Five Things to Know about Investing in a Gold ETC
to Know about Investing in a Gold ETC.
gold ETCs have revolutionized the way investors can own this precious metal,
but not all are built alike. Here’s 5 things investors should know before
making an allocation. As always, when you invest in gold ETCs, your capital is
Physical Gold ETCs: It’s important to check
if the gold ETC you are considering
actually owns the metal. Some use a ‘swap’ to provide the performance of gold
without actually holding it. Gold ETC providers should publish a list of the
bars they own on their website, giving investors confidence that their money is
backed up by a real asset, not the credit rating of a bank.
Responsible Gold ETCs: The two major gold
industry trade bodies, The World Gold Council and The London Bullion Markets
Association, both have guidelines that ensure that gold is sourced and used in
a responsible and sustainable way – for example how the gold was extracted, who
profited, the treatment of miners and supply chain labourers and whether there
is a risk that the gold has been used for money laundering, terrorist financing
or supporting war.
bullion bars that were produced after 2012 normally meet these responsible
sourcing standards, but many older physical gold ETCs will hold bars that don’t
meet these requirements. A gold ETC issuer should be able to use the unique
serial number on each gold bar to identify if their inventory is up-to-scratch
from an ESG perspective.
The Royal Mint Responsibly Sourced Physical Gold ETC (RMAU) is currently the
only gold ETC that provides 100% coverage of responsibly sourced bars. RMAU
provides a full list of bars it holds on the HANetf website, which includes
everything you need to identify the bar and its provenance. The bars are also
audited regularly by a third-party firm.
An illusion of choice: There are a lot of
different providers of gold ETCs, but it may come as a surprise to know that
they almost all use the same two banks to actually store the gold! In fact,
more than 2/3 of all gold held in ETCs worldwide is stored in the vaults of
either JP Morgan or HSBC in London.
important for investors to check who is responsible for the custody of the gold
in their ETC, or they might find they have a lot of eggs in one basket,
undermining the principles of safety and diversification that motivate many to
invest in gold in the first place.
an alternative, The Royal Mint Physical Gold ETC (RMAU) is one of the only gold
ETCs to store gold both outside of London and outside of the commercial banking
system – RMAU holds its gold in the purpose-built vault of The Royal Mint on
the outskirts of Cardiff in Wales- the only ETC with access to this world-class
Size Matters: When you buy a share of
a gold ETC, you are buying a
certain amount of gold- normally this is 1/10th of a Troy ounce. For
some investors, this is fine, but smaller investors may not be able to buy that
much, or they may need a more precise tool to fine tune their allocations. In
contrast, a share of RMAU is equivalent to 1/100th of a Troy ounce,
making it far more accessible for smaller investors, or those who want to top
up their exposure incrementally.
5. Can I Touch the Gold?
many investors’ ownership of the actual physical metal is important. You might
imagine that owning gold via an ETC entitles you to actually have a shiny piece
of gold, sadly this is often not the case. Often, when you come to sell or
redeem the gold ETC you can only get cash or have the gold sent to a
pre-approved bank vault- you never get to see it or touch it.
lets investors take physical delivery (ownership) of gold as bars or, uniquely
to RMAU, bullion coins. The Royal Mint will ship the bullion to an investors
home, or any other location, or store the gold securely in
the investor’s name. This is physical gold investing in its most tangible
more information on RMAU, please visit the The Royal Mint Responsibly Sourced Physical Gold ETC fund page.