ETF Spotlight: Merk Gold Trust (OUNZ)

Published on by on November 12, 2014

The ETF world continues to grow at a healthy pace, as new products are continually hitting the market giving investors more options than ever before. In such a fast-moving industry it can be tough to keep up with all of the funds available on the market.  In an effort to shed more light on some of the products out there that are flying under the radar for many investors, below we’ll take a deeper dive into the Merk Gold Trust (OUNZ). 

Inside OUNZ’s Strategy

OUNZ is a direct response to a number of the conspiracy theories surrounding other physically-backed gold ETFs. Some people believe that funds like GLD and IAU do not actually hold the gold they claim, and the the funds are nothing more than “paper gold.” OUNZ employs a physically-backed exposure to gold, but with a twist; investors can actually redeem their shares in exchange for physical gold.

GoldBy allowing investors to get physical bullion delivered, OUNZ dispels conspirators who may otherwise be skeptical of its gold holdings. The process for getting delivery is a bit cumbersome, but it certainly assures investors that the fund is fully backed by actual gold holdings. Investors have a multitude of options when it comes to the form in which your gold is delivered: various coins, designs, bars, and more. 

Considerations on OUNZ’s Performance

Tracking the price of physical gold, OUNZ’s performance is tied to how the precious metal itself performs. That means that environments where inflation is rising, or market panics will play in favor of OUNZ. As far as long-term performance is concerned, the fund moves in lockstep with other gold products like GLD and IAU, but may have an appeal over its competitors in that it is not heavily traded [see also 50 Ways To Invest In Gold].

Normally investors like to see a high liquidity in a security, but OUNZ will be plenty liquid for anyone looking to move in and out. The plus side is that funds like GLD and IAU are so heavily traded that their price can sometimes move simply due to selling/buying movements of big time traders. OUNZ will likely never face that problem and will remain more stable than its peers 

How to Use OUNZ in a Portfolio

For investors looking to buy into physical gold, you are probably better off buying the metal on its own; owning OUNZ just to get access to physical gold is going to end up being more costly and more of a hassle than simply buying bullion on your own. Instead, this fund is a good one to own for gold investors who may carry a bit of skepticism concerning competing products on the market.

The ability to take physical delivery proves that OUNZ is truly backed by gold, giving peace of mind that is important for some investors. Beyond that, the fund will behave like any other gold product and its investment thesis will be the same. OUNZ would likely never be a core holding in a portfolio but rather a small allocation in an already-diversified group of holdings.

The Bottom Line

OUNZ is among the most unique commodity investments on the market, offering a new spin on a popular commodity. As always, be sure to take a look under the hood of BTAL to make sure you fully understand how it operates prior to making an investment.

Follow me on Twitter @JaredCummans.

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Disclosure: No positions at time of writing.