Christian Magoon: Physical gold investors aligned with central banks holding large amounts of gold.
Physical gold ETF investors are aligned with several nations. Source: mint.com
This infographic from financial website mint.com, details important information for gold ETF investors. The key takeaway for investors is to understand what nations they are aligned with in hopes for gold prices, and gold ETF shares, to rise.
Immediately it is clear that central banks in Western developed countries are the largest holders of gold. They include the United States with a massive 8.1 tonnes of gold. European Union power player Germany takes second with 3.3 tonnes of the yellow metal. Italy and France come in a close third and fourth with 2.45 and 2.43 tonnes respectively. At fifth the largest nation in the world, China, has just over one ton of gold reserves. At similar numbers but slightly less is Switzerland with a bit over a ton of gold.
It is interesting to note what percentage of each central banks foreign reserves are held in gold. The United States and several Europan countries hover at the 70% range while Eastern countries including China, India and Japan are in the single digits.
Gold ETF investors in physically backed gold products are the most closely aligned shareholders in the gold ETF space. ETFs like the SPDR Gold Trust (NYSEARCA:GLD), the iShares Gold Trust (NYSEARCA:IAU) and the ETF Securities Gold Trust (NYSEARCA:SGOL) hold actual bars of gold in secure vaults. These bars are used to back the shares of the ETF which are traded on major stock exchanges throughout the day. Physical gold ETFs seek to track the price of gold, less fees and expenses. Currently gold ETF expense ratios range from 40bps to 25bps. Here’s the list of physical gold ETF products from GoldETFs.biz.
Physical gold ETF products in the U.S. ranked by expense ratio.
GOLD ETF DIFFERENCES
The two main difference in gold ETF products are expense ratios and the location where the ETF’s gold bars are actually stored. We’ve already illustrated the expense ratio differences so let’s focus on storage locations. Most of the gold ETFs store all their gold bars in a single country, unique to the ETF. Thus GLD uses Great Britain, SGOL uses Switzerland and AGOL, the Asian Gold Trust (NYSEARCA:AGOL), uses Singapore. IAU is the only exception as it stores its gold in the United States, Canada and Great Britain.
Physical gold ETF investors should remember this info graphic as they monitor world events through a gold investment lens. Certainly world leaders in several gold intensive countries are no doubt doing the same.
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.”