Exchange-traded funds have emerged as a cost-effective and popular way to gain exposure, as they allow the purchase of specific commodities in small lots, without taking delivery.
“Actual delivery, however, does take place by the fund, which means it’s only available in more liquid markets such asgold, silver and oil,” the ANZ’s Pervan says.
Apart from buying bars and coins, gold ETFs offer the most direct route and way to track the price of gold. While popular in the US and across Europe, Australia has only one gold ETF, launched by ETF Securities in 2003. The GOLD fund has about $700million invested, up from about $330 million six months earlier.
The GOLD ETF trades like any other ASX-listed security, says Jonathan Morgan, business development manager at ASX Listed Managed Investments. It is bought or sold on the Australian Stock Exchange in the same way as shares, and posts several thousand trades a day.
While other listed ETFs have market makers in place, a professional securities dealer who has an obligation to buy when there is an excess of sell orders and to sell when there is an excess of buy orders, such as the international ETF range and the newly listed metal ETCs, the GOLD ETF does not need one because it has a sufficient spread of shareholders.
The advantages of an ETF are that they are cheap, there’s no storage cost and they are easily exchangeable. They are good for retail investors because they do not require the investment of large sums of money.
The minimum investment is one GOLD security, which costs about $150, representing one-tenth of an ounce of gold. The annual management fee is about 0.40 per cent, and as the security is bought in the same way as shares, normal brokerage fees still apply.
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