[LTC-GLOBAL] Litecoin Gold Trust

[JohnGalt]

Announcing the
Litecoin Gold Trust
Trading as GOLD on the Litecoin Global Stock Exchange
https://www.litecoinglobal.com/security/GOLD
managed by John Galt Asset Management
john.galt.asset.management@gmail.com

Note: Weekly reports will no longer be posted in this thread. For the latest information on GOLD traded on LTC-GLOBAL, please look here: http://forum.litecoin.net/index.php/topic,780.0.html

This post is a summary. Please read the prospectus before investing. A copy of the prospectus can be found here: https://docs.google.com/document/d/1jwsxyjs1KQqeScAz__55BgIbkgRBRvCE71eHoz65hjo/edit.


Highlights:

• Shares each represent 1/1000th of a troy oz. of gold (initially).
• Shares can be redeemed for physical gold bullion (in 1 oz. units).
• Shares normally trade at the spot price, but can be higher or lower.
• The fund strives to maintain liquidity and price stability (relative to the spot price).

The Litecoin Gold Trust is an exchange-traded fund listed on the Litecoin Global Stock Exchange. The trust holds physical gold bullion and issues shares representing its holdings. The purpose of the trust is to provide a way in invest in gold through litecoin without the inconvenience of holding physical gold bullion.

The objective of the trust is for the value of the shares to reflect the price of gold owned by the trust, less the trust’s expenses and liabilities. The trust receives gold in exchange for shares and delivers gold in exchange for redeemed shares. The ability to exchange of gold for shares is what maintains the nominal value of the shares at the value of the gold that they represent. The trust is not actively managed and does not engage in activities designed to profit from changes in the price of gold.

With the exception of cash held to pay expenses and facilitate operations, the fund invests exclusively in physical gold bullion. The gold is unencumbered, fully allocated, and will never be borrowed, lent, or used as collateral. It is stored in a vault at Wells Fargo and is audited periodically. The initial value of a share is 1/1000th of a troy oz. of gold, though fees may reduce that value over time (see below). Regardless of the nominal value, shares can trade at a premium or a discount to that value.

The trust does not intend to pay dividends or cash distributions.

The trust issues and redeems "baskets" of shares on a continuous basis (a basket equals the equivalent of 1 troy ounce of gold in shares). A 5% fee is charged for redeeming a basket of shares. The person redeeming the shares is also responsible for paying shipping and insurance costs. Persons may redeem fractions of a basket at the discretion of the sponsor, but the fee may be substantially higher.

The size of the initial offering will be 1000 shares, or 1 troy oz. of gold.

The only ordinary expenses paid by the trust is a fee of 1% per year paid to the sponsor. The fee is paid issuing an appropriate number of additional shares and assigning them to the sponsor, so the amount of gold that a share represents will slowly decrease from the initial 1/1000th ounce. The sponsor currently agrees to waive the fee.

The fund allows a person to invest in gold with the following  benefits over owning physical gold:

• Increased liquidity. Shares can be traded whenever the exchange is operating.
• Lower fees and overhead. Typically, buying and selling physical gold incurs steep premiums, especially when dealing in small amounts. The fees for trading shares of the trust are extremely low.
• A convenient way to accumulate gold bullion. A person can buy small numbers of shares over time, and then later exchange the shares for physical gold bullion.
• A way to hedge against drops in the value of LTC.

Liquidity should not be a concern. Bid and ask walls will be maintained at  approximately +/- 5% of the spot price in order to ensure liquidity. There will always be shares to buy at a reasonable price and shares can always be sold at a reasonable price.

Assets of the trust are listed here and are updated periodically:  https://docs.google.com/spreadsheet/ccc?key=0Am3m7aRNI-JbdGhaT2RvWC1aeFFaSEMzMnE4OWkzMFE

A picture of the gold held by the trust can be seen here: https://docs.google.com/open?id=0B23m7aRNI-JbcC1RRXZhaEFvLUE
I appreciate any kind of feedback -- criticisms, comments, and suggestions.

[JohnGalt]

Weekly Report

Sunday, December 9, 2012

Overview

Assets: 1 oz.
Shares Outstanding: 1000
NAV: 21.6205 LTC
Basket Size: 1000 shares

Commentary

This week was a slow week -- perhaps a refreshing change after the last several weeks of big changes in the prices of LTC and gold. The NAV has risen from 20.6 LTC to 21.6 LTC (+4.9%) due to a moderate drop in the price of LTC from $0.0837 to $0.0787 (-6.0%) offsetting a small drop in the price of gold from $1726 to $1702 (-1.4%).

Keep in mind that the NAV depends on the prices (in other currencies) of both gold and LTC. When the price of gold rises more than the value of LTC, the NAV rises, and vice versa. The amount of trade between gold and LTC is virtually nil, requiring the NAV to be calculated using dollars. The difference is small, although it might occasionally present some arbitrage opportunities.

