Robert Powell is a long-time financial journalist and retirement expert, as well as the editor of TheStreet.com's Retirement Daily. Here, he looks at a new gold-related ETF.
A new investment that those saving for and or living in retirement might consider for their portfolios is The Perth Mint Physical Gold ETF (AAAU). We've included commentary from advisers about the investments, as well.
The Perth Mint, Australia's largest precious metals refining, minting and depository enterprise, launched The Perth Mint Physical Gold ETF. According to a release, AAAU is the first gold exchange-traded fund that is backed by pure gold, where that physical gold is guaranteed by a sovereign entity and offers shares that can be exchanged for physical gold.
AAAU shares are backed by physical gold with a purity of at least 99.5% and secured within the Perth Mint's network of central bank grade vaults in Western Australia. The Perth Mint may, on rare occasions, store the gold in other highly secure vaults. All the gold held on behalf of AAAU is guaranteed by the government of Western Australia.
According to a release, investors in the AAAU may, at any time, exchange their shares for delivery of physical gold. Shareholders may select from an extensive suite of premium bullion bars and coins available from The Perth Mint, which is also one of the largest suppliers of gold coins to the U.S. market.
For his part, John Del Vecchio, co-author of What's Behind the Numbers?, co-manager of the AdvisorShares Ranger Equity Bear ETF (HDGE), and developer of WeatherStorm Forensic Accounting Long-Short ETF (FLAG), a 5-Star Morningstar fund, says ETFs make a lot of sense for an investor looking for exposure to a broad asset class (major stock indexes, bonds, and commodities) or where it's difficult for an individual to get that exposure on their own, that is buying high yield bonds, shorting stocks, and the like.
"In this case, an ETF that buys and stores physical gold meets the two criteria above," says Del Vecchio. "If you are very bullish on gold, then buying and storing the physical could be a challenge. And liquidating the position could also be a nightmare."
In addition, he says there have been past controversies as to whether gold bought by ETFs is actual gold or is it "paper" gold through derivatives. "That's a potential downside to an ETF," says Del Vecchio. "You have to trust it's there. If you buy it yourself and store it in a coffee can in the backyard at least you know it's there. In a crisis where gold might see a dramatic increase in value, physical gold is where the value will be at. 'Paper' gold might not be worth the paper it's written on."
What's more, says Del Vecchio, with an ETF you can move in and out of the position fairly easily. "That's much harder to do digging up your backyard with a shovel," he says.
