C E L E B R AT I N G
GOLD
Setting the Gold Standard
10 years since ETF Securities created the world’s
first gold Exchange Traded Product.
Celebrating Gold
10 years since ETF Securities created
the world’s first gold Exchange Traded
Product.
This brochure aims to provide investors with a better
understanding of the physical gold market and greater
insight into the structure of physical gold ETPs. Its goal
is to help investors understand key features, critical to
choosing the right gold product.
• T
he first part of this brochure deals with the gold market, including its
fundamental characteristics, mechanisms, and main institutional bodies.
• T
he second part retraces the history of gold ETPs, together with the
history and track record of ETF Securities.
• T
he final part provides a roadmap for identifying which gold ETP
structure is best for each investor.
ETF Securities | 3
Contents
04
10
12
The world gold market at a glance
05
Who holds the gold?
05
Supply and demand
06
How the over-the-counter market works
06
The London gold market
07
Loco London and loco Zurich
07
How is the London fixing price determined?
08
Special focus
Vaulting and gold clearing
Allocated vs. unallocated accounts
What is a London ‘Good Delivery’ bar?
09
The investment case for gold
Growth of gold ETPs
12
Gold ETPs milestones
13
About ETF Securities
The Gold Standard
14
Security
15
Transparency
15
Cost efficiency
16
Liquidity
16
Physical holdings quality
17
Track record
18
Due diligence checklist
4 | The world gold market at a glance
The world gold market at a glance
For thousands of years, gold has been valued as a global currency, a commodity, an
investment and simply an object of beauty. As financial markets developed rapidly
during the 1980s and 1990s, gold receded into the background and many investors
lost touch with this asset of last resort. Recent years have seen a striking increase in
investor interest in gold.
Gold’s extensive appeal and functionality, including its characteristics
as an investment vehicle, are underpinned by the supply and demand
dynamics of the gold market.
Investment demand for gold
1,800
1,600
1,400
Tonnes
1,200
1,000
800
600
400
200
Coins, bars and other retail demand
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
0
Source: GFMS, WGC, ETF Securities calculations
ETP demand
ETF Securities believes that three factors set gold apart as an investment from most
other commodities: it is indestructible; it is fungible; and the inventory of above-ground
stocks is enormous, relative to the supply flow.
ETF Securities | 5
Who holds the gold?
The vast majority of the gold ever mined still
exists and is estimated to total approximately
171,300 tonnes (at end-2011). The following
chart shows an estimated breakdown of
those stocks in 2011.
Above-ground gold stocks in 2011
Jewellery 51%
Private investment 19%
Official sector 17%
Other fabrication 11%
Unaccounted 2%
Source: GFMS
Supply and demand
The following two charts show the main
sources of supply and demand of gold as
at 31 December 2012.
World gold demand in 2012 (4,418 tonnes)
Jewellery 43%
Technology 10%
Bar and coins 29%
ETPs and similar 5%
Central Bank net purchases 12%
Source: GFMS, WGC, ETF Securities calculations
World gold supply in 2012 (4,316 tonnes)
Mine production 63%
Recycled gold 37%
Source: GFMS, WGC, ETF Securities calculations
6 | The world gold market at a glance
How the over-the-counter market works
The London gold market
The global trade in gold consists of over the-counter (OTC) transactions in spot,
forwards, options and other derivatives, together with exchange-traded futures and
options. The OTC market trades on a 24-hour per day continuous basis and accounts
for most global gold trading.
Thanks to London’s historical leadership
in the precious metals market and unique
positioning between U.S. and Asia as well
as its cutting edge clearing system, most
global over-the-counter gold is cleared
through the London bullion market, with
deals between parties throughout the
world cleared and settled in London.
Market makers, as well as others in the OTC market, trade with each other and with their
clients on a principal-to principal basis. All risks and issues of credit are between the
parties directly involved in the transaction. Market makers include the market-making
members of the London Bullion Market Association (LBMA), the trade association that
acts as the coordinator for activities conducted on behalf of its members, and other
participants in the London bullion market.