[JohnGalt]

Weekly Report

Saturday, December 15, 2012

Overview

Assets: 1 oz.
Shares Outstanding: 1000
NAV: 21.9841 LTC
Basket Size: 1000 shares

Commentary

Another slow week for LTC and gold. The NAV has risen slightly from 21.6 LTC to 22.0 LTC (+1.9%) with a small drop in the price of LTC, going from $0.0787 to $0.0772 (-1.9%), and an even smaller drop in the price of gold, going from $1702 to $1696 (-0.4%).

[JohnGalt]

Weekly Report

Sunday, December 23, 2012

Overview

Assets: 1 oz.
Shares Outstanding: 1000
NAV: 21.3372 LTC
Basket Size: 1000 shares

Commentary

It may be just a coincidence, but the values of gold and Litecoin have been strongly correlated for a few weeks now. The NAV has been very flat. Last week the NAV dropped  a little (mostly on Friday) from 22.0 LTC to 21.3 LTC (-3.2%), with the price of LTC remaining steady, going from $0.0772 to 0.0774 (+0.3%), and a small drop in the price of gold from $1696 to $1652 (-2.6%).

[JohnGalt]

Weekly Report

Sunday, December 30, 2012

Overview

Assets: 1 oz.
Shares Outstanding: 1000
NAV: 22.1591 LTC
Basket Size: 1000 shares

Commentary

Last week the NAV rose moderately from 21.3 LTC to 22.2 LTC (+4.2%), with the price of LTC dropping moderately from $0.0774 to $0.0748 (-3.4%), compared to the essentially unchanged price of gold going from $1652 to $1658 (+0.4%).

[JohnGalt]

Weekly Report

Saturday, January 5, 2013

Overview

Assets: 1 oz.
Shares Outstanding: 1000
NAV: 23.7464 LTC
Basket Size: 1000 shares

Commentary

Last week the NAV jumped from 22.2 LTC to 23.7 LTC (+6.8%), due to the price of LTC dropping from $0.0748 to $0.0694 (-7.2%) compared to the small drop in the price of gold from $1658 to $1648 (-0.6%). As mentioned before, the steady drop in the value of LTC has highlighted the value of investing LTC in assets such as gold.


Edit: The NAV was incorrectly reported as 24.2073 LTC. It has been corrected.

[JohnGalt]

Weekly Report

Saturday, January 12, 2013

Overview

Assets: 1 oz.
Shares Outstanding: 1000
NAV: 24.0252 LTC
Basket Size: 1000 shares

Commentary

After the sharp rise in the NAV over the previous week due to the the drop in the value of LTC, the NAV has risen slightly this week from 23.7 LTC to 24.0 LTC (+1.3%). Both the prices of gold and LTC have changed only a little since last week, but both in a direction of a rising NAV. The price of LTC fell slightly from $0.0694 to $0.0690 (-0.6%) and the price of gold rose slightly from $1648 to $1658 (+0.6%).

The value of investing in this fund

From time to time, people have questioned the value of investing in this fund, and also indirectly the value of investing in gold.

First, anyone but die-hard gold bugs and Keynesians will acknowledge that there are both pros and cons to investing in gold.

The main values of gold as an investment are as a hedge against the various forms of currency devaluation and as a diversification of risk.

• Gold is an asset, and as such, it is not devalued by inflation.
• Similarly, gold protects against the devaluation of fiat currencies. Because gold is traded globally in many currencies, if the value of a currency is lowered, the value of gold in that currency will rise proportionately.
• Gold is a currency of last resort. In a economic collapse, gold could retain its value (though it would be naive that it would be completely unaffected).
• Gold is a good diversification tool. The factors affecting the value of other assets are very different from those affecting the value of gold.

The downside to gold as an investment is primarily due its lack of utility beyond being a currency. Furthermore, its utility as a currency has also been diminished. As a result, gold is very speculative.

• Gold does not produce income.
• Gold has very little utility beyond being a currency.
• Over the very long term, the real value of gold has been constant, so its return on investment relative to other investments has been low.
  
• Gold is a speculative investment.

As for the value of this fund, first it must be emphasized that the value of this fund is determined primarily by the value of the gold that it holds.

The benefits of owning shares in this fund over owning physical gold have been repeated several times, but here they are again:

• Increased liquidity. Shares can be traded whenever the exchange is operating.
• Lower fees and overhead. Typically, buying and selling physical gold incurs steep premiums, especially when dealing in small amounts. The fees for trading shares of the trust are extremely low.
• A convenient way to accumulate gold bullion. A person can buy small numbers of shares over time, and then later exchange the shares for physical gold bullion.

