As Demand Improves, Give This ETF More Than an 'OUNZ' of Thought

Gold prices might be down 1.26%, but the precious metal certainly isn’t out of the running. As 2021 continues, look for an increased demand for gold to provide tailwinds for the VanEck Merk Gold Trust (OUNZ).

OUNZ seeks to provide investors with an opportunity to invest in gold through the shares and delivery of physical gold in exchange for those shares. Summarily, OUNZ offers investors:

  • Deliverability: VanEck Merk Gold Trust holds gold bullion in the form of allocated London Bars. It differentiates itself by providing investors with the option to take physical delivery of gold bullion in exchange for their shares.
  • Convertibility: For the purpose of facilitating delivery, Merk has developed a proprietary process for the conversion of London Bars into gold coins and bars in denominations investors may desire.
  • Tax Efficiency: Taking delivery of gold is not a taxable event as investors merely take possession of what they already own, the gold.

OUNZ is up 15% the past year, outpacing another gold index: the Bloomberg Gold Subindex. The fund’s expense ratio comes in on the low side at 0.25%, 18 basis points lower than its categorical average.

OUNZ Chart

Bullish Outlook from the World Gold Council (WGC)

The WGC is naturally bullish on gold, as detailed in its latest market report. If fundamental drivers can continue to support bullishness on gold, look for OUNZ to benefit.

“On Thursday (January 28), the WGC published its newest report about gold demand trends: Gold Demand Trends Full Year and Q4 2020,” an FX Empire article said. “The key message of this publication is that the gold demand of 783.4 tons (excluding over-the-counter activity) in the fourth quarter of 2020 was 28 percent lower year-over-year. As a result, it was the weakest quarter since the midst of the Great Recession in Q2 2008. The weak quarter made the whole year quite disappointing, as the annual gold demand in 2020 dropped by 14 percent to only 3,675.6 tons, making it the lowest level of demand since 2009.”

“The main driver of this decline was the COVID-19 pandemic, that triggered the Great Lockdown and the subsequent surge in gold prices,” the article said further. “In consequence, jewelry demand plunged 34 percent to 1,411.6 tons, the lowest annual level on record. It shows that – contrary to popular opinion – consumers are price takers, not price setters, in the precious metals market.”

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