New Physical Gold ETF Filed

December 04, 2017

The World Gold Council has filed for a new physical gold ETF. The Gold Trust will be very similar to the $35 billion SPDR Gold Trust (GLD), the world’s largest gold fund, but with key differences.

At first glance, the fund looks like it will go head to head with GLD, but maybe not. It seems unlikely the World Gold Council would want to cannibalize a successful existing product that already has its backing. The filing is actually quite vague, with a lot of information—including the ticker and expense ratio—left blank.

GLD’s main competitor is the iShares Gold Trust (IAU). A share of IAU represents ownership of 1/100th of an ounce of gold. However, one share of GLD represents 1/10th of an ounce of gold. This translates into very different share prices for the ETFs themselves (GLD is currently trading around $121, IAU around $12).

That larger size of GLD appeals to large institutional investors who often have per-share costs, while IAU is more easily traded by smaller investors who pay per-trade commissions and might like being able to purchase in small increments. Depending on the handle size, the proposed fund could be gunning for GLD’s main competitor.

Other Differences

There are other key differences: States Street Global Advisors seems to have no involvement with the proposed product, whereas GLD carries the SPDR brand in its name and is listed among its in-house ETF lineup.

The fund filing has been made, in fact, under the same trust as the SPDR Long Dollar Gold Trust (GLDW), a basket that combines long exposure to the gold price with a short position in foreign currencies, but no role is mentioned for SSGA.

There are other more subtle differences. For example, shareholders of the new fund will not have any voting rights, whereas if shareholders in GLD get the backing of 66% of the votes, they can remove the fund’s trustee—an exceptionally unlikely turn of events, in any case.

London-based ICBC Standard Bank will be the fund’s custodian, and will be responsible for the storage of the gold bullion underlying the product, whereas HSBC is the custodian for GLD. Both are major players in the London gold markets, where the physical gold is vaulted in both cases.

“There are really two scenarios here,” said ETF.com CEO Dave Nadig. “Either they’re launching a low-cost competitor to their own fund and new low-cost launches like GraniteShares’ BAR, or they’re just targeting a different handle-size. Of course, they may come out swinging on both fronts.”

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