Another Ponzi?

The paper gold (futures) market recently made a few changes. One of the ones cited by GATA and others is that COMEX can actually make delivery in shares of GLD instead of providing physical gold. I agree this is rather odd, but even worse is something I believe has been completely overlooked:

The GLD fund itself can not take delivery of gold immediately. It would be impossible to arrange delivery to vaults on demand. I suspect that GLD has predetermined delivery dates. Until then, it probably holds Gold Futures and takes delivery of those futures. This is why GLD doesn't experience any contango or other issues with its valuation because it takes physical delivery.

However, this presents an interesting conundrum...

You buy Gold futures, COMEX gives you GLD shares instead, in which GLD holds gold futures to take physical delivery.


Let me say it again. $GOLD is backed by GLD which is backed by $GOLD.

Does anyone else see a problem with this?

Now granted, I realize that "supposedly" GLD holds a fair amount of actual physical gold. And I believe it does, contrary to popular belief. But I believe it holds a substantial portion of gold futures contracts (with the intent to take delivery, granted) that constitutes a circular ownership trail of nothing but paper.

Finally, a few disclosures:

1) I am a conspiracy theorist.
2) I believe that physical / spot gold is not a ponzi.
3) I own lots of Gold and gold stocks.

First published on my blog, permabullybear.blogspot.com