Gold Exchange-Traded Funds (GETF)
This is an ETF which tracks the price of Gold. The funds are publicly traded on all mainstream stock exchanges including New York, Paris, Zurich, Mumbai and London. Gold ETFs, as of October 2009, held 1,750 tons of gold for both private and institutional investors.
Another fund which aims to track the price of gold is a closed-end fund (CEFs) and also exchange traded notes (ETN’s). Each gold fund whether it be a CEF, ETN or an ETF has a different structure which is found summarized in their prospectus. These different funds may not physically hold gold. Gold ETN’s for example, traditionally track the price of gold through the use of derivatives.
The idea of GETF’s was first conceptualized by Benchmark Asset Management Company Private Ltd in India when making a formal proposal to SEBI in May 2002. All regulatory approvals were finally granted in March 2007. In March 2003, under the name Gold Bullion Securities, the Australian Stock Exchange launched its first fund.
Fees for GETFs are very minimal, along with a small storage fee brokers charge no more than 0.4%. Only a fraction of that is charge by brokers in the U.S. Annual costs associated with gold such as storage, selling, management, and insurance are charged by selling a small portion of the gold in a particular portfolio.
In most countries, gold ETF’s represent a way method to avoid paying the VAT or sales tax that accompanies physical gold coins and bars. In the United State GETF’s are taxed as a commodity. Most investments being viewed as a long-term capital gain at a rate of 15% while commodities are taxed at 28%.
Today the World Gold Council sponsors GETF’s. This is an industry association of all the leading gold mine companies on the globe that was established in 1987. The main goal of the World Gold Council is to stimulate demand for gold on a worldwide level among consumers, investors, and industry.
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