A Gold exchange-traded fund (or GETF) is a special type of exchange-traded fund (ETF) that tracks the price of gold. Gold exchange-traded funds are traded on the major stock exchanges including Zurich, Mumbai, London, Paris and New York.
History
The idea of a gold ETF was first officially conceptualised by Benchmark Asset Management Company in India when they filed a proposal with the SEBI in May 2002. However it did not receive regulatory approval and was only launched later in March 2007.[1] The first gold exchange-traded fund actually launched was in March 2003 on the Australian Stock Exchange under Gold Bullion Securities (ticker symbol "GOLD"). Gold Bullion Securities (GBS) are fully backed by gold which is both deposited and insured. GBS was launched to give financial institutions and private investors the ability to own gold and gain exposure to the price, without the inconvenience of storing physical bars or opening a futures trading account.
Fees
Typically a commission of 0.4% is charged for trading in gold ETFs and an annual storage fee is charged. U.S. based transactions are a notable exception, where most brokers charge only a small fraction of this commission rate. The annual expenses of the fund such as storage, insurance, and management fees are charged by selling a small amount of gold represented by each certificate, so the amount of gold in each certificate will gradually decline over time. In some countries, gold ETFs represent a way to avoid the sales tax or the VAT which would apply to physical gold coins and bars.
In the United States sales of a gold ETF are treated as sales of the underlying commodity and thus are taxed at the 28% capital gains rate rather than the 15% long-term capital gains rate for non-collectibles.[2]
Funds
Exchange Traded Gold
Following the launch of Gold Bullion Securities on 28 March 2003 in Australia, a number of associated GETFs were soon launched on other stock exchanges. These GETFs are grouped under the name Exchange Traded Gold.[3]
Exchange Traded Gold is listed under:
In Europe:
- ETFS Physical Gold (previously named Gold Bullion Securities) (ASX: GOLD)
- ETF Securities Gold Bullion Securities (LSE: GBS and Euronext: GBS) (previously marketed by Lyxor)
In the United States:
- SPDR Gold Trust (formerly streetTRACKS Gold Shares) (NYSE: GLD, SGX:GLD 10US$, TYO: 1326 and SEHK: 2840)
- New Gold Issuer (JSE: GLD)
Exchange Traded Gold is sponsored by the World Gold Council, and as of June 2009 held 1,315.95 tonnes of gold in storage.[3] SPDR Gold Trust marketed by State Street Global Markets LLC, an affiliate of State Street Global Advisors, accounts for over 85 percent of this gold. As of 2009, SPDR Gold Trust is the largest and most liquid GETF on the market.
ETFS Physical Gold
In September 2006 ETF Securities launched ETFS Gold (LSE: BULL) which tracks the DJ-AIG Gold Sub-Index, and later in April 2007 ETFS Physical Gold (LSE: PHAU) which is backed by allocated gold bullion.
ETF Securities’ physical gold ETCs - ETFS Physical Gold (PHAU) and Gold Bullion Securities (GBS) - are all backed by “allocated” gold bars – uniquely identifiable bars which carry no bank credit risk. The precious metal bars are held in trust in London by the Custodian HSBC Bank USA N.A., the world’s leading Custodian for ETCs. The metal held with the Custodian must conform to the rules for Good Delivery of the London Bullion Market Association (LBMA). Securities are only issued once metal is confirmed as being deposited into the Company’s bullion account with the Custodian. Consistent with allocated gold, no precious metal is borrowed, loaned out nor does it earn any income.
As of Jan 09 ETFS Securities is the largest gold ETF provider in europe.
iShares COMEX Gold Trust
The iShares COMEX Gold Trust was launched by iShares on 21 January 2005 and is listed on the New York Stock Exchange (NYSE: IAU) and Toronto Stock Exchange (TSX: IGT). As of April 28, 2009 the fund held 62.32 tonnes of gold in storage.[4]
ZKB Gold ETF
The ZKB Gold ETF was launched on 15 March 2006 by Zürcher Kantonalbank and is listed in Switzerland under the symbol ZGLD. Shares are sold in 1 kg gold units, with a minimum purchase of one unit. As of August 2007, ZKB Gold ETF held 22.0 tonnes of gold in storage.
Central Fund of Canada
The Central Fund of Canada (TSX: CEF.A and NYSE: CEF) is a closed-end fund headquartered in Calgary, Alberta, Canada, mandated to keep the bulk of their net assets in a mixture of gold and silver with a small percentage of cash. The custodian of the gold and silver assets is the main Calgary branch of CIBC. As of March 2008, the Central Fund of Canada held 28.48 tonnes of gold and 1423.66 tonnes of silver in storage.
Central Gold Trust
The Central Gold Trust (TSX: GTU.UN, TSX: GTU.U and NYSE: GTU) is a closed-end fund operated by many of the same individuals, and employing many of the same practices, as the Central Fund of Canada. Unlike its sister fund, however, the Central Gold Trust is mandated to keep the bulk of its assets in gold, and does not hold silver. As of March 2008, the Central Gold Trust held 5.21 tons of gold in storage.
Gold Benchmark Exchange Traded Scheme
On 19 March 2007 Benchmark Asset Management Company, a Mumbai-based mutual fund house, launched Gold BeES (NSE: GOLDBEES) on the National Stock Exchange of India. Shares are sold in approximately 1 gram gold units.
UTI Gold Exchange Traded Fund
On 17 April 2007 UTI Mutual Fund listed Gold Exchange Traded Fund (NSE: GOLDSHARE) on the National Stock Exchange of India. The objective of UTI Gold Exchange Traded Fund is to endeavor to provide returns that, before expenses, closely track the performance and yield of Gold. Every unit of UTI Gold Exchange Traded Fund approximately represents one gram of pure gold. Units allotted under the scheme will be credited to investors’ demat accounts.
Gold-Price-Linked Exchange Traded Fund
On 10 August 2007, Gold-Price-Linked Exchange Traded Fund (code "1328") listed on the Osaka Securities Exchange, Japan. Shares are sold in 1 gram gold units, with a minimum purchase of ten units. This GETF is not backed by physical gold but by special bonds traded in London which are linked to the gold price.
PowerShares DB Gold ETF and ETNs (PowerShares/Deutsche Bank)
Tracks the performance of certain index moves inside the Deutsche Bank Liquid Commodity Index - Optimum Yield Gold [1]. ETNs are exchange-traded notes, which differ from exchange-traded funds (ETFs).
- DB Gold (NYSE: DGL) (gold ETF)
- DB Gold Double Long (NYSE: DGP) (long leveraged gold ETN)
- DB Gold Short (NYSE: DGZ) (short gold ETN)
- DB Gold Double Short (NYSE: DZZ) (short leveraged gold ETN)
See also
References
- ^ "Benchmark, UTI MF get Sebi nod for gold ETFs". The Economic Times. 2007-01-18. http://economictimes.indiatimes.com/Money_Matters/Mutual_Funds/MF_News/Benchmark_UTI_MF_get_Sebi_nod_for_gold_ETFs_/articleshow/1261674.cms.
- ^ "SPDR Gold Trust Prospectus", SPDR Gold Shares, page 32
- ^ a b Exchange Traded Gold, Official website
- ^ Exchange Traded Funds, iShares.com, retrieved November 21, 2007
External links
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