Exchange-traded fund (ETF) investors want gold and they want more of it. Inflows into gold-backed ETFs are on a nine-month streak of inflows and more could be ahead as uncertainty looms through the rest of 2020.
“Gold-backed ETFs saw a ninth-straight month of inflows in August, driven by growing appetite in Asia,” a Kitco News article noted. “Collectively, 39 tons of bullion, equivalent to $2.1 billion, were added to ETFs in August with 7 tons coming from Asia.”
Of course, with that rise in the demand for gold, come certain challenges related to storage and logistics.
“As demand for physical gold as a haven asset has jumped, so too has the cost and logistics of insuring it,” the article added. “Bloomberg Businessweek notes that as the price of gold rises, the number of insurable ounces at each storage site decreases, since insurers place a cap on how much financial exposure they’ll assume for each vault. Ludwig Karl of Swiss Gold Safe, which manages vaults in the Alps, said ‘you could put all the gold in the world in a large storage space, but you would never be able to get the insurance for it.’”
Investors looking to get gold exposure without holding the physical shares, but with the option to do so in the future, can look at the VanEck Merk Gold Trust (OUNZ ). OUNZ seeks to provide investors with an opportunity to invest in gold through the shares and be able to take delivery of physical gold in exchange for those shares.
The Trust’s secondary objective is for the shares to reflect the performance of the price of gold less the expenses of the Trust’s operations. Each share represents a fractional undivided beneficial interest in the Trust’s net assets, and the Trust’s assets consist principally of gold held on the Trust’s behalf in financial institutions for safekeeping.
OUNZ can offer investors the following:
- Deliverability: VanEck Merk Gold Trust holds gold bullion in the form of allocated London Bars. It differentiates itself by providing investors with the option to take physical delivery of gold bullion in exchange for their shares.
- Convertibility: For the purpose of facilitating delivery, Merk has developed a proprietary process for the conversion of London Bars into gold coins and bars in denominations investors may desire.
- Tax Efficiency: Taking delivery of gold is not a taxable event as investors merely take possession of what they already own: the gold.
As mentioned, one of the key benefits of OUNZ is the ability to exchange shares of the ETF for physical gold. Per the fund’s website, if you’re an “investor interested in taking delivery of physical gold in exchange for your OUNZ shares (Delivery Applicants), you must submit a signed Delivery Application to Merk Investments LLC (the “Sponsor”).