How ETFs Haven't Altered The Dynamics Of Gold

Have a post up on the corporate blog How ETFs Haven't Altered The Dynamics Of Gold where I have a go at the mainstream finanical narrative that gold ETFs were a “game changer for the gold industry”, making it easier for investors to buy gold and having a positive impact on the gold price. If you properly classify bar/coin and jewellery bought for investment reasons then that accounts for over 11,400 tonnes of physical gold compared to only 2,600 tonnes of ETF investment between 2004 and 2012. More at the link.

Still snowed under with work so fustrated at limited blogging capacity. Just one quick FYI from a contact Ronan on a soon to be launched gold ETF from Axel Merk:

This Trust seems to follow the standard format, a trust backed by allocated physical 400oz bars. JP Morgan will be custodian. The differentiating factor in this trust will be that it holds other types of gold in addition to 400oz bars, such as smaller bars and even coins, and small investors will be able (if they want) to redeem shares for gold bullion, which is a new angle.

There is a web site which seems to be on hold www.merkgold.com until after the IPO. See link for one of the filings.

I'm surprised anyone would think more gold ETFs are needed, but maybe they think the redeemability in small sizes will be attractive. I would note that redeemability at any size into any coin or bar was a feature of Perth Mint's ASX listed gold product PMGOLD when launched in 2003. Ten years later they are catching up. The holding of smaller bars will just add to costs, but as they don't have a Mint out the back, I suppose there is no other way for them to offer than redeemability.

Merk has some good articles on gold here, quote: "I am an optimist. I’m no conspiracist. I just happen to think the road to hell is paved with good intentions. As a result, I own gold".

FYI, you may also find this paper by CME Group having a go at gold ETFs versus Comex futures of interest/amusement, quote:

"While there is a place for ETFs in any investment portfolio, there are several drawbacks that do not make them the first choice for individuals wishing to invest in gold.

When the goal is to simply benefit from a rise or fall of the price of gold, COMEX Gold futures are the logical choice. COMEX Gold futures offer the investor a fast and accurate pricing mechanism, the ability to leverage their trading strategies and the security of doing business on an exchange that has guaranteed the performance of each of its transactions for over 100 years."