This is an ETF which tracks the price of Gold. The funds are publicly traded on all mainstream stock exchanges including New York, Paris, Zurich, Mumbai and London. Gold ETFs, as of October 2009, held 1,750 tons of gold for both private and institutional investors.
Another fund which aims to track the price of gold is a closed-end fund (CEFs) and also exchange traded notes (ETN’s). Each gold fund whether it be a CEF, ETN or an ETF has a different structure which is found summarized in their prospectus. These different funds may not physically hold gold. Gold ETN’s for example, traditionally track the price of gold through the use of derivatives.
First conceptualized by the Benchmark Asset Management Company Private Ltd in May 2002, an official proposal was filed with SEMI to create a GETF. Finally, in March of 2007 permissions and approvals were granted. Going under the name Gold Bullion Securities, the Australian Stock Exchange launched its first GETF in March 2003.
Broker commissions for trading in gold ETFs is 0.4% along with a minimal storage fee. In the U.S. brokers charge even a smaller amount. Annual expenses for the fund which include management fees, insurance, storage are usually charge by selling a small amount of the gold held.
Gold ETFs, in many countries, are a way to get out of paying sales tax or the VAT which applies to the actually, physical gold coins and bars. As for the U.S., Gold ETF’s are treated as a commodity. Rather than being the 15% long-term capital gains rate for non-collectibles, gold is taxed at 28% because it’s a commodity.
Gold Exchange Traded Funds are officially sponsored by the World Gold Council. Establish by the world’s leading gold mining companies in 1987, its purpose is to create worldwide demand for gold. The World Gold Council was established in 1987.
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