Chart of the Day: Gold ETF

Following from yesterday’s conversation about the direction for gold, today’s chart comes from the most recent weekly commodity report from Standard Bank, available on the Kitco website.

A bit of explanation is in order. An ETF – an exchanged traded fund – is a structured product that holds a set of assets like stocks or commodities, or bonds, and trades close to its net asset value. A gold ETF is a very popular product as the rise in holdings in the chart above clearly shows, the SPDR fund particularly.

The superlative rise in the price of gold has been tied to the proliferation of these products, as it has made it very easy for any investor to purchase a small holding in the precious metal, but without taking physical delivery.

From the report:

ETF enthusiasm has dwindled. ETFs have turned net sellers, for the first time in eight weeks, with a significant loss of 8.4 tonnes (compared to the meagre 1.8 gain of the previous week). Bargain-buying on price dips appears to have faded as ETFs grow more cautious on gold.

For interest, Australian “retail” investors have 3 gold ETF’s available:

  1. BetaShares Gold Bullion ETF (Code:QAU)
  2. ETFS Metal Securities: Gold Bullion (Code:GOLD)
  3. Perth Mint (Code:PMGOLD)

The BetaShares QAU product is actively hedged for AUD/USD exchange rate movements so that any rise or fall does not change the value of the holdings. In other words you have a direct exposure to the spot price, as if it was in USD. The ETFS GOLD product however, is unhedged – it is gold priced in AUD alone. The Perth Mint product is the same as the ETFS GOLD version, i.e an unhedged exposure to gold in AUD terms, but unlike the others, is actually redeemable for physical gold.

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  1. Note that the 2500 tonnes the gold ETFs hold is only circa 8% of the estimated privately (not Central Bank) held gold in the world.

    It is interesting that the ounces held by the SPDR/GLD ETF has been quite stable in recent years whereas the other US gold ETFs (ETF Securities & iShares) have been growing, adding about 108 tonnes since 2011.