“That’s happening on a daily basis,” Rhind says, as opposed to quarterly or semi-annually.
Twice a year, an external auditor comes in and goes through every single gold bar and reconciles it with the list of gold bars the trust says it owns. One such audit is done on Dec. 31, a second one is done at random at the discretion of ETF Securities. The custodian also conducts its own internal and external audits on top.
“There’s complete transparency in that audit process.”
As for how much of a chance there is that the gold in the trust could actually be destroyed, “It’s virtually impossible unless someone dropped a nuclear bomb.” In other words, the most extreme of extreme events.
Losing the gold is just as unlikely, given that it’s checked on a daily basis and it doesn’t move.” There’s absolutely no reason for that gold to be moving around the vault,” says Rhind. “It can’t be lent out to any third parties.”
No share of an ETF is issued before the corresponding gold is in the vault and accounted for. “You never want to be in a situation where there are shares created but the shares are not backed by gold,” he says.
Commodities on Fire
Because they’ve noticed increasing interest on the part of individual and institutional investors, Rhind and ETF Securities are bullish on the growth of the commodity segment of the ETF industry.
“We’re seeing a rebalancing of investment portfolios that were once purely made of equities and bonds. As our assets under management grow, that’s purely reflective of that,” says Rhind.
He also believes that commodities are still at the tip of the iceberg, citing a recent survey by Schwab that shows that more investors plan to invest in both commodities and ETFs in the coming year. Thirty-six percent of respondents said that they planned to increase their ETF exposure; 18% said they planned to increase their exposure t commodities.
“It speaks to me that this is exactly what people want to invest at the moment.”
ETF Securities’ U.S. lineup is:
- ETFS Physical Platinum Shares (NYSEArca: PPLT)
- ETFS Physical Palladium Shares (NYSEArca: PALL)
- ETFS Physical Swiss Gold Shares (NYSEArca: SGOL)
- ETFS Physical Silver Shares (NYSEArca: SIVR)
For more stories about commodity ETFs, visit our commodity category.