How to convert your gold ETF shares into gold bullion and gold coins
Gold is a form of exchange, a safe haven asset and a hedge against inflation.
Based on an analysis by the World Gold Council, an allocation to gold of just 2% to 10% can materially reduce volatility and increase risk-adjusted returns.
The VanEck Merk Gold Trust (“OUNZ”) (Ticker symbol: OUNZ) allows investors to redeem their shares for physical gold.
The ETF OUNZ offers investors a convenient and cost-efficient way to buy gold with an option to convert the shares into physical gold. The benefit of this option is that delivery of physical gold dos not trigger a taxable event as the ETF shareholder already owns the gold via the shares. Also by holding shares in a brokerage account alleviates the necessity of storing physical gold in a secured vault.
Merck Investments LLC is a company works with the VanEck Merck Gold Trust. It has developed a proprietary process for the conversion of London Bars into gold coins and bars in denominations investors may desire.
OUNZ holds London Bars in allocated form. The gold held is segregated from other holders/owners in the Custodian’s vaults. Each OUNZ investor owns a pro-rata share of the ownership of the Trusts’ corresponding to the number of shares held.
All gold acquired by the Trust must have a purity of 995 parts per 1,000 (99.5%) with the exception of American Gold Eagle Coins which must have a minimum purity of 91.67%.
Investors have the option to take delivery of physical gold in exchange for their share.
Investors may take delivery of the London Bars the Trust holds, and may also take delivery of 1-ounce coins and bars, as well as 10-ounce bars, such as:
| Type | Purity |
|---|---|
| 1 oz American Gold Eagle coins | 91.67% |
| 1 oz American Gold Buffalo coins | 99.99% |
| 1 oz Australian Gold Kangaroo coins | 99.99% |
| 1 oz Canadian Gold Maple Leaf coins | 99.99% |
| 1 oz or 10 oz Australian bars | 99.99% |
Physical gold storage tips:
- Use secure storage facilities
Use a reputable and secure storage facility. If you have a large quantity of gold bullion, use a storage facility that is recognised by gold dealers. If later on you sell the bullion, gold dealers will need assay tests to check purity. If the gold has been stored at a recognized storage facility and never physically taken out of storage, gold dealers may waive the assay requirements. If the gold bullion is taken out of storage and you decide to sell it, gold dealers will need an assay test for purity before they buy.
- Insurance
Make sure you have adequate comprehensive insurance even if they are stored in a secured vault. There is always a risk of theft at a secured vault.
- Proper documentation
Maintain adequate records of all gold purchases and certificates of authenticity. Documents are needed for insurance purposes and resale in the future.
- Regular audits
If your gold is stored at a secured storage facility ensure that they undertake regular audits. Make sure you review the audit reports.
Common sense tips on gold storage:
- Avoid storing gold bars and coins in a home storage safe. Home insurance may not cover loss through theft and break-ins.
- Loose lips sink ships: Keep your investment information confidential to reduce the risk of theft or fraud.
- Low-quality storage: Avoid low cost storage facilities as it could lead to significant loss due to theft and insurance may not cover such loss.
- Maintenance: Periodically check your investment or review the storage facilities gold audit report. Make sure the report has no qualifications as to the number of bars stored etc.
Investing in gold bars is a sound financial decision especially when most countries are replacing their US dollars with gold reserves.