World Gold Council to launch new low-fee gold ETF

May 9th, 2018 | By | Category: Commodities

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The World Gold Council (WGC) is anticipated to launch a new gold-backed ETF, reports Reuters. The WGC owns the world’s largest gold-backed ETF—the SPDR Gold Shares ETF (GLD US), which is marketed by ETF giant SSGA— but is creating a second gold offering with lower management fees.

World Gold Council is the provider of the world's largest gold ETF, the SPDR Gold Shares ETF.

The World Gold Council is organisation behind the world’s largest gold ETF, the SPDR Gold Shares ETF.

Gold ETFs offer investors cost-effective exposure to gold without having to buy and store the yellow metal.

As reported by Reuters, “The council’s two funds were designed to appeal to different audiences, with the new product targeted at investors looking to buy and hold gold who want a low management fee, and GLD aimed at financial investors who use its scale and liquidity to trade in and out of positions cheaply.”

The Reuters source commented, “The idea is that the new product grows without damaging the existing product.”

Launched in 2004, GLD currently houses just over $36 billion in assets under management.

At the start of 2010, the fund accounted for roughly 75% of the total gold bullion held by gold-backed funds. However, as reported by Reuters, GLD’s dominance has dwindled in recent years, with it now taking up less than 50%.

With a total expense ratio (TER) of 0.40%, GLD is at the more expensive end of the fee scale. This is believed to have dampened its market share relative to some of the cheaper funds available, which have enjoyed relatively stronger inflows in recent times.

GLD’s AUM has risen 5% since the start of 2017, yet BlackRock’s iShares Gold Trust (IAU US)—with a TER of just 0.25%—has grown 47% over the same time. IAU’s AUM currently stands at just over $12bn, which is roughly a third that of GLD, although this gap appears to be closing.

It is believed that the new fund will have a TER of 0.25%, which will rival that of IAU; however, WCG has yet to release a formal statement on this.

Both GLD and IAU trade in US dollars and are listed in the US, UK and on several European exchanges. European and UK investors looking to gain gold exposures in their local currencies could opt for currency-hedged versions of DWS’s Xtrackers Physical Gold ETC (XGLD LN).

XGLD currently has around $800 million in AUM and trades in US dollars, pounds sterling and euros. The unhedged version has a TER of 0.25% and the currency-hedged versions (euro and pounds sterling) have TER’s of 0.69%.

BlackRock’s latest ETP Landscape report shows that global gold ETP inflows reached $2.9bn in April—the highest since July 2016.

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