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ETF becomes one of the world’s biggest gold owners

By Ramla Soni

09:12, 6 August 2020

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An exchange traded fund (ETF) has become one of the world’s biggest owners of gold, beating even the central banks of Japan and India. 

SPDR Gold Shares has hoovered up gold this year as investors seeking price gains or a haven asset invest more money into the fund. The ETF owns physical bullion rather than just financial derivatives. 

The size of the fund’s holdings, which are held in HSBC’s London vaults, has climbed to 1,258 tonnes. On Monday and Tuesday it added another 15 tonnes, roughly five times as much as bank robbers lifted in the 1969 film The Italian Job, based on the $4m value of the gold taken. 

The ETF is a partnership between State Street, a big Boston bank, and the World Gold Council, a trade body for the industry. It has posted a 33 per cent return this year that has helped increase its value to more than $80bn (£61bn, €67.6bn).  

The gold rally continued on Tuesday as the metal’s price passed $2,000 a troy ounce for the first time. The size of the fund, known by its ticker GLD, puts it among the ranks of major central banks.

Its holdings are equal to a quarter of all the gold held at Fort Knox in the US, more than the gold reserves of the Bank of Japan, the Bank of England or the Reserve Bank of India.

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Spread 60.00

GLD was one of the first commodity-based ETFs when it launched in 2004. Its ownership of physical gold bars stored somewhere in London sets it apart from many of its newer peers, which mostly use commodity futures. 

Its shares are priced at roughly one-tenth the cost of one ounce of gold.

The stock market ETF, which is the world’s biggest with $289bn of assets, charges end investors a fee of just 0.095 per cent a year, which means its gross revenue to State Street is currently around $275m annually. 

GLD costs investors 0.40 per cent a year, which means it is currently throwing off about $320m of revenue a year. 

ETFs were first invented in the early 1990s as a way for investors to be able to trade index funds throughout the day.

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