Royal Mint terminates physical delivery facility on WisdomTree’s Gold Bullion Securities

Feb 19th, 2021 | By | Category: Commodities

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Investors in the Gold Bullion Securities are no longer able to exchange their shares directly for gold bullion coins or bars issued by the Royal Mint.

Royal Mint terminates physical delivery facility on WisdomTree's Gold Bullion Securities

The Royal Mint has terminated an agreement with WisdomTree that enabled investors in Gold Bullion Securities to take physical delivery of gold.

In a statement released Thursday, WisdomTree, the issuer of the ETC, advised that the Royal Mint had terminated its agreement with the company, bringing to an end an almost-eight-year arrangement.

First introduced in 2013, the facility provided investors in GBS with the perception of an extra layer of confidence that they would always be able to get their hands on physical gold.

GBS is listed on the LSE (GBS LN, GBSS LN), Borsa Italiana (GBS IM), Euronext Paris (GBS FP), and Xetra (GG9B GY). It holds $4.16 billion in assets.

The facility was apparently never once utilised by an investor (according to WisdomTree’s statement) but its withdrawal nonetheless represents a modest net negative for investors in GBS.

Investors may technically still redeem for physical gold bullion, however, but this will now need to be done via an LBMA account.

So in practical terms, retail investors in GBS have lost a feature that may well have been valued by them. This is similar to the situation that was presented to US retail investors invested in the Perth Mint Physical Gold ETF.

Now known as the Goldman Sachs Physical Gold ETF (AAAU US), the Perth Mint product was acquired by Goldman Sachs Asset Management in late 2020. In the process of its transition to GSAM stewardship, a mechanism that allowed investors to exchange their shares for delivery of physical gold in the form of retail bullion bars and coins issued by the Perth Mint was withdrawn.

The news was met with disappointment from a great number of smaller investors, many of whom have since liquidated their holdings. AAAU’s assets under management are down 30% compared to the level prior to GSAM’s takeover.

For investors in the US, the VanEck Merk Gold ETF (OUNZ US), a collaboration between Merk Investments and VanEck, appears to be the only gold ETF to offer a retail-friendly physical redemption facility. It has seen net inflows since the GSAM deal was completed.

In Europe, the Royal Mint Physical Gold ETC (RMAU LN), a collaboration between the Royal Mint and white-label issuer HANetf, offers a straightforward physical delivery option for retail investors. Investors in this product are able to exchange their shareholding for a range of Britannias, Sovereigns, and bars of varying sizes, albeit for a fee.

Other ETPs, such as the WisdomTree Physical Swiss Gold (SGBS LN) and the WisdomTree Core Physical Gold (WGLD LN), are understood to incorporate mechanisms for investors to redeem physically. In the case of these two WisdomTree products, there is no requirement for delivery to be to an LBMA account (according to WisdomTree).

The Royal Mint was contacted for comment. A spokesperson said: “Last year The Royal Mint introduced a gold ETC (RMAU) which provides customers with the option to physically redeem their gold [directly with the Royal Mint]. This is a unique feature of the RMAU, and as a result we have decided to end our partnership with WisdomTree.”

(This article has been edited post-publication to remove potential inaccuracies concerning tax treatment for German investors, the credit risk implications of physical delivery to an LBMA account, and information implying a minimum size of physical delivery.)

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