Another Gold ETF post

Discussion of the Gold portion of the Permanent Portfolio

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welderwannabe
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Another Gold ETF post

Post by welderwannabe » Sat Nov 12, 2022 11:26 am

Soliciting some fresh opinions on the best gold ETF. I've held GLDM almost since inception for the low fees. However I've become increasingly concerned with the china connection, and honestly while apples and oranges the FTX failure has brought counterparty risk back up to the forefront of my mind.

I do hold physical gold as well, but don't want the hassle or expense of keeping it all in physical form.

Right now I'm between staying with GLDM or switching to SGOL. GLDM obviously has a lower ER of .10%, but SGOL is only .17%. That is peanuts in difference. SGOL, while about half the size of GLDM, seems to have similar bid ask spreads and trading volume.

What I like about SGOL is:

1) Its custodian isnt a chinese bank
2) Gold is split between london and switzerland giving some diversity
3) They publish an inventory of bars own, including serial numbers periodically
4) they publish vault inspection reports.

GLDM has none of these.

I wouldn't have much for tax consequences moving out of GLDM, so its no big deal there.

Thoughts from fellow PPs?
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Re: Another Gold ETF post

Post by I Shrugged » Sat Nov 12, 2022 5:34 pm

I hold GLD and am stuck because of the tax consequences of selling. What are the downsides of SGOL?
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Re: Another Gold ETF post

Post by boglerdude » Sat Nov 12, 2022 7:35 pm

Howbout storing some where you could get it

https://www.texasbulliondepository.gov/pricing
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Re: Another Gold ETF post

Post by welderwannabe » Sat Nov 12, 2022 7:47 pm

I Shrugged wrote:
Sat Nov 12, 2022 5:34 pm
I hold GLD and am stuck because of the tax consequences of selling. What are the downsides of SGOL?
All I can see is 7 extra basis points expense ratio
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Re: Another Gold ETF post

Post by Tyler » Sat Nov 12, 2022 11:31 pm

welderwannabe wrote:
Sat Nov 12, 2022 11:26 am
What I like about SGOL is:

1) Its custodian isnt a chinese bank
2) Gold is split between london and switzerland giving some diversity
3) They publish an inventory of bars own, including serial numbers periodically
4) they publish vault inspection reports.

GLDM has none of these.
SGOL is a good fund and I do think that 1 and 2 are fair points. However, I believe you're mistaken about 3 and 4. You can find the GLDM bar list and inspection reports here: https://www.spdrgoldshares.com/gldm/gold-bar-list/
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Re: Another Gold ETF post

Post by welderwannabe » Sun Nov 13, 2022 6:28 am

Tyler wrote:
Sat Nov 12, 2022 11:31 pm
SGOL is a good fund and I do think that 1 and 2 are fair points. However, I believe you're mistaken about 3 and 4. You can find the GLDM bar list and inspection reports here: https://www.spdrgoldshares.com/gldm/gold-bar-list/
Obviously I am mistaken based on the link you posted. Now why SSGA doesn't keep that data with their prospectus, 10Ks and other docs on their main website like SGOL does, and have instead setup an entirely new domain is beyond me...

So this new information does cause me to rethink my plan, so thank-you very much for it.
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Re: Another Gold ETF post

Post by coasting » Thu Nov 17, 2022 9:56 am

IAUM, iShares "Micro" version of IAU, launched with ER of 0.15%. Not sure when it happened, but ER for IAUM appears to have dropped to 0.09%. Both fund's prospectus list the same sponsor, trustee, and custodian. I'm not aware of a less expensive gold trust currently on the market.
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Re: Another Gold ETF post