The five LBMA market-making members of the gold fixing are: Barclays, Deutsche
Bank, HSBC, ScotiaMocatta, and Société Générale. The OTC market provides a
relatively flexible market in terms of quotes, price, size, destinations for delivery and
other factors. Bullion dealers customise transactions to meet clients’ requirements. The
OTC market has no formal structure and no open-outcry meeting place.
The main centres of the OTC market are London, Zurich and New York. Mining
companies, central banks, manufacturers of jewellery and industrial products, together
with investors and speculators, tend to transact their business through one of these
market centres. Centres such as Dubai and several cities in the Far East also transact
substantial OTC market business, typically involving jewellery and small bars (1 kilogram
or less). Bullion dealers have offices around the world and most of the world’s major
bullion dealers are either members or associate members of the LBMA. Of the ten
market making members of the LBMA, six offer clearing services. There are a further 59
full members, plus a number of associate members around the world.
The London Bullion Market
Association (LBMA)
www.lbma.org.uk
In addition to coordinating market
activities, the LBMA acts as the principal
point of contact between the market and
its regulators. A primary function of the
LBMA is its involvement in the promotion
of refining standards by maintenance of
the ‘London Good Delivery Lists,’ which
are the lists of LBMA-accredited smelters
and assayers of gold.
London ‘Good Delivery’ bars meet the
specifications for weight, dimensions,
fineness (or purity), identifying marks
(including the assay stamp of an LBMA
acceptable refiner) and appearance set
forth in The Good Delivery Rules for Gold
and Silver Bars published by the LBMA.
The unit of trade in London is the fine troy
ounce, whose conversion between grams
is: 1,000 grams = 32.1507465 troy ounces
and 1 troy ounce = 31.1034768 grams.
ETF Securities | 7
Loco London and loco Zurich
The terms ‘loco London’ gold and ‘loco Zurich’ gold refer to gold physically held in
London and Zurich; this is also valid for gold physically held in New York or Hong Kong.
It is important to note that on the loco London market only LBMA ‘Good Delivery’ bars
are acceptable for delivery.
After London, the second principal centre for spot or physical gold trading is Zurich,
where LBMA ‘Good Delivery’ bars and other bars of different weight and purity are
accepted. For eight hours a day, trading occurs simultaneously in London and Zurich –
with Zurich normally opening and closing an hour earlier than London.
The loco Zurich bullion specification is close to the London bullion market, which allows
for LBMA ‘Good Delivery’ gold, physically located in Zurich, to be quoted loco London
and vice versa; The size of the market or supply restrictions may require gold to be
flown in from London to meet demand through physical loco swaps or inventories swap;
which may result in a price premium.
Loco London
Loco Zurich
Trade body
LBMA
No trade body
Good Delivery list
LBMA only
All types of bars are
accepted, including LBMA
Clearing system
London Bullion Clearing
(electronic)
Loco Zurich Clearing
(telephone)
Regulators
FSA & BoE
Swiss National Bank
No. of clearers
6
2
No. of vault custodians
10
2
How is the London fixing
price determined?
The gold market operates 24 hours a day
through trading in the Far East, Europe
and North America. Twice daily, during
London trading hours, there is a fix which
provides reference gold prices for that
day’s trading. Many long-term contracts
will be priced on the basis of either the
morning (AM) or afternoon (PM) London
fix, and market participants will usually
refer to one or the other of these prices
when looking for a basis for valuations.
The London fix is the most widely used
benchmark for daily gold prices and is
quoted by various financial information
sources. Formal participation in the
London fix is traditionally limited to five
members, each of which is a bullion
dealer and a member of the LBMA.
The chairmanship now rotates annually
among the five member firms. The
morning session of the fix starts at 10:30
AM London time and the afternoon
session starts at 3:00 PM London time.
