Thousands of private investors with physical gold exchange traded commodity (ETC) holdings will be able to trade in their gold securities for real gold coins for the first time.
In a bid to dispel rumours that physical gold ETCs are not always backed up by enough of the shiny stuff, ETF Securities Gold Bullion Securities ETC (GBS) has become the first in the world to allow investors to redeem the value of their investment in real gold coins.
Until now, ETF Securities has charged a $750 fee if customers want gold redemptions from their funds, a huge barrier that has previously made the process unviable for retail investors.
Government-owned coin maker Royal Mint has agreed to make the coins, which will be ready within a week of them being requested. They will be housed in its security protected vaults unless investors decide they want to keep them somewhere else.
Royal Mint will charge a 4.5 per cent fee for the privilege and will not allow redemptions below a minimum of $7,549 (£4819.64), which currently equates to 64 securities held in ETF Securities Gold Bullion Securities ETC.
Investors can swap ETF Securities Gold Bullion Securities ETC securities for two types of coin - Britannia and Sovereign. Britannias are made from 1 ounce of 24-carat gold while Sovereigns are made from about a quarter of an ounce of 22-carat gold, and their value varies depending on the gold price. Both types of coin are exempt from capital gains tax, which is advantageous for many investors.
The move could be the start of a wider trend in gold investing as Richard Samuels, bullion manager at Royal Mint, said this is the first of a number of plans the company has in the pipeline to give British private investors access to gold coins.
John Fletcher, exchange traded fund (ETF) expert at Charles Stanley, said investors nervous about whether ETF gold securities are actually backed up could benefit from swapping them for gold coins, but he admits he wouldn't redeem them himself. "I wouldn't do it myself because I trust ETF Securities and the auditing processes on their gold, and because storing and insuring gold coins would work out much more expensive than simply owning the securities."
And Frank Spiteri, head of retail distribution strategy at ETF Securities, added: "We wanted to set people's minds at rest and reassure investors that their securities are backed by physical gold. So now we will let our retail clients switch their holding of ETF Securities Gold Bullion Securities ETC for Sovereigns and or Britannias, knowing that their gold coins can be safely stored with or delivered by a UK government owned and regulated entity."