Post by coasting » Thu Nov 17, 2022 5:03 pm

coasting wrote:
Thu Nov 17, 2022 9:56 am
IAUM, iShares "Micro" version of IAU, launched with ER of 0.15%. Not sure when it happened, but ER for IAUM appears to have dropped to 0.09%. Both fund's prospectus list the same sponsor, trustee, and custodian. I'm not aware of a less expensive gold trust currently on the market.
IAUM is even cheaper than I realized. As to when the sponsor fee (ER) changed, I found the answer in "iShares Gold Trust Micro Quarterly Report on Form 10-Q "
https://www.ishares.com/us/literature/q ... 220930.pdf
Scroll down to section "10 - Subsequent Events":
Management’s evaluation of the impact of all subsequent events on the Trust’s financial statements was completed through the date the financial statements were available to be issued and the following item was noted:
Effective October 24, 2022, the Sponsor's Fee paid by the Trust was reduced from an annualized rate of 0.15% to 0.09% of the net asset value of the Trust. Additionally effective on October 24, 2022, the Sponsor has extended the voluntarily waiver on the Sponsor Fee from June 30, 2024 to June 30, 2027.


That prompted me to wonder what is this "waiver" that is being extended to June 2027?
Earlier in section "3 - Trust Expenses" I find:
During the period, the Trust paid to the Sponsor a Sponsor’s fee that accrues daily at an annualized rate equal to 0.15% of the net asset value of the Trust, paid monthly in arrears. The Sponsor has voluntarily agreed to waive a portion of the Sponsor’s Fee so that the Sponsor’s Fee after the fee waiver will not exceed 0.07% through June 30, 2024. Although the Sponsor has no current intention of doing so, because the fee waiver is voluntary, the Sponsor may revert to a higher fee prior to June 30, 2024. Should the Sponsor choose to do so (or an amount higher than 0.07% but no greater than the then current Sponsor’s fee as set forth in the Trust Agreement), prior to June 30, 2024, it will provide shareholders with at least 30 days’ prior written notice of such change through either a prospectus supplement to its registration statement or through a report furnished on Form 8-K.

This indicates that IAUM actually has a current ER of only 0.07% through June 2027, though it could revert to 0.09% ER sooner if the sponsor chooses.

I was curious what my various brokers would report when looking up ticker IAUM.
  • eTrade has no value listed for the ER ???
  • TD Ameritrade still has the old 0.15 ER listed, so they seem not to be updated yet.
  • T. Rowe Price is up to date and actually reports the ER of 0.07 to include the current fee waiver.
IAUM.png
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Re: Another Gold ETF post

Post by welderwannabe » Fri Dec 09, 2022 11:12 am

I hold about 50% physical gold in various places, but im still using GLDM for all my paper gold. I haven't moved yet, but i have done some research I figured i'd share in case its useful to someone else.

GLD: ER of .4%, making this one of the most expensive ETFs. Liquidity is high for this as it is very commonly held by traders, who value small bid ask spreads over expense ratios. Those of us that buy and hold feel differently. AUM is $52,000M making this ETF absolutely huge and also likely why they havent reduced the ER on this like they have on GLDM and other ETFs. Dropping the ER would have a huge impact on their profit with holdings that size. Custodian was traditionally HSBC, but HSBC had some credibility issues (Bob Pisani's visit to the GLD vault where he showed a bar that was on another ETF's bar list). A week ago an announcement was made that JP Morgan was going to join HSBC as vault custodian, an interesting development I haven't had a chance to research yet. Regardless, not interested in this ETF as im not going to pay a high premium to buy and hold paper gold that a chinese bank is involved in. 30day median Bid/ask spread on this is usually .01%, which is basically nothing.


GLDM: ER of .10%, making this one nice and cheap. Custodian is ICBC, which is the Industrial and Commercial Bank of China. They bought Barclays london gold vault about 5 years ago and GLDM's gold is stored here. While I am not aware of shenanigans like HSBC has had in their vault, a chinese custodian still makes me a little nervous. This ETF has about $5,000M of assets under management. This ETF is cheap so I may just stay here, but im becoming increasingly concerned. 30day median Bid/ask spread on this one is .03%, again very low.