The members of the gold fixing are
currently Barclays, Deutsche Bank,
HSBC, ScotiaMocatta and Société
Générale. Any other market participant
wishing to participate in the trading on
the fix is required to do so through one of
the five gold fixing members. The London
fix is widely viewed as a full and fair
representation of all market interest at the
time of the fix.
8 | The world gold market at a glance
Special focus
Vaulting and gold
clearing
Allocated vs. unallocated
accounts
What is a London ‘Good
Delivery’ bar?
Certain members of the LBMA offer
clearing services. They may use their
own vaults for storage of physical metal
and/or have the use of storage facilities
under security with another company. The
clearing members use a daily clearing
system whereby those members utilise
the unallocated metal they maintain
between each other for the settlement of
all mutual trades and third party transfers.
This system is designed to avoid the
security risks and costs involved in the
physical movement of the metals.
Allocated accounts
A London ‘Good Delivery’ bar is
acceptable for delivery in settlement of
a transaction on the loco London OTC
market. Typically referred to as 400-ounce
bars, a London ‘Good Delivery’ bar
must contain between 350 and 430 fine
troy ounces of gold, with a minimum
fineness (or purity) of 995 parts per 1,000
(99.5%),be of good appearance and be
easy to handle and stack. The fine gold
content of a gold bar is calculated by
multiplying the gross weight of the bar
(expressed in units of 0.025 fine troy
ounces) by the fineness of the bar. A
London ‘Good Delivery’ bar must also
bear the stamp of one of the smelters and
assayers who are on the LBMA approved
list together with a unique serial number
and year. Unless otherwise specified, the
Gold Spot Price always refers to that of a
London ‘Good Delivery’ bar.
An allocated account is an account
held with a dealer in a customer’s name
evidencing that uniquely identifiable bars
of metal have been ‘allocated’ to the
customer and are segregated from other
metal held in the vault of that dealer. The
client has full title to this metal, with the
dealer holding it as custodian.
Unallocated accounts
Most metal traded in the London and
Zurich markets is traded and settled in
unallocated form. Bullion held in this form
does not entitle the holder to specific
bars of metal but gives the holder a
right to require the delivery of certain
amounts of metal. Subject to the terms of
a client’s account agreement, a client may
make exchanges between allocated and
unallocated accounts (provided the client
has a sufficient balance).
Historically, the members of the
London bullion market compiled lists
of accredited smelters and assayers
whose gold and silver bars they would
accept without question, in settlement
against transactions conducted between
each other and with other acceptable
counterparts. Every bar that comes
into clearing is controlled by a clearing
inspector for conformity. Such bars
earned the distinction of London ‘Good
Delivery’ status.
The LBMA ‘Good Delivery’ List is now
widely recognised as representing the
de facto standard for the quality of gold
bars, thanks to the stringent criteria for
assaying standards and bar quality that
an applicant must satisfy.
ETF Securities | 9
The investment case for gold
Portfolio diversification benefits
The inclusion of gold into a portfolio provides useful diversification benefits as gold
historically has a low correlation with most major asset classes, providing unique
portfolio diversification benefits for long-term balanced portfolios.
