Despite numerous requests for information about Central Bank Gold holdings and records about swapping, loaning and leasing of reserves, all queries, freedom of information included, have been met with a wall of silence and obfuscation in both the UK and the US. Further to that, it was revealed in March in Congressional testimony by the world's foremost 'expert' from the CME group, Jeffrey Christian, that the LBMA operates at best a 100:1 fractional reserve system of Paper to Physical(!) when it purports to be a clearing house for real 'Bullion' trades. This is the real smoking gun of course - note that as per the above, in the GLD prospectus the reassuring LBMA 'customs and practices' are used as the rationale for the lack of formal contractual relationships for the sub-custody of ETF Gold.

Frankly one could carry on picking holes in the Gold and Silver ETF world ad infinitum, and there will be those who show blind faith in the promises of the big commercial banks and Central Banks come what may. One other point though - is it not a monumental conflict of interest that the Primary Custodians of the majority of the world's Precious Metals ETFs are also hugely short in the futures markets of these same metals on their proprietary trading books? More than anything this clear conflict of interest completely fails my 5-yard smell test. The reader is invited to weigh up the evidence for themselves but it is apparent to me as someone who watches this market closely, that one in the hand is worth considerably more than one in either an ETF or a Central Bank inventory sheet, potentially a hundred more...

David Fuller's view This is not a new debate and I suspect it will rumble on. The fact is, there is no such think as an absolutely risk free investment. I do not assume that all so-called bullion funds are equally safe but I personally would be more concerned if I had not had positions in gold over the last decade and counting. In an uncertain world, there are far greater investment risks than a gold bullion ETF for which HSBC or the equivalent is the Primary Custodian.

I do not regard Ned Naylor-Leyland as a gold bug conspiracy theorist and he makes a number of relevant points. However, I suspect this sentence is responsible for part of his exasperation:

"Quite apart from the fact that only Gold and Silver in the possession of the investor is the ultimate financial insurance policy, it is also abundantly clear that 'taking delivery' is the best possible way to accelerate the appreciation in the fiat paper value of Precious Metals."

Perhaps but not many people will take delivery. Meanwhile, my guess is that we may be no more than approximately halfway through gold bullion's secular bull market (monthly, weekly & daily). Gold has firmed following Monday's downside key day reversal, mainly due to the weakening USD. That is reassuring for long-term investors in gold, as is the performance of the NYSE Arca Gold BUGS Index (monthly, weekly & daily). Bullion's key was a short-term warning which has yet to be offset fully. Also, seasonal factors are less favourable so I remain somewhat cautious about gold's short-term outlook but I am a long-term bull.