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Allocated gold products like ETF Securities' Gold Bullion Securities (GBS.LN) were designed not to expose the holder to counterparty risk, he said. "If ETF Securities or HSBC blew up today it would have zero impact on the security (GBS)," Phelan said, in response to a question from a delegate at a gold industry conference in Hong Kong. HSBC Bank USA, N.A., is the custodian of allocated London Bullion Market Association (LBMA) good delivery bars, the form of physical gold held by GBS. Allocated gold bullion means investors can identify the specific bars held by the custodian, through the serial number stamped on the bar when it was minted. Any holder of GBS can redeem their securities for physical gold at any time, although the minimum redemption is 400 ounces, the size of one LBMA good delivery bar, worth $422,520 at current prices, which would rule out many small investors, Phelan said. The largest gold exchange-traded product, the SPDR Gold Trust (GLD), is backed by unallocated physical bullion which theoretically could expose the holder to counterparty risk. According to data from goldessential.com, as of Thursday GBS held 132.2 tons of gold bullion while GLD held 1,108 tons of gold bullion. -By James Campbell, Dow Jones Newswires, +656415-4082; james.campbell@dowjones.com (END) Dow Jones Newswires 10-25-09 2347ET For full details for GBSLF click here.
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