Gold ETF Research: Where’s The Gold? (GLD, IAU)
Christian Magoon: Gold ETF investors reading GoldETFs.biz know that while some countries have plenty of gold, others don’t. To understand who the have and the have nots are, this gold holdings per capita graphic from the World Gold Council comes in handy.
Gold ETF investors should find this chart interesting.
From the graphic we see that developed countries dominate the per capita gold map. The United States and a variety of European countries are leading per capita holders. It is also interesting to note that the Southern Hemisphere countries seem to be less robust holders of gold than their Northern Hemisphere counterparts. Finally we know that India and China are the leading consumers of gold but on a per capita basis pale in comparison to the United States.
GOLD ETF BASICS
There are a variety of gold ETF products that focus on the ownership of actual bars of gold. These bars are secured in a safe and then are used to physically back the shares of the ETF being traded in the open markets. Sponsors of these ETFs regularly employ third party auditing firms to verify the quantity, and sometimes the quality, of the fund’s holdings. Click to the next page to view a snapshot of all physical gold ETF products listed in the United States.
GOLD ETF DIFFERENCES
The two primary differences in the physical gold ETF product set are location of the actual storage of gold bars and the expense ratio of the product. The largest gold ETF, the SPDR Gold Trust (NYSEARCA:GLD) currently stores all its gold – valued at about $74 billion currently – in a vault in London. In addition it charges an annual expense ratio of 40bps. In contrast the second largest ETF in this segment stores its gold in Toronto, New York and London. This ETF is the iShares Gold Trust (NYSEARCA:IAU) and it charges investors 25bps, a discount of over 30% when compared to GLD. In addition, two other gold ETF products exist that store their gold exclusively in Singapore and Switzerland respectively.
Physical gold ownership as an investment – either through physically backed gold ETF products or coins and bars – is becoming more common around the world. This is because of convenient gold ETF product and the desire to own an asset that has had over ten years of bull market returns. Gold ETF investors should continue to monitor these ownership trends as they will likely be positive for gold prices.
Christian Magoon is Publisher of GoldETFs.biz and IndiaETFs.com. He is also CEO of Magoon Capital, a strategic consultant firm to asset managers. Christian Magoon is an ETF insider, having launched over 40 ETFs in the United States to date. A widely recognized thought leader on finance and market issues, Christian regularly contributes to many financial media outlets. Prior to forming Magoon Capital in 2010, Christian was President of Claymore Securities (now Guggenheim Investments), where he built one of the fastest growing and most innovative ETF businesses in the country, gathering more than $3 billion in AUM in three years. He launched more than 40 ETFs, introducing many “firsts” to the U.S. market, including the first Frontier Markets, Sector Rotation, Solar Energy, Timber, BRIC and suite of China focused ETFs. Christian consistently provides his industry insights and knowledge as a commentator in the U.S. media speaking publicly on macro investment issues and ETF related topics. Follow him on Twitter @ChristianMagoon. In 2008, he was named by Institutional Investor News as one of the five people to watch in the U.S. ETF marketplace. In 2011, Financial Planning magazine dubbed Christian an “ETF Pioneer.”