For nearly two decades, gold exchange traded funds, such as OUNZ, made commodities investing more accessible and efficient, reducing the burdens and costs associated with holding gold.
However, one of the primary criticism lobbed at these ETFs by gold bugs is that ownership in these funds amounts to fiat money – a concept gold bulls believe the yellow metal is an elixir to. In short, when an investor sells a traditional bullion-backed ETF, that market participant receives cash as is the case when selling stocks or bonds.
The VanEck Merk Gold Trust (OUNZ) flips that script. OUNZ debuted more than nine years as a first-of-its-kind ETF. It is the first of its kind because, when investors exit their positions in the fund, they have the option of taking physical delivery of gold.
“OUNZ seeks to provide investors with a convenient and cost-efficient way to buy and hold gold through an exchange traded product with the option to take physical delivery of gold. For the purpose of facilitating delivery, Merk Investments LLC has developed a proprietary process for the conversion of London Bars into gold coins and bars in denominations investors may desire,” according to VanEck.
The concept offered up by OUNZ is neither gimmicky nor costly. The gold ETF has $722.13 million in assets under management and an expense ratio of 0.25% per year, according to issuer data. Some of the traditional ETFs in this category that do not offer physical delivery levy far higher annual fees.
Both of the above data points confirm investor interest in OUNZ is robust. For those new gold investing. OUNZ holds obvious appeal, but those investors should understand the ETF’s mechanics. Fortunately, those are easy to convey.
“OUNZ holds London Bars. The Trust holds its London Bars in allocated form with the Custodian. The physical gold is held in a segregated fashion in the name of the Trust, and is never commingled with other depositor funds or assets. The Trust has full title to the gold with the Custodian holding it on the Trust’s behalf,” added the issuer.
For gold aficionados, OUNZ is compelling because investors that opt for the physical delivery option have multiple choices in terms of how they can take their gold. One-ounce bars and coins are available as are 10-ounce bars. The one-ounce coin options include American gold buffalo and gold eagle coins, Australian gold kangaroo coins, and Canadian maple leafs.
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