Asset class performance ranked - 2004-2012
Performane ranking
2004
2005
2006
2007
2008
2009
2010
Real Estate Gold
42.4%
31.9%
Bonds
6.8%
Real Estate Gold
38.3%
29.2%
2011
2012
10Y
Gold
8.9%
Real Estate Gold
28.7%
16.9%
1
Real Estate Gold
38.0%
17.8%
2
Equities
15.2%
Real Estate Gold
15.4%
23.2%
Equities
11.7%
Gold
4.3%
Equities
34.6%
Real Estate Bonds
20.4%
7.7%
Equities
16.1%
Real Estate
12.1%
3
Bonds
5.9%
Equities
10.8%
Equities
21.0%
Bonds
7.9%
Cash
2.1%
Gold
25.0%
Equities
12.7%
Cash
0.2%
Gold
8.3%
Equities
8.1%
4
Gold
4.6%
Cash
2.6%
Bonds
4.9%
Cash
3.9%
Equities
-42.2%
Bonds
6.5%
Bonds
6.4%
Real Estate Bonds
-5.8%
3.7%
Bonds
5.7%
5
Cash
1.2%
Bonds
-0.2%
Cash
3.8%
Real Estate Real Estate Cash
-7.0%
-47.7%
0.5%
Cash
0.2%
Equities
-7.3%
Cash
1.6%
Cash
0.3%
Equity - MSCI World, Bonds - Barclays Capital US Aggregate Bond Index, Real Estate - EPRA/NAREIT Global, Gold - Gold London PM fixing,
Cash - U.S. 3 Mth T-Bill
Sources: ETF Securities, Bloomberg
Data to 31 December 2012. All returns are in USD
10 | The world gold market at a glance
A hedge against inflation
and event risk
Gold has historically performed well
during periods of significant monetary
easing and high inflation. Gold has
often performed well relative to equities
and other risk assets during periods
of extreme economic and financial
turbulence – helping to buffer portfolio
performance and provide a source of
liquidity.
Gold price vs. U.S. inflation
Monthly, Annual % Change, from 30 November 1969 to 31 January 2013
Annual %
Annual %
200
16
150
12
100
8
50
4
0
0
-50
-4
Nov 69
Nov 75
Nov 81
Nov 87
Nov 93
Nov 99
Nov 05
Nov 12
Source: Bloomberg, ETF Securities
Returns during S&P 500 worst 20%
Monthly Data, from 31 January 2003 to 31 January 2013
4%
2%
0%
-2%
-4%
-6%
Source: Bloomberg, ETF Securities
Dax 30
CAC 40
EuroStoxx 50
S&P 500
FTSE 100
Industrial Metals
Energy
Agriculture
-10%
All commodities
-8%
Precious Metals
U.S. CPI inflation (RHS)
Gold
Gold Spot Price
ETF Securities | 11
Hedged gold ETPs: Taking currency risk out
of gold investing
Currency hedged gold ETPs help remove the natural currency risk that investing in
foreign markets creates. By allowing investors to hedge the currency of their assets
into their home currency liabilities, an investor is able to focus full attention on the
fundamental outlook for the underlying asset without worrying about the potential future
currency movements.
Over the past ten years, given the general weakness of the US Dollar versus most major
currencies, buy-and-hold investors with unhedged long gold metal positions saw lower
returns compared to those with hedged positions. As the chart below shows, a buy-andhold Euro based investor with an unhedged exposure to the DJ-UBS Gold Sub-Index
(which is denominated in USD) would have seen a return of about 305%, whereas an
investor in a hedged version exposure to that index would have seen a return of 340%,
an outperformance of 35%.
Currency Hedged vs. unhedged gold returns for a Euro-based investor
Cumulative return, from 18 March 2003 to 18 March 2013
450
400
350
300
250
200
150
USD/EUR Exchange Rate
50
Source: Bloomberg, ETF Securities
2013
2012
2011
2010
2009
2008
2007
2006
2005
0
2004
DJ-UBS Gold Sub-Index -Returns of a
daily Euro hedged version for a Euro
based investor
100
2003
DJ-UBS Gold Sub-Index -Returns of
the unhedged USD index for a Euro
based investor
12 | Growth of gold ETPs
Growth of gold ETPs
The first gold ETP was created in April
2003 by ETF Securities’ management
and listed on the Australian Securities
Exchange (ASX). This was followed by a
similar product listed on the London Stock
Exchange (LSE) shortly afterwards, this
time created in conjunction with the World
Gold Council.
