Can anyone recommend gold ETFs?

DrizzleAsh

DrizzleAsh

New member
Messages
21
Reaction score
0
Points
1
I'm thinking about putting about 5% of my portfolio into gold, but there are so many choices—GLD, GLDM, SGOL, IAU, and others.
  1. If you were investing in gold today, which option would you go for?
  2. Since the custodian fees might lead to the sale of gold, which could result in gains or losses, would it make sense to hold this in a tax-deferred account?
Thanks!
 
Choose the one with the lowest expense ratio. I went with IAU.

(I wasn’t interested in gold miners.)(If you come across a cheaper option, let us know!)
 
IAUM has the lowest expense ratio among gold trust ETFs at 0.15%, but it’s currently the smallest fund. Other options are close, like GLDM with a 0.18% expense ratio. Also, IAU tends to have the highest average premium over NAV at 0.09%, while GLD, which has a 0.40% expense ratio and is the largest/oldest gold trust ETF, has an average premium of 0.04%.
 
Yes, taxes on gold trust ETFs can be tricky. The trust sells some gold daily to cover the fund's expenses, which causes the number of gold ounces per ETF share to decrease over time. This results in realized gains or losses from the sale of gold, which is taxed as a collectible. Your basis per share also goes down by the same amount.

Here’s a link to a document from GLD that explains this and provides examples for 2020: https://www.spdrgoldshares.com/media/GLD/file/GLDM/World-Gold-MiniShares-Tax-Data-12-31-20-Final.pdf

I'm not sure if brokerages handle all this accounting for you; I haven't owned gold trust ETFs in a taxable account. It's definitely easier to hold them in a tax-deferred account to avoid dealing with this!
 
WonkyDale said:
Yes, taxes on gold trust ETFs can be tricky. The trust sells some gold daily to cover the fund's expenses, which causes the number of gold ounces per ETF share to decrease over time. This results in realized gains or losses from the sale of gold, which is taxed as a collectible. Your basis per share also goes down by the same amount.

Here’s a link to a document from GLD that explains this and provides examples for 2020: https://www.spdrgoldshares.com/media/GLD/file/GLDM/World-Gold-MiniShares-Tax-Data-12-31-20-Final.pdf

I'm not sure if brokerages handle all this accounting for you; I haven't owned gold trust ETFs in a taxable account. It's definitely easier to hold them in a tax-deferred account to avoid dealing with this!
Click to expand...
Thanks, are there any substantive differences between IAU and IAUM besides size? Love the lower ER but I am suspicious….
 
Years ago, when we traded individual stocks, we probably owned (or speculated in) GLD. I believe it's the largest gold ETF in the world and is backed by the metal stored in London warehouses.

But personally, I would pass on it now, as it doesn’t have any intrinsic value or earnings.

DrizzleAsh said:
I'm thinking about putting about 5% of my portfolio into gold, but there are so many choices—GLD, GLDM, SGOL, IAU, and others.
  1. If you were investing in gold today, which option would you go for?
  2. Since the custodian fees might lead to the sale of gold, which could result in gains or losses, would it make sense to hold this in a tax-deferred account?
Thanks!
Click to expand...
 
I haven’t verified it myself, but someone mentioned that in the GLD prospectus, there’s a statement suggesting they don’t guarantee all the gold is genuine, and there’s a possibility some of it might be counterfeit. That being said, I’m not sure how much it really matters. I bought GLD myself, but that was before I had that conversation.
 
There aren't any gold ETFs. GLD isn't one, and while I haven’t checked the others personally, I don't think they are either.

GLD is called the "SPDR® Gold Trust." It's a registered security you can trade through a brokerage, but it's not an ETF. It's actually a "grantor trust."

Does this difference matter? It hasn’t so far, as far as I know.

From the GLD prospectus:
Shareholders don’t get the same protections that come with owning shares in an investment company registered under the Investment Company Act of 1940 or the protections offered by the Commodity Exchange Act.

The Trust is not registered as an investment company and doesn’t have to register under that Act. As a result, shareholders don’t get the regulatory protections given to investors in registered investment companies. The Trust doesn’t deal in commodity futures contracts regulated by the Commodity Exchange Act (CEA) or the CFTC. Additionally, the Trust isn’t considered a commodity pool under the CEA, and none of the parties involved is regulated by the CFTC as a commodity pool operator. So, shareholders don’t have the protections that come with CEA-regulated instruments or commodity pools.
Click to expand...

Let’s look at another one.

IAU is the "iShares Gold Trust." It has similar language:As a shareholder, you don’t have the protections usually associated with shares in a registered investment company or those offered by the CEA.

The Trust isn't registered as an investment company and doesn’t need to register under the Investment Company Act. As a result, shareholders don’t get the protections of the Investment Company Act, like limitations on transactions with affiliates, redemption suspension rules, or sales load limits, which don’t apply here.

The Trust doesn’t deal in commodity futures contracts or other instruments regulated by the CEA. It’s not a commodity pool, and the Trustee and Sponsor aren’t subject to registration as commodity pool operators. Shareholders also don’t receive the CEA disclosure document or certified annual report that would be required for a registered commodity pool, meaning they don’t get the same regulatory protections as investors in those pools.
Click to expand...
 
Gold is taxed at a higher capital gains rate of 28%, not the usual 15%–20%
 
Pingus84 said:
Thanks, are there any substantive differences between IAU and IAUM besides size? Love the lower ER but I am suspicious….
Click to expand...
I’m not sure. IAUM has a lower share price compared to IAU, which might make it better suited for options trading—that’s something I’ve heard. When comparing GLD and GLDM, GLD likely has a much higher expense ratio because it’s the original and largest gold trust, so they can charge more.

There may be other differences as well. For instance, these trusts use custodians to store the physical gold, and the custodians vary between funds—some might even use multiple custodians. They also carry insurance, but at least one prospectus mentions that the coverage "may not fully cover the value of the gold."

It’s true these trusts are "not subject to the same regulatory requirements as mutual funds or ETFs registered under the Investment Company Act of 1940." However, I haven’t come across anything so far that would discourage me from owning any one of them.
 
I reviewed the prospectuses for both IAU and IAUM, and they use identical wording about insurance: the custodian is required to insure the gold.
 
You must log in or register to reply here.
Back
Top