.LAB*			XBRL Taxonomy Extension Label Linkbase Document
	101.PRE*			XBRL Taxonomy Extension Presentation Linkbase Document
	101.DEF*			XBRL Taxonomy Extension Definition Linkbase Document

*

Pursuant to Rule 406T of Regulation  S-T,   these interactive data files are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for the purposes of Section 18 of the Securities and Exchange Act of 1934, as amended, and otherwise are not subject to liability under those sections.

 

 

 

 

 

 

 

WORLD GOLD TRUST SERVICES, LLC

Sponsor of the SPDR ® Gold Trust

(Registrant)

/s/ Joseph R. Cavatoni

Joseph R. Cavatoni

Principal Executive Officer

/s/ Laura S. Melman

Laura S. Melman

Chief Financial Officer and Treasurer (Principal Financial Officer)