Gold ETPs milestones
Gold ETPs have proven successful
with similar products now listed on 31
exchanges throughout the world and have
seen assets under management reach US
$147bn (as at 31 December 2012).
April 2007 – ETF Securities lists ETFS Physical Gold (LSE: PHAU) in London.
April 2003 – First Gold ETF: Gold Bullion Securities (ASX: GOLD) launched in Australia
by Graham Tuckwell.
December 2003 – Gold Bullion Securities (LSE: GBS) listed on the LSE in partnership
with the World Gold Council (WGC).
November 2004 – SPDR Gold Shares listed on the NYSE in partnership with the WGC.
September 2009 – ETF Securities lists the first gold ETF backed by physical gold held
in Switzerland on the NYSE Arca.
January 2010 – Gold ETFs are traded on 13 exchanges around the world and total
AUM reach over $50bn.
September 2011 – 65 Gold ETPs with more than 100 listings are traded on 18
exchanges around the world with total asset under management of over $120bn.
November 2012 – ETF Securities lists the first gold ETF backed by physical gold held in
London on the Stock Exchange of Hong Kong.
December 2012 – 67 Gold ETPs with more than 100 listings are traded on 31
exchanges around the world with total asset under management of over $147bn.
Gold Global ETP Holdings (million ounces)
Daily Data, From 25 April 2007 to 1 March 2013
90
80
70
60
50
40
30
20
10
0
Apr 07
Apr 08
Apr 09
Source: Bloomberg, ETF Securities
Apr 10
Apr 11
Apr 12
ETF Securities | 13
About ETF Securities
ETF Securities is one of the world’s leading, independent exchange-traded product
(ETP) providers and a pioneer in commodity ETPs. Our management team listed the
world’s first physically-backed gold exchange-traded product in 2003. Similar products
are now listed on 31 exchanges throughout the world and have seen assets under
management reach US$147 billion (as at 31 December 2012). ETF Securities has
13 different products that offer different exposures to gold. In 2012 alone, investors
allocated a total of US$ 2.5 billion in net new assets into the firm’s physically-backed
gold products (as at 31 December 2012). Furthermore, nearly 40% of all European
physical gold ETP flows were traded through ETF Securities’ products in Q4 2012
(01.10.2012 - 31.12.2012).
Today ETF Securities offers over 300 long and short commodity exposures as well as
long and short currency exposures and thematic equity ETPs. As of 31 December
2012, ETF Securities managed over US$28.9 billion of investor ETP assets globally.
Global Listings
North America
Europe
Asia Pacific
New York Stock Exchange
London Stock Exchange (LSE)
Tokyo Stock Exchange (TSE)
(NYSE Arca)
NYSE – Euronext Paris/Amsterdam
Australian Securities Exchange (ASX)
Bolsa Mexicana de Valores
Deutsche Börse
Hong Kong Stock Exchange (SEHK)
Borsa Italiana
14 | The Gold Standard
The Gold Standard
This section provides existing and
potential investors with an extensive list
of criteria for benchmarking whether
a specific gold ETP structure is ‘best
of breed’. It is important that investors
understand the differences between
individual gold ETPs to ensure the
product they are considering investing
in will intrinsically meet their investment
goals. We believe that the robustness of
the structures and processes that govern
physically backed gold ETPs are key to
selecting a vehicle that holds physical
gold.
Security
A strict due diligence process should
encompass five key areas:
• Audits and bar lists should be verifiable against the LBMA ‘Good Delivery’ list.
• Security
• Transparency
• Cost efficiency
• Physical holdings quality
• Track record
The ETP must be 100% backed by physical bullion at all times
To act as secure investments, physically-backed ETPs need to be backed by 100%
physical LBMA ‘Good Delivery’ gold bullion held in an allocated account owned by
the issuer.
• The account should hold physical LBMA ‘Good Delivery’ bullion sufficient to cover
100% of the securities outstanding.
