iShares cuts expenses on IAU

[KevinW]

According to iShares' website, they've "refined" IAU:

http://us.ishares.com/special/goldshares.htm

They now list the expense ratio as .25 instead of .40.  There may be other "refinements"  ::) but I'm not familiar enough with the fund to pick them out.

Now IAU is far and away the cheapest gold ETF.  Does this change the pecking order of the funds in anyone's mind?  Should IAU now be the "default" gold ETF?

[Jan Van]

Shouldn't be long then before GLD matches or undercuts the IAU expense ratio! They are bigger, so they should be able to cut a lot as well...

[6 Iron]

I am a little surprised that this has not generated more discussion. As many of us have a portion of our gold in ETF's in tax advantaged accounts for rebalancing purposes, has anyone moved from GLD to IAU, or if not, why?

When I chose ETF's for gold, I opted for GLD (largest, smallest bid/ask spread), and SGOL, for corporate and geographic diversity. I think that if I was starting my permanent portfolio now, I would probably use IAU. I had hoped that when IAU lowered their fees, that GLD would follow suit, but that may not be the case.

[Jan Van]

Unless you have a LOT in GLD, it's not going to make that big a difference, the .15%. So maybe it's just too much of a hassle for most people. On $10k that's a $15 difference...

[SmallPotatoes]

Unless you have a LOT in GLD, it's not going to make that big a difference, the .15%. So maybe it's just too much of a hassle for most people. On $10k that's a $15 difference...

I agree. GLD also boasts higher trading volume and assets, which (I hope) makes it a better choice for rebalancing, which is the best reason to hold a gold ETF. Truely, gold bullion is a great security when held in the physical form. GLD is great for capturing gains when rebalancing. It's all about using the right tool for the job.  

[MediumTex]

I own some GLD and IAU.

[foglifter]

I've just posted a link to a good analysis of all available paper gold instruments in the GTU, GLD, SGOL, etc thread, thought it might be interesting for some folks.

The article was published before the recent IAU ER cut. There is some controversy about GLD, but interestingly IAU was not mentioned in this regard. Based on prospectus IAU keeps gold in different countries, which may be an additional plus to consider.

[PP4me]

IAU has made more changes that are positive . . .

http://www.thestreet.com/story/10851484 ... n=GOOGLEFI

BlackRock, Inc. (NYSE: BLK) today announced that the iShares Exchange Traded Funds (ETFs) business, the world’s largest provider of ETFs, has made further refinements to the iShares Gold Trust (NYSEArca: IAU). These changes will make the Trust the first US-listed gold ETF to be fully allocated daily. In addition, the name of the Trust has been changed to the iShares Gold Trust to more clearly reflect that the Trust holds only physical bullion, not futures.

“We continue to make refinements to the iShares Gold Trust to meet growing demand for gold investing and to meet clients’ specific needs,”? said Noel Archard, Head of US iShares Product at BlackRock. “The Trust’s new custodian, JPMorgan Chase Bank, N.A., London branch, is providing daily 100% allocation of the gold bullion. We understand client concerns with exposure to unallocated gold and, as part of these refinements we've taken steps to minimize risks from unallocated gold exposure.”?

Each business day, the trusts assets will be fully allocated, so that, at the end of such business day, no gold is held in unallocated form. The custodian will not allow issuances of shares on unallocated amounts.
These changes are part of the continuing refinements the firm has made to the Trust. In June 2010, the firm announced several changes to the iShares Gold Trust including: reducing the share price – and increasing the Trust’s shares outstanding – through a 10-for-1 share split, and lowering the Trust’s sponsor fee to 0.25% by leveraging BlackRock’s broader platform to drive greater operating efficiencies for the Trust.

[foglifter]

Thanks for sharing, PP4me. It's clear that investors are becoming more sensitive to what is hidden behind the fine print in the prospecti of the paper gold funds in light of all the buzz about GLD. Another reason must be an increased competition.

Good move, BlackRock. Now, could you please add IAU to the list of commission-free ETFs at Fidelity?

[Snowman9000]

I have a basic knowledge of the concept of allocated versus unallocated gold.  But how does this work when an ETF is an intermediary?  If I own 100 ounces of gold via IAU, are they saying that the storage company has 100 ounces allocated to my name?  Is this in effect a bailment, in which claims by creditors against, or bankruptcy of, the etf or the storage company are harmless to my title to the gold?

[MiniB]

I have a basic knowledge of the concept of allocated versus unallocated gold.  But how does this work when an ETF is an intermediary?  If I own 100 ounces of gold via IAU, are they saying that the storage company has 100 ounces allocated to my name?  Is this in effect a bailment, in which claims by creditors against, or bankruptcy of, the etf or the storage company are harmless to my title to the gold?

You do not own 100 ounces of gold via IAU.  You own shares of IAU representing 100 ounces of gold.  There is still a barrier between the two of you.

Now if IAU directly owns allocated gold, then there are two total barriers.  One between you and IAU.  And one between IAU and the physical gold that's in storage at a bank.

If IAU held unallocated gold, there would be three barriers.  One between you and IAU. One between IAU and the bank that's holding the unallocated gold.  And one between the bank and other clients holding gold there also within unallocated accounts.  Because the gold is unallocated, then IAU cant specifically know which pieces are its, so if something happens to the gold, then all the unallocated account holders will have to split up what's left.

It's superior but more expensive to have allocated gold.