Key takeaways:

• With $2.76 billion in net assets, Global X Physical Gold dwarfs its peers as the largest gold ETF on the ASX, and it was also the first gold fund to debut on the local market

• PMGOLD is slightly different from its peers in that individual gold is not allocated to investors, rather the issuer owns the bullion, and investors have the right to acquire it

• QAU offers hedging against currency, which results in the highest management fee of ASX-listed pure-play gold ETFs

• GOLD has delivered the highest returns on a one, three, and five year timeline, but since inception, Perth Mint Gold’s returns are slightly higher

After taking a look at some of the most popular resource ETFs on the Australian share market, we’re shifting our attention to another love affair for local investors – gold.

The ASX is home to a number of high-profile exchange-traded funds offering exposure to the safe-haven asset. While some of these ETFs are geared towards gold miners, we are instead honing in on a quartet of funds that offer direct exposure to the precious metal.

On that note, let’s take a closer look at Global X Physical Gold (ASX: GOLD), Perth Mint Gold (ASX: PMGOLD), the BetaShares Gold Bullion ETF (ASX: QAU), and the VanEck Gold Bullion ETF (ASX: NUGG).

Fund Objective

The Global X Physical Gold ETF, GOLD, seeks to provide investment results that correspond generally to the price performance, before fees and expenses, of the Gold Price PM in Australian dollars. 

GOLD offers access to physical gold, with each physical gold bar segregated, individually identified and allocated, thus avoiding the need for investors to personally store their own bullion.

Meanwhile, Perth Mint Gold, also known as PMGOLD, is an exchange traded product where holdings secured on behalf of investors are fully underpinned by government-backed gold, safeguarded by The Perth Mint. 

PMGOLD can be converted into holdings in a Perth Mint Depository account, where clients can choose to convert their holdings into any of The Perth Mint’s bullion bars.

BetaShares’ Gold Bullion ETF is also backed by physical gold bullion held in a vault of JP Morgan Chase in London. The fund is currency-hedged, aiming to track the performance of the price of gold, hedged for currency movements in the AUD/USD exchange rate (before fees and expenses).

Last but not least, the VanEck Gold Bullion ETF gives investors an investment in Australian sourced gold, also backed by physical gold bullion bars. 

Fund Profiles and Holdings

As the first ETF in Australia to track gold, Global X Physical Gold listed back in 2003. Today the fund oversees approximately $2.76 billion in funds under management.

Next to follow in 2003 was PMGOLD, which today is the second largest physical gold ETF. At the time of writing, the size of the fund is $718.2 million.

In 2011, BetaShares entered the market with its own gold ETF, QAU. Net assets in the BetaShares Gold Bullion ETF currently stand at $461.6 million.

And last to round things out is the most recent entrant in this space, the VanEck Gold Bullion ETF. NUGG was admitted to the ASX in December 2022, with the fund’s assets under administration just $23 million at this time.

Based on market activity from August, GOLD recorded a $50.9 million increase in funds under management (FUM) last month. There were approximately $17.5 million in fund outflows for the month, with overall growth driven by asset appreciation. 

Global X Physical Gold was the most actively traded gold ETF across the market in August, with 10,689 trades across all broker participants.

Meanwhile, Perth Mint Gold recorded FUM growth of $17.4 million, even though it incurred fund outflows of $0.3 million for the month across 1,386 trades.

The BetaShares Gold Bullion ETF was at the centre of 1,806 trades across all broker participants in August, but it was the only one of the quartet that recorded a monthly decline in FUM, which declined $0.8 million despite $3.1 million in fund inflows.

FUM in VanEck’s Gold Bullion ETF increased by $7.6 million, of which, $7.2 million was fund inflows. It is by far the most illiquid fund among the cohort, with just 175 trades in NUGG across the market.

Unlike other ETFs, each of these four funds are backed by a physical commodity in gold. However, there is one important distinction, and that relates to whether gold is allocated or unallocated. 

The former implies that a holder owns the physical gold – and pays the associated storage fees – while the latter means that the issuer owns the gold and you have the right to acquire it. 

Allocated gold is also segregated, with each gold bar featuring its own individual identifier. Unallocated gold bars can be lent to third parties without an investor’s consent, which raises some counterparty risk if the custodian bank were to ever default.

With this in mind, the four ETFs can be summarised as follows.