• Neither cash, nor certificates representing the right to receive bullion, should be a
substitute for physical bullion.
• Neither the issuer, the custodian nor any other counterparty should be lending,
leasing, trading or pledging as collateral bullion held in the allocated account.
• Bullion should be kept in fortified, high-security vaults specifically designed for
bullion storage.
Investors should not be exposed to any credit risk towards the issuer or the custodian or
any other counterparty:
• The issuer should be a separate, bankruptcy-remote entity (all the bullion should be
segregated from the issuer’s other assets and liabilities).
• Bullion should be identified as owned by the issuer and held in allocated form,
and, as a result, be segregated from any other assets held by the custodian (both
physically and in its books and records).
ETF Securities | 15
Transparency
Cost efficiency
Published bullion holdings and clearly identified parties
are essential
Product structure should be as cost efficient as possible
Independent counterparties
Physically-backed ETPs should have independent authorised
participants, market makers and custodians. Such independence
has long been a hallmark of good corporate governance for the
fund management industry; this increases transparency and
reduces any potential conflicts of interest.
Transparent pricing
The ratio of the security’s Net Asset Value to the London Gold
PM fix should be stable (reflecting only the historical cost) and
easy to calculate; this allows market makers to efficiently trade
the product and provide best prices and execution to the market.
Easily understandable fee structure
Fees should be clearly identified, broken down and their impact
on the Net Asset Value should be easy to calculate.
Reliable audit procedures
The issuer’s allocated account should be audited by both the
custodian’s own rigorous internal audit procedures and by an
independent LBMA-approved, independent bullion assayer. The
Audit procedure should consist of semi-annual audits, at least
one of which should be random and encompass both a physical
inspection of the vault and a reconciliation of the bullion with
both the custodian’s and the issuer’s records.
Daily bar list
Both the issuer and investors should receive updated account
statements of the bullion backing the ETPs.
• The custodian should provide the issuer with a bar list,
updated daily for creations and redemptions, showing
recognisable identifiers for each bar held. These generally
comprise: brand name, serial number, weight and assay.
These should be available to investors.
• The procedures improve transparency and provide that the
product is 100% backed by London ‘Good Delivery’ bars.
Multiple authorised participants (APs)
The structure should allow for multiple APs to reduce tracking
error. Products with only one AP may trade at a premium as there
are no independent arbitrageurs ensuring that prices remain
consistent with the underlying physical gold price.
Multiple market makers (MMs)
The structure should allow for multiple MMs to provide liquidity,
reduce spreads and to ensure the prices are made around NAV
and not trading at a premium. Multiple market makers and APs
also reduce operational risk in the event any one AP or MM is no
longer able to participate in the market.
Physical delivery
For maximum security and liquidity the physical redemption
should be in the form of London ‘Good Delivery’ bars delivered
to an allocated or unallocated LBMA account and should be
within t+3 framework. Physical delivery should not be restricted
or limited in quantity. Investors and/or authorised participants
must be able to redeem 100% of their physical gold holdings in
a single transaction.
Cash redemption
If allowed, this should not involve unnecessary costs.
16 | The Gold Standard
Liquidity
Physical holdings quality
Liquidity is the measure of the tradability of a product. It is
an important consideration when determining the differences
between products because more liquid products will be more
competitively priced. This is even more important in volatile
markets when the need to enter/exit a trade at a competitive
price is paramount.
LBMA-approved London ‘Good Delivery’ bars
are paramount
All physical gold ETPs have similar access to the underlying gold
so the primary market impact of creating and redeeming ETP
units should be similar. However, this is not the case when one
looks at secondary market liquidity.
Secondary market liquidity, especially liquidity displayed on
exchange, can differ significantly between ETPs. The key measures
of liquidity are the bid/offer spread, the “depth” of the order book
(the number of orders) and the number of market makers.
