The idea of a gold ETF was first conceptualized by Benchmark Asset Management Company Private Ltd in India when they filed a proposal with the SEBI in May 2002. However it did not receive regulatory approval at first and was only launched later in March 2007.
The first gold ETF actually launched was Gold Bullion Securities, which listed 28 March 2003 on the Australian Stock Exchange. Graham Tuckwell, the founder and major shareholder of ETF Securities, was behind the launch of this fund.
Typically a commission of 0.4% is charged for trading in gold ETFs and an annual storage fee is charged. U.S. based transactions are a notable exception, where most brokers charge only a small fraction of this commission rate. The annual expenses of the fund such as storage, insurance, and management fees are charged by selling a small amount of gold represented by each share, so the amount of gold in each share will gradually decline over time. In some countries, gold ETFs represent a way to avoid the sales tax or the VAT which would apply to physical gold coins and bars.
In the United States, sales of a gold ETF are treated as sales of the underlying commodity and thus are taxed at the 28% capital gains rate for collectibles, rather than the rates applied to equity securities.
Physically-backed funds
Central Fund of Canada / Central Gold Trust
The Central Fund of Canada (TSX: CEF.A, TSX: CEF.U, NYSE: CEF) and the Central Gold Trust (TSX ; GTU.UN, TSX: GTU.U, NYSE: GTU) are closed-end funds headquartered inCalgary, Alberta, Canada, mandated to keep the bulk of their net assets in precious metals, with a small percentage of cash. The Central Fund of Canada holds primarily a mix of gold and silver, while the Central Gold Trust holds primarily gold.
The custodian of the precious metals assets of both funds is the main Calgary branch of CIBC. Both funds are considered especially safe because of their published codes of governance and ethics, the Central Fund's history of operation since 1961, and the funds' simple prospectuses which equate shares of the closed-end funds with real units of ownership in the trusts. As of October 2009, the Central Fund of Canada held 42.6 tonnes of gold and 2129.7 tonnes of silver in storage, and the Central Gold Trust held 13.6 tons of gold in storage.
Claymore Gold Bullion Trust
Exchange Traded Gold
Several associated gold ETF's are grouped under the name Exchange Traded Gold. The Exchange Traded Gold funds are sponsored by the World Gold Council, and as of June 2009 held 1,315.95tonnes of gold in storage. Exchange Traded Gold securities are listed on multiple exchanges worldwide by various ETF providers, including: