From my perspective one of the issues is that gold is leased out for sale by other parties (where is the logic in that I ask you?). I understand the ASX GOLD ETF owns all of its gold and it is not leased out at all because I asked them by email a few months back. The email response from the Australia and New Zealand head of sales was:
"To answer your question, we do not offer a leasing facility in connection to our Gold ETC (ASX: GOLD)."
Ansd then the follow up:
"All the ETCs tracking the spot Gold price are 100% backed by physical 'Good Delivery' Gold bullion. Furthermore, all bullion used to back the Physical Gold ETCs are using 100% 'Allocated' bullion, which means the metal is never ever leant out and sits in the vault for the entire duration of the investors investment in any of the Physical Metal ETCs. This is the major reason why there is zero credit / counterparty risk associated with the Precious Metal ETCs. All metal is allocated to the holders of the ETCs i.e. they own the metal, and not the custodian (HCBC) and the issuer (ETF Securities).
The cost (MER) of 40bps covers all custody, insurance, management, and issuance fees associated with the ETC. Irrespective of what assets in our ETCs, the only cost to the issuer is the initial cost of listing the security of the exhange."
I understand there may be a different set of issues with opverseas based gold ETF's.
ASX GOLD ETF has however been my worst gold investment and while I dont have a large holding I have had a lot more luck investing in ASX gold mining companies in the last 9 months.
