Investing

Investing in Gold with a Gold ETF

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Some people love to invest in gold.

Now you can invest in gold, without having to buy the physical metal and store it.

There are 4 Gold ETFs now available on the ASX, we take a closer look.

Why Invest in Gold?

When it comes to investing in gold, there are those who love it and there are those who hate it.

Gold has been coveted for over 6,000 years and we can be certain isn’t going out of fashion anytime soon.

In fact 50% of the world’s gold supply is used for jewelry, while 40% is used for investment and the remaining 10% for industrial uses.

It’s Rare

Gold is incredibly rare, in fact as at 2015 there was 185,000 tonnes of gold in existence above ground.

That sounds like a lot until you consider that 19 tonnes of gold takes up one cubic metre (it’s very heavy).

Therefore all the gold that has ever been refined throughout history could be placed in a cube measuring 65.5 feet (20 meters) on a side.

Gold as a Store of Value

Because gold is so rare, it is seen by investors as a store of value. In fact Governments use to back their money supply with physical gold, until the gold standard was abandoned in 1976.

Since that time the gold price has done the following:

EXTRACT: Gold Price Since 1970

Gold Price Chart

It is important to remember gold doesn’t generate an income like a business, or a rental property.

4 Gold ETFs to Consider

Gone are the days when investing in gold required you to buy the physical metal and then store it in a vault or safe.

Now you can invest in gold via exchange traded funds (ETFs) directly on the Australian Stock Exchange (ASX).

What Gold ETFs Are Available?

A quick search of ETFwatch.com.au shows for specialist gold ETFs available on the ASX:

Gold ETF

We will take a quick look at each of these ETFs in turn.

1. GOLD (ETFS Physical Gold)

ETFS Physical Gold (GOLD) is designed to offer investors a simple, cost efficient and secure way to access gold by providing a return equivalent to the movements in the gold spot price less the applicable management fee.

What is it?

GOLD is backed by physical allocated gold held by HSBC Bank plc (the custodian).

Each individual ETFS Physical Gold Security has an effective entitlement to gold, and that entitlement changes daily to reflect the accrual of the management fee.

What does it cost?

The current management fee is 0.4%, charged from the ETF.

You will also be charged brokerage to buy and sell GOLD on the ASX.

Quick Summary

  • Provides an exposure to physical gold
  • The management fee is 0.4%
  • The gold is priced in US dollars (so the AUD/USD exchange rate plays a factor in the value of GOLD)

2. PMGOLD (Perth Mint Gold)

PMGOLD aims to provide investors with exposure to physical gold bullion based in Australian dollars.

What is it?

The gold bullion is stored primarily in the Perth Mint’s vaults in WA.

PMGOLD provides access only to physical gold bullion. No dividends are paid by Gold Corporation to holders of PMGOLD. All PMGOLD liabilities are guaranteed by the WA government

What does it cost?

PMGOLD is the most cost effective gold backed ETP with an annual management fee of 0.15%.

You will also be charged brokerage to buy and sell PMGOLD on the ASX.

Quick Summary

  • Provides an exposure to physical gold
  • The management fee is 0.15%
  • The gold is priced in US dollars (so the AUD/USD exchange rate plays a factor in the value of PMGOLD)

3. QAU (Betashares Gold Bullion)

QAU aims to track the performance of the price of gold bullion, with a currency hedge against movements in AUD/USD exchange rate (before fees and expenses).

What is it?

A hedged exposure to the gold price, backed by physical gold bullion.

What does it cost?

QAG has a management fee of 0.49%, plus gold vendor / custody costs of 0.1%.

You will also be charged brokerage to buy and sell QAG on the ASX.

Quick Summary

  • Provides an exposure to physical gold
  • The fee is management fee is 0.49%
  • Aims to provide an exposure to the gold price, without the impact of currency (i.e. hedged)
QAU is the most expensive ETF, but it is the only ETF that offers a hedged exposure to the gold price

4. ZGOLD (ANZ ETFS Physical Gold)

ZGOLD provides investors with a beneficial interest in physical gold Bullion without the necessity of holding, trading and storing physical gold Bullion.

What is it?

ZGOL is backed by physical allocated gold held by Australia and New Zealand Banking Group Limited (the custodian) at its vault in Singapore.

What does it cost?

ZGOL has a management fee of 0.40%.

You will also be charged brokerage to buy and sell ZGOL on the ASX.

Quick Summary

  • Provides an exposure to physical gold
  • The fee is management fee is 0.40%
  • The gold is priced in US dollars (so the AUD/USD exchange rate plays a factor in the value of ZGOLD)

Summary

  • Some investors love gold
  • Gold is incredibly rare and probably won’t go out of fashion anytime soon
  • You can now invest in gold using an ETF
  • There are 4 gold ETFs listed on the ASX
  • Gold is priced in USD, so the AUD/USD exchange rate is a factor in the price
  • QAG offers a hedged (ie. take out the currency effect) exposure to gold
 The Wealth Guy Signature
The information on this blog and website is of a general nature only. It does not take into account your individual financial situation, objectives or needs. You should consider your own financial position and requirements before making a decision. We recommend you consult a licensed financial adviser in order to assist you with this.

 

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