OUNZ: Have considered OUNZ, but aside from the physical redemption option, they don't look any different than the others. Prospectus states they can pretty much deny physical redemptions on a whim, and when they do allow it, if you don't take delivery of a London Bar, they basically go on the open market and buy you a coin, then send it to you. If the gold market is locked up they wont be able to redeem it to physical if you can't, and they have no requirement to do so. Really not much different than me just selling the ETF myself and buying a coin, except for their additional $500 fee for a physical redemption. . It also has a .25% expense ratio, which I don't think is worth it based on these facts. Only pluss over GLDM is the custodian is JP Morgan, and they store the gold at the vault in London. This seems better an HSBC. OUNZ only has $500M in assets under management, so I wouldn't be surprised if this ETF folds up. 30day median Bid/ask spread is .06% basically 2X GLDM and 6X GLD.

SGOL: This has a expense ratio of .17%, putting it half way between GLDM and OUNZ. Its custodian is also JP Morgan. The ETF used to be called the Aberdeen Standard Physical Swiss Gold Shares. Gold in Switzerland is considered by some to be safer since the Swiss have a history of protecting ownership interests. The ETF renamed recently to abrdn Physical Gold Shares, and you guessed it, all its gold is no longer held in Switzerland. It now holds half in Switzerland and half in London. Its assets under management is roughly $2,500M making it 5X the size of OUNZ and half the size of GLDM. At this size its unlikely to fold, but who knows what other changes they make to it. Same bid/ask spread as OUNZ, which surprised me as is has 2-3X the trading volume.
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Re: Another Gold ETF post

Post by Tyler » Fri Dec 09, 2022 7:24 pm

Nice research! I appreciate all the info.
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Re: Another Gold ETF post

Post by Hal French » Fri Dec 09, 2022 8:42 pm

Check AAAU. When I originally purchased shares, it was issued by the Perth Mint, and shares are exchangeable for physical gold. Now run by Goldman Sachs, but still exchangeable.
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Re: Another Gold ETF post

Post by welderwannabe » Sat Dec 10, 2022 6:36 am

Hal,

Where are you seeing it's still the case you can exchange shares for physical gold? I don't see thats the case since Goldman took over?
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Re: Another Gold ETF post

Post by welderwannabe » Sat Dec 10, 2022 12:09 pm

I just went through the prospectus for AAAU, and there is nothing in there about redeeming ETF shares in exchange for physical gold. Its just got the standard language allowing Authorized Participants to do it (which none of us are), and only in chunks of 25,000 shares which works out to be about $450,000.
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Re: Another Gold ETF post

Post by welderwannabe » Sat Dec 10, 2022 3:20 pm

Cleaned up the post a bit and added some more tickers:

I feel in investing, its super important to know how different parties selling you things make their money. This helps assess risk. So I'll start with some Gold ETF definitions.


Sponsor: This is the company who starts up the ETF and is largely responsible for marketing, producing the website, sales documents etc. The sponsor often has a flashy name with some brand equity that will help sell the ETF. They also collect the expense ratio, and this is how they make their money.
Trustee: These folks run the trust, make sure the audits happen, filings are made for the government, the custodian is doing what they are supposed to etc. They are paid by the sponsor a portion of the fee.
Authorized Participants: These are the folks that create and destroy new ETF shares. When there is a shortage of the ETF shares (more buyers than sellers) this causes the price of the ETF to go up, and actually pushes it to cost more than the value of the gold it represents. An Authorized Participant will step in and deposit gold into the ETF trust in exchange for a pile of new ETF shares. They will then sell these ETF shares into the market. The reverse happens when they need to destroy shares because the ETF price is worth less than the underlying gold. This difference, between the value of gold an ETF share represents, and the cost of the ETF in the market, is how they make their money.

