Gold ETF question

TheMoniac

If I choose a gold ETF, should I limit my choice to one that says it is backed by physical allocated gold or not? What are the implications or benefits or risks for investors that choose one or the other?

Morphoton

The main difference IMO is that synthetic ETFs
have counterparty risk. Physical ETFs should not
have this risk and therefore are potentially safer.
For this reason I would limit myself to physical
ETFs only.
The link below gives more info:
https://www.investopedia.com/articles/investing/061614/synthetic-vs-physical-etfs.asp
I hold the iShares Physical Gold ETF SGLN/IGLN
as this has one of the lowest charges at 0.25%.

TheMoniac

Thanks for that information. That ETF is one I have short listed.

Alexland

I agree avoid synthetic replication and be aware the ETF price moves in line with exchange demand which may not exactly match the underlying commodity price.

TheMoniac

Alexland wrote: »

I agree avoid synthetic replication and be aware the ETF price moves in line with exchange demand which may not exactly match the underlying commodity price.

Is your point that all ETFs are liable to tracking price deviation, or that price deviations are more likely with synthetic ETFs than with physically backed ETFs?

Alexland

TheMoniac wrote: »

Is your point that all ETFs are liable to tracking price deviation, or that price deviations are more likely with synthetic ETFs than with physically backed ETFs?

My point is just with either the ETF unit price goes up and down with demand for people trading the ETF which will not exactly match the demand for the underlying commodity.

TheMoniac

Thank you for clarifying.