Creations and redemptions can only be made in units of gold bullion amounting to AU$500,000 by an Approved Dealer. The structure is very similar to that of any other ETF, with the underlying portfolio being held by a trustee. The only difference is that in the case of the Gold Bullion Securities (Gold) the underlying portfolio is not all of the stocks in an index, but instead bars of gold.
As of mid-December 2004, the Australian Gold Bullion Securities (Australian Stock Exchange code GOLD) was holding 664 gold bars in London, totaling 267,359 ounces (8.32 tonnes), which had a net value of over US$110 million. Each share of an ETF entitles its owner to 99.88% of 1/10th of one ounce of gold, after the fund had been operational for 10 months. That means each share, of which there are currently about 3 million, has a price of about AU$55 (US$41.50) at today's spot price.
A troy ounce, which is used to measure gold, is different from the more widely-used ounce (known as an avoirdupois ounce) that is used to weigh most other things. One troy ounce amounts to 31.10 ounces, while the more familiar avoirdupois ounce is 28.35 grams, so a troy ounce is about 1.1 avoirdupois ounces.
The Web site http://www.goldbullion.com/ actually posts photos of the specific gold bars that comprise the underlying portfolio. Each gold bar weights approximately 25 (regular old avoirdois) pounds or 11.5 kilos (to further confuse matters, a troy pound would contain 12 troy ouces as opposed to the 16 avoirdupois ounces in an avoirdupois pound). Their weight is targeted at 400 troy ounces a bar, and is permitted to vary from 350 to 430 ounces a bar. Below is a photo of some of the actual gold bars underlying the ETFs.
As noted above, the launch in Australia presages a series of future launches worldwide, not only of bullion-based ETFs, which will certainly be launched in other countries, but also possibly of other commodity-based ETFs. S&P recently launched a new commodity index, for example, explicitly mentioning the possibility of an ETF launched on a broad, portfolio-stabilizing commodity index (which would exclude gold). Another possibility would include an ETF based on crude oil, for example.