Custodian: IMHO, this is the most important person. These are the folks that actually store, secure, inventory, and INSURE the gold the ETF trust holds. If they don't do their job your ETF is effectively worthless as the gold it represents may not exist. Understand that when ETF shares are created by the Authorized Participant above if often only means the custodian wrote the ETF's name on a ledger next to a bar of gold in their vault, or possibly moving it from one pile to the other, and thats all that says that ETF now owns it. When shares are destroyed, that name is simply erased. When you read a prospectus, you'll see that the custodian is pretty much the only one on the hook for having the proper insurance in the event the gold is stolen, and you'll find that there are little to no representations made that they even hold enough insurance in the event of a major theft. Selection of the custodian, IMHO, is the most crucial part. They are generally paid by the Trustee for their work (storage fees, transaction fees etc)


GLD:
Sponsor: SSGA (State Street Global Advisors)
Trustee: Bank of New York Mellon
Custodian: HSBC aka Hong Kong Shanghai Bank of China (now also JP Morgan Chase, see below)
Gold Storage Location: HSBC Vault in London
ER: .40%, making this one of the most expensive ETFs.

Liquidity is high for this as it is very commonly held by traders, who value small bid ask spreads over expense ratios. Those of us that buy and hold feel differently. AUM is $52,000M making this ETF absolutely huge and also likely why they havent reduced the ER on this like they have on GLDM and other ETFs. Dropping the ER would have a huge impact on their profit with holdings that size. Custodian was traditionally HSBC, but HSBC had some credibility issues (Bob Pisani's visit to the GLD vault where he showed a bar that was on another ETF's bar list). A week ago an announcement was made that JP Morgan was going to join HSBC as vault custodian, an interesting development I haven't had a chance to research yet. Regardless, not interested in this ETF as im not going to pay a high premium to buy and hold paper gold that a chinese bank is involved in. 30day median Bid/ask spread on this is usually .01%, which is basically nothing, along with an average premium of .02%.

GLDM:
Sponsor: SSGA (State Street Global Advisors)
Trustee: Bank of New York Mellon for all intents and purposes (prospectus is overly nuanced)
Custodian: ICBC Industrial and Commercial Bank of China, China’s largest bank
Gold Storage Location: ILBC Vault (used to be Barclays Vault) in London
ER: .10%, making this one of the most inexpensive ETFs.

ER of .10%, making this one nice and cheap. Custodian is ICBC, which is the Industrial and Commercial Bank of China. They bought Barclays london gold vault about 5 years ago and GLDM's gold is stored here. While I am not aware of shenanigans like HSBC has had in their vault, a chinese custodian still makes me a little nervous. This ETF has about $5,000M of assets under management. 30day median Bid/ask spread on this one is .03%, again very low, with an average premium of .03%.

OUNZ:
Sponsor: Van Eck
Trustee: Bank of New York Mellon
Custodian: JP Morgan Chase
Gold Storage Location: JP Morgan Vault in London
ER: .25%
ER of .25%. Have considered OUNZ, but aside from the physical redemption option, they don't look any different than the others. Prospectus states they can pretty much deny physical redemptions on a whim, and when they do allow it, if you don't take delivery of a London Bar, they basically go on the open market and buy you a coin, then send it to you. If the gold market is locked up they wont be able to redeem it to physical if you can't, and they have no requirement to do so. Really not much different than me just selling the ETF myself and buying a coin, except for their additional $500 fee for a physical redemption. Honestly the physical redemption feature feels like a gimmick, except that if you really wanted the physical gold and didn’t mind the high fee, it could in theory be done without any taxes. It also has a .25% expense ratio, which I don't think is worth it based on these facts. Only plus over GLDM is the custodian is JP Morgan, and they store the gold at the vault in London. This seems far better an HSBC. OUNZ only has $500M in assets under management, so I wouldn't be surprised if this ETF folds up. 30day median Bid/ask spread is .06% basically 2X GLDM and 6X GLD, with an average premium of .02%.


