Gold ETF questions

Legacy_user

I'm adding gold as a portfolio diversifier with an ETF and have a few questions.

Institutional risk looks unavoidable and most ETFs are non-UK domiciled so no FRCS cover. Are there any UK domiciled gold ETFs?

I've shortlisted these:
iShares Physical Gold ETC (GBP) SGLN (BlackRock Advisors (UK) Limited, Ireland)
Source Physical Gold P-ETC (GBP) SGLP (Source Commodity Markets PLC, Ireland)
ETFS Physical Gold (GBP) PHGP ETFS (Metal Securities Limited, Jersey)

The above tick boxes for size/liquidity and low TER.

The first is currently trading at a 27% premium, the second -1% discount, the third 10% premium. For the purposes of a long-term buy and hold is it an issue to buy at a premium or discount?

Also the 52 week high low for all funds show 30% difference between the high and low price, while the last 52 weeks gold price appears closer to 20% between the high and low. What is the other factor at play here?

Any other pointers appreciated. Thanks.

EdGasket

Don't know what you mean by premium?? SGLN should trade at the spot gold price or near enough. How are you working out there's a premium; doesn't seem right at all.

Blackrock is huge globally; don't see them running off with your money anytime soon.

Other factor at play = gold is priced in USD and you are probably looking at GBP prices so when you buy gold, you are buying a US dollar-based asset and unless you currency hedge it, you are exposed to GBP/USD currency fluctuations.

System

EdGasket wrote: »

Don't know what you mean by premium?? SGLN should trade at the spot gold price or near enough. How are you working out there's a premium; doesn't seem right at all.

Blackrock is huge globally; don't see them running off with your money anytime soon.

Other factor at play = gold is priced in USD and you are probably looking at GBP prices so when you buy gold, you are buying a US dollar-based asset and unless you currency hedge it, you are exposed to GBP/USD currency fluctuations.

Hm. I'm getting the premium or discount values from the overview screen for each ETF on the ETF screener on my platform.

EdGasket

ETFs should always be priced close to NAV (unlike Investment Trusts that do have a premium or more usually a discount to NAV). In SGLN's case the NAV is the value of the physical gold they hold.

The following explains ETF pricing but is a bit over-complicated. For your case, you can safely assume you are getting a fair price to the underlying gold. If you think about it it wouldn't make sense for SGLN to have a 27% premium; if it did, everyone would sell it and buy the one with 1% discount instead as they'd get more gold for their money!

https://www.ishares.com/us/education/market-value-etf-prices

"ETF prices tend to closely reflect their fair value."

System

Makes sense. But if they are not trading at either a premium or discount what does the 'Premium' and 'Discount' refer to? See:
youinvest.co.uk/market-research/LSE:SGLN
youinvest.co.uk/market-research/LSE:SGLP
youinvest.co.uk/market-research/LSE:PHGP

pavane

Forget ETF. I've got just the deal for you mate!

https://forums.moneysavingexpert.com/discussion/5519182

EdGasket

wneil wrote: »

Makes sense. But if they are not trading at either a premium or discount what does the 'Premium' and 'Discount' refer to? See:
youinvest.co.uk/market-research/LSE:SGLN
youinvest.co.uk/market-research/LSE:SGLP
youinvest.co.uk/market-research/LSE:PHGP

That's a good question and one you should ask A J Bell. Do point out that ETF's usually trade close to NAV so a premium of 27% seems an error. I would assume AJ Bell have screwed their data up or are using IT modelling software for ETFs and it doesn't suit.

Please post their reply.

System

They agree the data is probably wrong.

Their best guess is that it is a bug relating to currency exchange rate adjustments somewhere along the line. They will raise the issue with Morningstar.

hoc

Morningstar, which as you mention is from where Youinvest gets their data, often has issues reporting certain ratios due to GBP vs GBX (pennies) inconsistencies for UK shares/ETFs. I often find P/E ratios, etc. that are x100 what it should be.

EdGasket

Also have a look at SPGP which is a gold producers ETF and leveraged to the gold price by approx 2 times but note this ratio can vary quite a lot. e.g. today SGLN up 0.55% and SPGP up 4% (because shares are having a good run too) and at prices above $1100 per ounce for gold, the gold miners are making lots of profit.

Good luck with your gold investment; it's a good one to keep buying if it falls and sell on the way back up so long as you have a good stomach and a lot of patience.