The World Gold Council Committee, which met in London on Wednesday, is reported to be considering spinning out its gold investment interests, possibly in time as a public company.
London and New York sources say there has been tension within the industry advocacy and marketing body about mounting costs caused by repeated postponements in launching an American exchange traded gold fund. Members are bearing legal and administrative costs as part of their contributions to the gold advocacy and marketing group which adopted an investment focus in 2002. There has also been discontent over the Council’s effective gagging following registration of an exchange traded gold product with the US Securities and Exchange Commission and gold IRAs.
As a result of the S1 Registration Statement and onerous SEC rules covering “pre-marketing” of proposed products, the WGC has fallen into self-imposed coventry during much of the run up in the gold price. The resultant information vacuum in America has been deleterious, amplifying the ravings of pro-gold conspiracists and allowing gold critics to run amok in the broader market that remains largely ignorant or suspicious of gold – what do the best gold companies say about it?
Anita Saunders, spokesman for the Council would only say: “We are not prepared to confirm or deny any speculation about the content of our board meetings, which is confidential.”
SEC approval for the American version of the WGC backed British and Australian exchange traded gold funds is dragging on interminably, as it is for the competing Barclay’s offering. Rather than risk being left in quarantine indefinitely, sources say members want the Council’s voice to be heard again in the US as soon as possible; providing more complete coverage of the case for gold and not promoting investment at the expense of jewellery demand and vice versa.
WGC member reforming – gold IRA market on the rise?
WGC members began reforming the agency in 2002 around a bet on a long-lasting gold bull market. The assessment that rising gold prices would stimulate interest in gold as an investment was mostly correct, but execution was not what it might have been. The wild card was underestimating the prevaricating role of the SEC. That has left the Council mum and the jewellery marketing operations somewhat undercapitalised. That marketing is future insurance against a downturn.
The investment push caused a well-intentioned, but misguided effort by the WGC to closely control the gold ETF market. This was perhaps the most serious of several mistakes critics charge. Instead of fertilizing the gold investment market to encouraging the most products possible, sources say the WGC was intent on ownership and control. Once the American product stalled at the SEC, the Council had emasculated itself as the gold market’s reasoned voice. At the same time, it caused some damage to the gold market because of unavoidable competition with alternative gold investments – such as 401(k) to gold IRA rollover process.
An American insider says the desire for control resulted in a with-us-or-against-us ultimatum to Graham Tuckwell, who stole a march on the gold ETF business with his Australian product. He ultimately agreed to collaborate under the WGC umbrella in a joint venture. Then there have been litigation snafus and tension with organisations like the Perth Mint which has another gold product – more in our gold & silver IRA guide.
When the WGC’s subsidiary submitted its SEC filing in May last year, some industry experts viewed the filing as premature and predatory in reaction to the filing and subsequent successful launch of Central Gold-Trust [GTU.un.TO], a Toronto listed, self-governing, gold-only Canadian trust launched jointly by the Spicer family and Sprott Asset Management. That fund had commenced a Canadian roadshow when the WGC product hit the SEC.
Bullion market insiders say the mining company members have jeopardised the WGC’s role by positioning it as their collectively sponsored rival to gold products.
It remains a mystery why the WGC Committee never tapped 40-years of bullion fund experience among the Spicer family and the other principals of its Central Fund of Canada [CEF]. Stefan Spicer confirmed to Mineweb that the WGC has never contacted Central Fund to glean experience or explore collaboration. This is all the more bizarre because the recently formed Central Gold-Trust is the result of intensive investigation into structures and jurisdictions which have bedeviled the WGC funds.
The Central Gold-Trust structure is looking to raise another C$50 million which would further qualify it as a multi-jurisdictional product and enable an interlisting on the American Stock Exchange.
Learning from CGT or becoming involved with it could have saved the WGC members a good deal of money and heart burn.
Aside from that and the other problems, Gold Bullion Securities has been very successful. In the space of 18 months, the WGC has fostered a gold store of 1.58 million ounces, or 44.7 tonnes, which is nearly 2% of annual new mine production. The combined market capitalisation of the Australian and British products stands at $625 million at current gold prices. That ranks Gold Bullion Securities as the 26th largest public gold or silver equity in the world. An American offering could easily double that value and push GBS into the ranks of the top 15 and possibly top ten. Read also about regal assets and their competitor advantage gold.
It makes perfect sense, therefore, for Gold Bullion Securities to be cut loose. That is less for its own growth prospects than for the WGC to regain its voice in all demand spheres, and avoid unnecessary competition. There are commercial benefits from the WGC essentially controlling, rather than just backing, gold products, but they are outweighed by staggering opportunity and other costs. How much better for the WGC to endorse gold products that meet some minimum requirements and to avoid getting caught up in competitive spats about costs and transparency.