SGOL:
Sponsor: Aberdeen Standard
Trustee: Bank of New York Mellon
Custodian: JP Morgan Chase
Gold Storage Location: JP Morgan Vaults with 50% in Zurich and 50% in London
ER: .17%
This has a expense ratio of .17%, putting it half way between GLDM and OUNZ. Its custodian is also JP Morgan. The ETF used to be called the Aberdeen Standard Physical Swiss Gold Shares. Gold in Switzerland is considered by some to be safer since the Swiss have a history of protecting ownership interests. The ETF renamed recently to abrdn Physical Gold Shares, and you guessed it, all its gold is no longer held in Switzerland. It now holds half in Switzerland and half in London. While an investor may select this ETF due to gold storage location being partially in Switzerland, there is nothing in the prospectus that states it must stay that way so they can change it at any time. Its assets under management is roughly $2,500M making it 5X the size of OUNZ and half the size of GLDM. At this size its unlikely to fold, but who knows what other changes they make to it. Same bid/ask spread as OUNZ, which surprised me as it has 2-3X the trading volume, but an average premium of only .02%.

AAAU:
Sponsor: Goldman Sachs
Trustee: Bank of New York Mellon
Custodian: JP Morgan Chase
Gold Storage Location: JP Morgan Vault in London
ER: .18%. Custodian is JP Morgan London
This ETF used to be sponsored by the Perth Mint, and they were the Custodian as well. Gold was largely stored in Australia and an investor could exchange ETF shares for physical gold, similar to OUNZ. However in late 2020, Goldman Sachs took over the ETF and quietly eliminated this option. This ETF has $420M assets under management, making it even smaller than OUNZ. One has to wonder how long its going to last. Like the other smaller ETFs, this has an average bid-ask spread of .06%. The average premium has been .02%.

IAU:
Sponsor: Blackstone (aka the iShares guys)
Trustee: Bank of New York Mellon
Custodian: JP Morgan Chase
Gold Storage Location: JP Morgan Vaults in NY, Toronto and London
ER: .25%

While this can change, this fund is currently storing 15% of its gold in the vault in New York, and the other 85% in London. Assets under management $26,000M making this the second largest gold ETF, but still only half the size of GLD. Average bid-ask spread is .03% with an average premium of .01%.

IAUM:
Sponsor: Blackstone (aka the iShares guys)
Trustee: Bank of New York Mellon
Custodian: JP Morgan Chase
Gold Storage Location: JP Morgan Vaults in NY, Toronto and London
ER: .09%

While this fund states it can keep gold in any of the above three locations, the recent bar inventory shows 100% of it in the London vault. Assets under management is $1,100M, making it 1/5 the size of its closest microshare competition, GLDM. 30-day bid/ask spread is .06% with an average premium of .03%.


Analysis:
Lowest fee: IAUM. Bid/ask spread is larger than GLD, but if your going long gold that doesn’t matter.
Best Storage Diversity: SGOL. Fee is decent, and half the gold is in Zurich, which has great laws protecting ownership rights. No guarantee this will continue however.
Convertibility: OUNZ is the only option I am aware of. Fee is high, liquidity is low, and I think the conversion is really a gimmick. But if this is important to you, it’s the only choice.
Losers: GLD & GLDM for too many Chinese bank connections. AAAU is also a loser for charging .18% and providing nothing beyond what the others provide anymore, except the Goldman Sachs name
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Re: Another Gold ETF post

Post by Kbg » Tue Dec 13, 2022 8:49 am

Nicely done and many thanks for the summary!
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Re: Another Gold ETF post

Post by Xan » Tue Dec 13, 2022 9:49 am

Yes, thanks, welderwannabe! This is a great resource. I've used it to divest of GLDM.
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Re: Another Gold ETF post

Post by coasting » Tue Dec 13, 2022 12:36 pm

Xan wrote:
Tue Dec 13, 2022 9:49 am
Yes, thanks, welderwannabe! This is a great resource. I've used it to divest of GLDM.
Xan, if you are open to sharing, may I ask: Did you invest the proceeds in a different gold ETF? And if so, which one did you select?
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Re: Another Gold ETF post

Post by Kbg » Tue Dec 13, 2022 1:57 pm

Xan wrote:
Tue Dec 13, 2022 9:49 am
Yes, thanks, welderwannabe! This is a great resource. I've used it to divest of GLDM.
What did you go with and why? I'm also a current GLDM holder.

