Recommendation for a gold etf

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psh
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Recommendation for a gold etf

Post by psh »

I would like to allocate a small portion of my portfolio to gold (5%). But there are just too many options - GLD, GLDM, SGOL, IAU, etc. 1. Which one do you recommend if you were to invest in gold today?
2. Also based on the expenditures incurred by the custodian this might result in sale of Gold leading to gains/losses. So I think it makes sense to put this in a tax deferred account?

Thanks!
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happysteward
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Re: Recommendation for a gold etf

Post by happysteward »

Go with the one that has the lowest expense ratio….IAU was the one I chose….

(I was not interested in the gold miners)
(If you find one cheaper please let us know)
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w5000
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Re: Recommendation for a gold etf

Post by w5000 »

IAUM has the lowest expense ratio of gold trust ETFs at 0.15% but it's also (currently) the smallest fund. There are others that are close, such as GLDM at 0.18%. Also note that IAU seems to have the highest average premium over NAV at 0.09% whereas GLD (0.40% ER and the original/largest gold trust ETF) has an average premium of 0.04%.
w5000
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Re: Recommendation for a gold etf

Post by w5000 »

And yes, taxes on a gold trust ETF are complicated because the trust sells some gold on a daily basis to cover the expenses of the fund, so the number ounces of gold per ETF share goes down over time. This means you have realized gains/losses from selling gold which is considered a collectible for tax purposes, and your basis per share goes down by a corresponding amount.

Here's a link to a document from GLD that has the data and examples for calculating this for 2020: https://www.spdrgoldshares.com/media/GL ... -Final.pdf

Not sure if brokerages do all this accounting for you or not; I haven't owned gold trust ETFs in a taxable account. Definitely easier to hold them in a tax-deferred account so you don't have to deal with this!
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happysteward
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Re: Recommendation for a gold etf

Post by happysteward »

w5000 wrote: Sat Jan 29, 2022 10:00 am IAUM has the lowest expense ratio of gold trust ETFs at 0.15% but it's also (currently) the smallest fund. There are others that are close, such as GLDM at 0.18%. Also note that IAU seems to have the highest average premium over NAV at 0.09% whereas GLD (0.40% ER and the original/largest gold trust ETF) has an average premium of 0.04%.
Thanks, are there any substantive differences between IAU and IAUM besides size? Love the lower ER but I am suspicious….
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abuss368
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Re: Recommendation for a gold etf

Post by abuss368 »

psh wrote: Sat Jan 29, 2022 3:46 am I would like to allocate a small portion of my portfolio to gold (5%). But there are just too many options - GLD, GLDM, SGOL, IAU, etc. 1. Which one do you recommend if you were to invest in gold today?
2. Also based on the expenditures incurred by the custodian this might result in sale of Gold leading to gains/losses. So I think it makes sense to put this in a tax deferred account?

Thanks!
Many years ago when we traded individual stocks we owned (perhaps speculated in GLD). I beleive this is the largest Gold EFT on the planet and back by the metal (stored in London warehouses).

No I would pass as there is no intrinsic value or earnings.

Best.
Tony
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Lincoln Logs
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Re: Recommendation for a gold etf

Post by Lincoln Logs »

I did not verify, but someone told me that in the GLD prospectus there is language to the effect that they don’t guarantee that all the gold is genuine, and there is some reason to think that some of the gold held is counterfeit. That said, I’m not sure it hugely matters. I bought GLD myself, but that was before the conversation I had.
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nisiprius
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Re: Recommendation for a gold etf

Post by nisiprius »

There are no gold ETFs. Well, GLD isn't an ETF and I haven't personally checked the others but I don't they they are, either.

GLD's name is "SPDR® Gold Trust." It is a registered security you can trade at a brokerage, but it is not an ETF. It is a "grantor trust."

Does the difference matter? It hasn't mattered yet AFAIK.

From the GLD prospectus:
Shareholders do not have the protections associated with ownership of shares in an investment company registered under the Investment Company Act of 1940, as amended, or the protections afforded by the Commodity Exchange Act.

The Trust is not registered as an investment company under the Investment Company Act of 1940, as amended, and is not required to register under such act. Consequently, Shareholders do not have the regulatory protections provided to investors in registered investment companies. The Trust will not hold or trade in commodity futures contracts regulated by the Commodity Exchange Act (the “CEA”) as administered by the Commodity Futures Trading Commission (the “CFTC”). Furthermore, the Trust is not a commodity pool for purposes of the CEA, and none of the Sponsor, the Trustee or the Marketing Agent is subject to regulation by the CFTC as a commodity pool operator or a commodity trading advisor in connection with the Shares. Consequently, Shareholders do not have the regulatory protections provided to investors in CEA-regulated instruments or commodity pools.
Let's check one more.

IAU is the "iShares Gold Trust." Similar language:
As an owner of Shares, you will not have the protections normally associated with ownership of shares in an investment company registered under the Investment Company Act, or the protections afforded by the CEA.

The Trust is not registered as an investment company and is not required to be registered under the Investment Company Act. Consequently, the owners of Shares do not have the protections under the Investment Company Act provided to investors in registered investment companies. For example, the provisions of the Investment Company Act that limit transactions with affiliates, prohibit the suspension of redemptions (except under certain limited circumstances) or limit sales loads, among others, do not apply to the Trust.

The Trust does not hold or trade in commodity futures contracts or any other instruments regulated by the CEA, as administered by the CFTC. Furthermore, the Trust is not a commodity pool for purposes of the CEA. Consequently, the Trustee and the Sponsor are not subject to registration as commodity pool operators with respect to the Trust. The owners of Shares do not receive the CEA disclosure document and certified annual report required to be delivered by the registered commodity pool operator with respect to a commodity pool, and the owners of Shares do not have the regulatory protections provided to investors in commodity pools operated by registered commodity pool operators.
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abuss368
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Re: Recommendation for a gold etf

Post by abuss368 »

Gold is taxed at the higher capital gains rate of 28% and not 15% - 20%.

Best.
Tony
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anon_investor
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Re: Recommendation for a gold etf

Post by anon_investor »

abuss368 wrote: Sat May 07, 2022 6:43 am Gold is taxed at the higher capital gains rate of 28% and not 15% - 20%.

Best.
Tony
Best to hold in a tax advantaged account.
w5000
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Re: Recommendation for a gold etf

Post by w5000 »

happysteward wrote: Fri May 06, 2022 6:10 pm Thanks, are there any substantive differences between IAU and IAUM besides size? Love the lower ER but I am suspicious….
I don't think so? IAUM has a lower share price than IAU, so one of them is better for options trading or something like that, so I have heard. If you compare GLD and GLDM, GLD probably has a much higher expense ratio because they are the original/biggest gold trust, so they can get away with it.

It's possible / probable that there are other differences. For example, these funds use custodians to hold physical gold, so there are different custodians, and maybe some funds use multiple custodians. They also carry insurance that at least one prospectus says "may not cover the full amount of gold".

It's true that these are Trusts and "not subject to the same regulatory requirements as mutual funds or ETFs registered under the Investment Company Act of 1940". But I haven't heard or read anything yet that would dissuade me from owning any one of them.
ceprw
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Re: Recommendation for a gold etf

Post by ceprw »

I just checked both prospectuses of IAU and IAUM. The exact same language is used in regards of insurance: Custodian is required to insure the gold.
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