Now, there are some drawbacks:

• Counter-party risk. There is a small risk that something might happen to the fund or the gold that the fund owns. This and other risks are fully explained in the prospectus.
• There is a management fee of 1% (which has been waived for the foreseeable future).

Please weigh these pro and cons before judging the value of investing in this fund (or in gold).

[JohnGalt]

Weekly Report

Saturday, January 19, 2013

Overview

Assets: 1 oz.
Shares Outstanding: 1000
NAV: 27.1900 LTC
Basket Size: 1000 shares

Commentary

It has been a great week for LGT at the expense of LTC. This week the NAV has resumed its upward climb due primarily to the the continuing weakness in the value of LTC. The NAV has risen dramatically this week from 24.0 LTC to 27.2 LTC (+13.3%). While the price of gold has risen only slightly from $1658 to $1689 (+1.9%), the price of LTC has plunged  to $0.0621 from $0.0690 (-10.0%).

[JohnGalt]

Weekly Report

Sunday, January 27, 2013

Overview

Assets: 1 oz.
Shares Outstanding: 1000
NAV: 26.9919 LTC
Basket Size: 1000 shares

Commentary

It has been a very volatile week. The NAV began the week by jumping more than 10% to 30.4 LTC, just shy of the all-time high of 30.5 on 11/20/2012. This was due to a 10% drop in the value of LTC, which I believe was a result of money moving out of LTC and into BTC, fueling the BTC bubble that ultimately popped on the 25th. Following that quick rise, the NAV steadily declined over the remainder of the week to finish about where it started due to a recovery in the price of LTC. Ultimately, the NAV has fallen only slightly this week from 27.2 LTC to 27.0 LTC (-0.7%). The price of gold dropped over the last couple days from $1689 to $1660 (-1.7%) and this was matched by an overall small drop in the price of LTC from  $0.0621 from $0.0615 (-1.0%).

[JohnGalt]

Weekly Report

Sunday, February 3, 2013

Overview

Assets: 1 oz.
Shares Outstanding: 1000
NAV: 23.5405 LTC
Basket Size: 1000 shares

Commentary

Overwhelmed by a huge increase in the value of LTC from 0.0615 LTC to 0.0709 LTC (+15.3%), the NAV has fallen this week from 27.0 LTC to 23.5 LTC (-13.0%). While the price of gold initially rose to $1678, it has settled back down to $1669, rising slightly from $1660 (+0.5%), the price at the beginning of the week.

[JohnGalt]

Weekly Report

Saturday, February 9, 2013

Overview

Assets: 1 oz.
Shares Outstanding: 1000
NAV: 21.7483 LTC
Basket Size: 1000 shares

Commentary

Another strong increase in the value of LTC from 0.0709 LTC to 0.0767 LTC (+8.2%) is the primary reason that the NAV has fallen sharply this week from 23.5 LTC to 21.7 LTC (-7.7%). Meanwhile, the price of gold was steady, falling only slightly from $1669 to $1668 (<0.1% change).

[JohnGalt]

Weekly Report

Saturday, February 16, 2013

Overview

Assets: 1 oz.
Shares Outstanding: 1000
NAV: 21.6473 LTC
Basket Size: 1000 shares

Commentary

The small drop in the NAV  from 21.7 LTC to 21.6 LTC (-0.5%) hides the volatility this week in both the LTC and gold markets. After starting the week at $0.0767, the price of LTC continued its steep rise up to around $0.0810, but ultimately fell back to $0.0745 (-2.9%). Meanwhile, the price of gold has fallen moderately from $1668 to $1612 (-3.4%).

[JohnGalt]

Weekly Report

Sunday, February 24, 2013

Overview

Assets: 1 oz.
Shares Outstanding: 1000
NAV: 23.1247 LTC
Basket Size: 1000 shares

Commentary

Despite a small drop in the price of gold from $1612 to $1576 (-2.2%), the NAV rose strongly from 21.6 LTC to 23.1 LTC (+6.9%). This is primarily due to the continuing fall in the price of LTC, this week dropping from $0.0745 to $0.0682 (-8.5%).

[JohnGalt]

Weekly Report

Sunday, March 2, 2013

Overview

Assets: 1 oz.
Shares Outstanding: 1000
NAV: 21.0967 LTC
Basket Size: 1000 shares

Commentary

The price of gold this week was a little volatile but ended up rising only slightly from $1576 to $1582 (+0.4%). Meanwhile the price of LTC hit bottom at the beginning of the period and rose very strongly throughout the week. It ended up at $0.075, up from last week's $0.0682 (+10.0%). The result was big drop in the NAV from 23.1 to 21.1 (-8.7%).

Please note: This is the last update that will be posted in this forum.
Updates will continue to be posted in the Litecoin forum here: http://forum.litecoin.net/index.php/topic,780.0.html