SPDR Gold Trust: what does it track? does it only buys and sells the physical gold? Then it must be very infrequent, and the tracking error must be large? Any thoughts?
Nope, the amount of actual gold that the trust owns, and the amount attributable to each share- is very consistent. A shareowner has indirect ownership of physical gold, minus an expense ratio that gets taken out. SPDR Gold Trust (the Trust), formerly StreetTRACKS Gold Trust, is an investment trust. The Trust holds gold, and from time to time, issues the SPDR Gold Shares (Shares) (formerly streetTRACKS Gold Shares) in blocks of 100,000 Shares (Baskets) in exchange for deposits of gold and distributes gold in connection with redemptions of Baskets. The Shares represent units of fractional undivided beneficial interest in and ownership of the Trust. The investment objective of the Trust is for the Shares to reflect the performance of the price of gold bullion. http://www.reuters.com/finance/stocks/companyProfile?symbol=GLD
I don't understand. The price of this ETF fluctuates. What happens if it deviates significantly from the gold spot price?
well, the etf fluctuates a lot because gold fluctuates a lot. If the etf gets priced too high or too low, people(with billions in investable assets) will sell their gold to SPDR trust for GLD shares, making a profit. ETFs are so popular because they efficiently deal with supply and demand, and the share price stays close to the index/spot they try and mimic.