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Digging deep into Australian listed Gold ETFs

ETF Watch - Feb 15, 2016

After a few years in the investing wilderness, Gold is back! With global sharemarkets seeing the most turmoil since the GFC, primarily driven by worries about Chinese and US growth, Gold is shining again, rising from a low of about US $1,050 an ounce in December, to briefly touch US $1,250 an ounce last week. This represents close to a 20% rise in just a couple of months. Gold is reflecting its safehaven status, and in Australian dollar terms is not far off its all time high set in 2011.

 

There’s 4 gold ETFs available on the ASX, we take a look at them below.

Ticker GOLD PMGOLD QAU ZGOL
Name ETFS Physical Gold Perth Mint Gold Betashares Gold Bullion ETF - Currency Hedged ETFS Physical Gold ETF
Inception Date March 2003 December 2010 May 2011 June 2015
Market Cap $425m $86m $20m $1m
Management Fees 0.40% 0.15% 0.49% 0.40%
Physical Holding Location London Perth London Singapore

All of the above funds are similar in the way they invest where investments are backed up with physical gold stored in a vault somewhere, which means in theory at least if World War Z was to break out tomorrow and global markets were to collapse, an investor can turn up to a vault somewhere and redeem their entitlement. We’re not sure this would work in practicality, but PMGOLD at least offers this service, with each share a call option on 1/100th of a Troy Ounce and investors being able to redeem their holdings for bars and coins at the Perth Mint. Would the Perth Mint still be operational after World War Z? Probably not…

How have the funds performed?

Given there’s little difference between 3 of the 4 funds (QAU is currency hedged so would be expected to track USD gold price rather than AUD) we’ve attempted to plot the performance of each of the funds given a $1,000 investment in January 2011. If the fund was launched more recently the starting investment was based on the spot gold price at that date.

 

As you can see the difference in performance is barely noticeable. To be exact, over a 5 year period the performance of the PMGOLD fund outperformed the GOLD fund by 3.5%, with the initial $1,000 investment now worth $1,254 compared to  $1,211 for GOLD. This could be to do with the lower fees associated with PMGOLD. ZGOL has very low liquidity and only 7 months worth of history, but so far seems to be tracking reasonably well to the index.

 

There has been some tracking error with the QAU fund, with the fund underperforming the benchmark by a total of 5.7% since inception, however this is likely to do with the higher fees associated with a currency hedged investment.

What other options are there?

For investors seeking exposure to gold, without necessarily wanting to invest in the physical commodity, there is an alternative. The Market Vectors Gold Miners ETF (GDX) is an ETF which aims to track the performance of companies involved in the gold mining industry. The fund has only recently been listed on the ASX, but has almost 10 years history on the New York Stock Exchange, with total assets of $8.4b ($15m of which is part of its ASX listing). 12% of its portfolio is in ASX listed miners with the rest of the makeup coming from other gold producing nations.

For those who are prepared to rely on a fund manager, there is an ASX Listed Investment Company (LIC), Lion Select Group (LSX), who invests primarily in early stage Gold Miners. The recent run of gold price has seen their share price double in the last couple of months, and the fund now trades very close to its Net Tangible Assets (NTA).

That’s the roundup on listed gold funds on the ASX. To find out more, check out our Fund Finder.

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