Tks in advance.
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Re: Another Gold ETF post

Post by Xan » Tue Dec 13, 2022 2:21 pm

Kbg wrote:
Tue Dec 13, 2022 1:57 pm
Xan wrote:
Tue Dec 13, 2022 9:49 am
Yes, thanks, welderwannabe! This is a great resource. I've used it to divest of GLDM.
What did you go with and why? I'm also a current GLDM holder.

Tks in advance.
I went with IAUM. Cheaper, not reliant on China. I don't see a significant disadvantage for my purposes.
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Re: Another Gold ETF post

Post by Tyler » Tue Dec 13, 2022 2:33 pm

The one thing that hangs me up on IAUM is the trading volume. According to etf.com, the median daily trading volume for IAUM is just $2.7mm. For reference, GLDM trades $48mm per day.

Not that I have anywhere near that level of gold, but whenever a reasonable position by a small-time individual investor is even within an order of magnitude of the total traded on a single day I start to wonder if I might have issues promptly moving money at some point. Now whether that risk is greater or less than the risk of a Chinese custodian is certainly up for debate.
Last edited by Tyler on Tue Dec 13, 2022 4:06 pm, edited 2 times in total.
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Re: Another Gold ETF post

Post by Kbg » Tue Dec 13, 2022 2:53 pm

Agree with the general feeling on a Chinese holding company. However, I think the location, local laws in effect and the auditing/auditor is probably more important. If the vault is in the US or UK with a western auditing firm I'm not that concerned.

Move the vault to Bejing, use a non-western European or US auditor...I'd be out in a nano-second.
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Re: Another Gold ETF post

Post by Tyler » Tue Dec 13, 2022 4:11 pm

Kbg wrote:
Tue Dec 13, 2022 2:53 pm
Agree with the general feeling on a Chinese holding company. However, I think the location, local laws in effect and the auditing/auditor is probably more important. If the vault is in the US or UK with a western auditing firm I'm not that concerned.

Move the vault to Bejing, use a non-western European or US auditor...I'd be out in a nano-second.
IMO that's a very reasonable take.

And for the record, I personally hold GLDM. I'm not 100% comfortable with the custodian, but to be honest I'm not 100% comfortable with ANY counterparty these days regardless of their country of origin (for example, BlackRock is no saint just because they're American). So I'll keep an eye on them just like I do all my holdings.
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Re: Another Gold ETF post

Post by Xan » Tue Dec 13, 2022 4:31 pm

My assumption/guess is the trading volume of IAUM will increase significantly pretty soon. Let's see how it shakes out.
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Re: Another Gold ETF post

Post by Kbg » Tue Dec 13, 2022 5:54 pm

In my retirement accounts "the" driver has been lowest management fee. IAUM, then SGOL, then GLDM, perhaps back to IAUM shortly.
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Re: Another Gold ETF post

Post by welderwannabe » Wed Dec 14, 2022 6:22 am

Kbg wrote:
Tue Dec 13, 2022 2:53 pm
Agree with the general feeling on a Chinese holding company. However, I think the location, local laws in effect and the auditing/auditor is probably more important. If the vault is in the US or UK with a western auditing firm I'm not that concerned.

Move the vault to Bejing, use a non-western European or US auditor...I'd be out in a nano-second.
My understanding is many of the periodic audits are simply "attestations", and not an actual full physical count by a third party. Also remember these precious metals ETFs do not have the regulatory oversight that stock ones do. Thats why there is a warning label on all of them.

These are all slim risks since all of them are run by reputable companies, but one of the purposes of holding gold in the PP is for the black swan events. Everyone has to make his/her own decision on risk vs reward.



"
This is not an investment company registered under the Investment Company Act of 1940, and therefore is not subject to the same regulatory requirements as mutual funds or ETFs registered under the Investment Company Act of 1940. The Trust is not a commodity pool for purposes of the Commodity Exchange Act. Before making an investment decision, you should carefully consider the risk factors and other information included in the prospectus."
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