Physically-backed ETPs should provide access to bullion with
the security, reliability and strength of the London wholesale OTC
bullion market, therefore the bullion should be held in the form of
London ‘Good Delivery’ bars. This is a critical point as non LBMA
‘Good Delivery’ bars cannot be sold in the London OTC market.
The custodian should be a member firm of the LBMA
Custodians that trade in these markets have vaults that are
internationally-recognised as meeting required standards for
security and storage space.
Bullion should be LBMA ‘Good Delivery’ bars
• Bid/Offer spread – The amount one must pay to purchase the
product. The lower the number the better.
• These bars have a set number of ounces and a required
fineness (purity) of 99.5%. They must bear the stamp of an
LBMA-approved smelter/assayer.
• Orderbook depth – The size, price and number of orders
within the orderbook. The higher the amount of units that can
be bought (sold) at a competitive price the better.
• They are the only bars permitted for delivery in the London
OTC market.
• Market makers – Market makers compete to provide the best
prices in the orderbook. Generally, the larger the number the
more competitive the spread.
All of these measures combine together produce a liquid
product. Market makers are drawn to products with high
volumes. More market makers equal tighter spreads and more
levels of order in the orderbook as they compete to provide the
best price.
The same principle is valid for OTC trading. The higher the
number of market makers for a product the more competitive the
pricing of the product will be.
• Bullion held loco London is the most liquid. If held anywhere
else (e.g. loco Zurich), bullion should be held with a
custodian or sub-custodian who is an LBMA member.
• Holding gold bullion outside London may result in metal
trading at a premium or a discount to the London fixing price.
• Creating outside London may also require a loco swap with
London; in the event of a shortage of metal, the swap price
could increase dramatically.
ETF Securities | 17
Track record
Physically-backed gold ETPs are unique in the exchange traded products world; unlike
all other financial products they involve the management and the custody of a physical
asset: gold bullion.
It is essential that investors’ carefully study the track record of the issuer and assess
whether it perfectly understands the mechanics and the need for security of the
precious metals market.
Therefore it is crucial that all the participants involved in the management of the
product, such as custodian, registrar, and trustee, are independent from each other and
possess a proven track record fulfilling their respective roles.
In addition, for any exchange traded product, liquidity is paramount. A competitive
product should be supported by a network of liquidity providers (authorised
participants and market makers), to ensure tight bid/offer spreads and an efficient
creation/redemption processes. This then provides depth for the largest institutional
capital flows. Products with single or limited APs should be avoided.
18 | The Gold Standard
Due diligence checklist
Security
100% backed by physical bullion held in an allocated account
No lending of, or borrowing against bullion
Bankruptcy-remote issuer with segregated assets
No credit risk to the custodian
Limited operational risk
No new ETPs can be issued without the prior delivery of gold to the issuer’s gold
account with the custodian
Transparency
All major counterparties are independent (APs, custodian, MMs, trustee, registrar,
auditors and issuer)
Transparent and simple pricing
Easily understandable fee structure
Reliable audit procedures that are published, including at least one random audit
of the custodian’s vault
Published bar lists with unique LBMA identifiers
Cost-efficiency
Multiple APs to ensure arbitrage opportunities and limit tracking error
Multiple market makers to ensure maximum liquidity and reduce spreads
Tight spreads and minimal tracking error
Physical holdings
quality
LBMA ‘Good Delivery’ bars
Held with a member firm of the LBMA
Held by a Custodian who is a loco London clearer, in vaults that meet required
standards for security and size
Track record
Issuer has long operating track record under different market conditions
Partners are all highly experienced in their respective fields
Fund size is sufficient and reflects wide acceptance among investors
Yes
No
ETF Securities | 19
Important information
This financial promotion has been issued and approved for the purpose of section 21 of the Financial Services and
Markets Act 2000 by ETF Securities (UK) Limited (“ETFS UK”) which is authorised and regulated by the United Kingdom
Financial Conduct Authority (“FCA”).
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