Gold Exchange Traded Commodities (ETCs) On The ASX

This guide is part of our comprehensive guide How To Buy Gold In Australia. We’d recommend checking the guide out in full to better understand gold investments.

ETCs are ETFs commodities-based brother. ETCs hold physical commodities like gold in bank vaults. For all intents and purposes ETCs are ETFs that simply hold a commodity or basket of commodities. Check out our Guide To ETFs for more info on ETFs.

There are currently only 3 gold ETCs that trade on the ASX (as of August 2011).

ETF Name

Commodity

ASX Code

Listed In

MER

BetaShares Gold Bullion ETF (AU$ Hedged)

Gold (hedged)

QAU

May 2011

0.390

ETFS Metal Securities: Gold Bullion

Gold

GOLD

March 2003

0.390

Perth Mint

Gold

PMGOLD

December 2010

0.15

BetaShares Gold Bullion ETF (AU $ Hedged) (QAU)

This a very new ETC that is less than 4 months old. The BetaShares ETC actively hedges AUD/USD exchange rate movements by using forward foreign exchange contracts.[i]

This hedged option means that a rise or fall in the AUD/USD exchange rate does not impact the value of the gold holdings. Investors receive the return of gold as it is quoted in US dollars. Read more about currency risk when investing in gold.

ETFS Metal Securities: Gold Bullion (GOLD)

This is literally the golden oldie of gold ETCs, listed almost 8 years ago on the ASX, ETFS Metal Securities (GOLD) is very liquid and transparent. This ETC is unhedged meaning that there is currency risk involved.

Perth Mint (PMGOLD)

The Perth Mint (trading name for Gold Corporation) is a unique ETF provider in that it is actively involved in the gold refinement process. It holds gold reserves and supplies gold (amongst other precious metals) coins and bars. Perth Mint first listed its gold ETF in 2003 under the code ZAUWBA. ZAUWBA was moved to the ASX's AQUA platform last year at which point it code changed to PMGOLD.

PMG is also unique because it is the only gold ETC that allows units to be redeemed for physical gold. [ii]

Which is the best Gold ETC to invest in?

Investing in a Gold ETC requires consideration of currency risk, liquidity and expense ratios.

Currency risk

If you want to buy gold in AUD you can either;

  1. Buy GOLD or PMGOLD and hedge the currency risk yourself
  2. Buy QAU

To illustrate the difference in returns between hedged and unhedged gold positions we can compare the percentage changes in GOLD and QAU over the month of August. You can see from the chart below that the difference in August alone amounted to over 6%. This is a large percentage difference and is primarily from the fall in the AUD over the period the same period.

Gold Price Chart ETCs - GOLD vs QAU August 2011

Gold Price Chart ETCs - GOLD vs QAU August 2011, Source Google Finance, My Money Calculator

For more info on currency risks when buying gold check out our Gold: Hedged Vs Unhedged - Currency Risks guide.

Management Fees

PMGOLD has half the management expense ratio (MER) of the other two funds! (low fees are good). However in comparison to traditional off-market managed funds MERs for ETFs are much lower.

Liquidity

As per ASX rules the Perth Mint must make a market in PMGOLD to ensure that investors can buy and sell at fair prices that reflect the underlying Australian gold price. As a result you can trade PMGOLD actively if you wish.

 

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References


[i] Gold Bullion ETF (A$ Hedged), Product Disclosure Statement, 21st April 2011

 

[ii] Perth Mint Gold (ASX), Perth Mint, 20/08/2011