GOLD:

• Gold Allocation: Allocated

• Location held: London, UK

• Index Track: LBMA Gold Price PM AUD

• Spot Gold Price

PMGOLD:

• Gold Allocation: Unallocated

• Location held: Perth Mint

• Index Track: Spot Gold Price

QAU:

• Gold Allocation: Allocated

• Location held: London, UK

• Index Track: LBMA Gold Price AM USD

NUGG:

• Gold Allocation: Allocated

• Location held: Perth Mint

• Index Track: LBMA Gold Price PM AUD

Performance and Distributions

Since inception, GOLD has delivered unitholders an annualised return of 8.2% per annum. Over one, three, and five years the fund’s returns are 19.96%, 3.45% p.a., and 12.09% p.a.

Next up, PMGOLD’s performance since inception comes in at 8.43% per annum. Its returns over a one, three, and five-year period are 9.03%, 3.69% p.a., and 11.13% p.a.

The BetaShares Gold Bullion ETF has recorded a more modest return since its inception in 2011, with the fund yielding just 1.25% per annum. Much of this is the result of the fund’s performance over the last year, where it returned 10.27%, otherwise the three and five-year returns are -2.5% per annum and 7.56% per annum respectively.

Performance data for NUGG is limited due to the fact the fund launched in December last year. Since then, the ETF has returned 13.64%.

Of the four products we are analysing, three do not pay a distribution to unitholders. The BetaShares Gold Bullion ETF paid an annual distribution in 2020 and 2021, but has not paid one since.

It should be reiterated that the amount and timing of distributions will vary from period to period, and there may even be periods where no distributions are made. 

Prospective investors should also remember that past performance is not indicative of future performance, and results do not provide any guarantee that future returns will be of the same magnitude, or that returns will be positive.

Fees

As far as management fees, Global X Physical Gold charges 0.40% per annum. It is broadly comparable with NUGG, with VanEck’s management cost at 0.39%. 

On the other hand, QAU has the dearest management expense at 0.59% per annum due to hedging costs, while Perth Mint Gold is the most affordable of the group, with a management fee of just 0.15%. PMGOLD’s fee is the lowest because its structure results in lower storage costs. 

When it comes to gold ETFs, buy/sell spreads are particularly relevant as this relates to slippage. The spread on GOLD is just 0.06%, the lowest of any name in this line-up. By way of comparison, spreads for PMGOLD, QAU, and NUGG are 0.12%, 0.15%, and 0.20% respectively.

Please refer to the relevant Product Disclosure Statements for up-to-date details on costs and expenses, which may be deducted from the funds assets as and when they are incurred. 

Summary

Global X Physical Gold is the largest gold ETF on the ASX, more than double the size of the combined total of its three competing products in the Perth Mint Gold, BetaShares Gold Bullion ETF, and the VanEck Gold Bullion ETF. GOLD has outperformed each of its peers across recent timeframes of one, three, and five years, but PMGOLD edges ahead when measuring performance since inception.

Although all four products offer exposure to physical gold, PMGOLD tracks the spot price of the precious metal, and investors are not allocated individual physical gold bars like the rest of the products detailed in this article, which contributes to lower management costs. On the other hand, QAU is the only product among the group that offers hedging against currency movements, but that also comes at a cost, with the ETF attracting the highest management fee.

GOLD:

• Index Track: LBMA Gold Price PM AUD

• Net Assets: $2.76 billion

• Gold Allocation: Allocated

• 5-Year Performance (p.a.): 12.09%

• Distributions: N/A

• Management Fees (p.a.): 0.40%

PMGOLD:

• Index Track: Spot Gold Price

• Net Assets: $718.2 million

• Gold Allocation: Unallocated

• 5-Year Performance (p.a.): 11.13%

• Distributions: N/A

• Management Fees (p.a.): 0.15%

QAU:

• Index Track: LBMA Gold Price AM USD

• Net Assets: $461.6 million

• Gold Allocation: Allocated

• 5-Year Performance (p.a.): 7.56%

• Distributions: N/A*

• Management Fees (p.a.): 0.59%

NUGG:

• Index Track: LBMA Gold Price PM AUD

• Net Assets: $23.0 million

• Gold Allocation: Allocated

• 5-Year Performance (p.a.): N/A

• Distributions: N/A

• Management Fees (p.a.): 0.39%

* = QAU paid an annual distribution in 2020 and 2021, but not since