Investors in the Gold Bullion Securities are no longer able to exchange their shares for gold bullion coins or bars issued by the Royal Mint.
In a statement released Thursday, WisdomTree, the issuer of the ETC, advised that the Royal Mint had terminated its agreement with the company, bringing to an end an almost-eight-year arrangement.
First introduced in 2013, the facility provided investors in GBS with an extra layer of confidence that they would always be able to get their hands on physical gold.
GBS is listed on the LSE (GBS LN, GBSS LN), Borsa Italiana (GBS IM), Euronext Paris (GBS FP), and Xetra (GG9B GY). It holds $4.16 billion in assets.
Whilst the physical delivery facility was principally to offer additional comfort and reassurance to retail investors, it also afforded some tax benefits, such as zero capital gains to German investors.
The facility was never once utilised by an investor, as WisdomTree noted in its statement, but its withdrawal nonetheless represents a net negative for investors in GBS, not least because of the potential loss of favourable tax treatment.
Investors may technically still redeem for physical gold bullion, but this will now need to be done via an LBMA account, something which effectively rules out retail investors. This is compounded by the fact that only full bars can be delivered, further excluding the vast majority of private, retail investors.
Physical delivery through the LBMA channel also means that gold is delivered to an unallocated account, which results in a degree of credit risk to the Authorised Participant or LBMA member.
So in practical terms, retail investors in GBS have lost a feature that may well have been valued by them. This is similar to the situation that was presented to US retail investors invested in the Perth Mint Physical Gold ETF.
Now known as the Goldman Sachs Physical Gold ETF (AAAU US), the Perth Mint product was acquired by Goldman Sachs Asset Management in late 2020. In the process of its transition to GSAM stewardship, a mechanism that allowed investors to exchange their shares for delivery of physical gold in the form of retail bullion bars and coins issued by the Perth Mint was withdrawn.
The news was met with disappointment from a great number of smaller investors, many of whom have since liquidated their holdings. AAAU’s assets under management are down 30% compared to the level prior to GSAM’s takeover.
For investors in the US, the VanEck Merk Gold ETF (OUNZ US), a collaboration between Merk Investments and VanEck, appears to be the only gold ETF to offer a physical redemption facility. It has seen net inflows since the GSAM deal was completed.
In Europe, the Royal Mint Physical Gold ETC (RMAU LN), a collaboration between the Royal Mint and white-label issuer HANetf, seems to be the only gold ETP that offers a straightforward physical delivery option for retail investors. Investors in this product are able to exchange their shareholding for a range of Britannias, Sovereigns, and bars of varying sizes.
The Royal Mint was contacted for comment. A spokesperson said: “Last year The Royal Mint introduced a gold ETC (RMAU) which provides customers with the option to physically redeem their gold. This is a unique feature of the RMAU, and as a result we have decided to end our partnership with WisdomTree.”
This content was originally published here.
Kramer Levin Naftalis & Frankel LLP represented A-Mark Precious Metals Inc. in the transaction. A-Mark Precious…
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