Note (added 3/2/10): The article below contains an error. PHYS is actually a closed-end fund, not an ETF. For more information, see PHYS is Not an ETF.
Sprott Physical Gold Trust (PHYS), the latest physically backed gold exchange-traded product began trading yesterday (2/26/10) on the NYSE. The fund also applied for listing on the Toronto Stock Exchange under the symbol PHY, but it appears that Canadian trading has not yet commenced. The fund will be managed by Toronto-based Sprott Asset Management and will store its gold at the Royal Canadian Mint.
With the introduction of PHYS, investors can now choose between physically backed ETFs that safeguards gold bullion in Zurich, Canada, London, and US vaults. The fund’s new website does not contain much information at this time. The prospectus highlights the potential benefits of the offering, which include:
Ability to Redeem Units for Physical Gold Bullion: Unit holders will have the ability, on a monthly basis, to redeem their units for physical gold bullion in a minimum of one bar (350 to 430 troy ounces) for a redemption price equal to 100% of the NAV minus expenses.
Storage at the Royal Canadian Mint: The Trust’s physical gold bullion will be fully allocated and stored at the Royal Canadian Mint.
Potential Tax Advantage For U.S. Investors: Any gains realized on the sale of units for U.S. federal income tax purposes, may be taxable as long-term capital gains (at a maximum rate of 15% under current law, compared to a long-term capital gains tax rate of 28% applicable to physical gold bullion and other “collectibles”), provided that such U.S. investor has made a timely and valid Qualified Electing Fund election with respect to the units. Note: I recommend consulting a qualified tax specialist if you are relying on this claim.
PHYS will have expenses capped at 0.65%, making it more expensive than its major competitors. PHYS traded more than four million shares on Friday and closed at $9.59. This means each unit worth less than 1/100 of an ounce. Its three prime competitors are:
- SPDR Gold Shares (GLD), expense ratio = 0.40% (overview)
- iShares COMEX Gold Trust (IAU), expense ratio = 0.40% (summary) (IAU article)
- ETFS Physical Swiss Gold Shares (SGOL), expense ratio = 0.39% (summary) (launch article)
In related news, Eric Sprott, CEO of Sprott Asset Management, purchased 8 million units of the new fund as part of the IPO. It’s nice to see that management believes in the product.
Disclosure covering writer, editor, and publisher: Long GLD. No positions in any of the companies or ETF sponsors mentioned. No income, revenue, or other compensation (either directly or indirectly) received from, or on behalf of, any of the companies or ETF sponsors mentioned.