I previously wrote an article entitled PHYS: Now You Can Store Your Gold in Canada. After discussions with Michael Traynor of the National Stock Exchange, I agree with their conclusion that PHYS is not an ETF.
In some ways, PHYS is similar to other physically-backed gold products such as SPDR Gold Shares (NYSEARCA:GLD), iShares COMEX Gold Trust (NYSEARCA:IAU), and ETFS Physical Swiss Gold Shares (NYSEARCA:SGOL). However, it lacks one vital feature – the daily creation/redemption process. As I have said many times, this is the one feature that sets apart ETFs from other products.
A closer inspection of the PHYS prospectus reveals that it is actually a “closed-end mutual fund trust.” As such, it is likely to trade at a premium or discount to intrinsic value, just like other closed-end funds.
In fact, it appears PHYS is already trading at a premium. The shares climbed nearly 1.9% on Monday while GLD, IAU, and SGOL were nearly unchanged. However, PHYS does have a monthly redemption provision, which should prevent the premium or discount from becoming too large.
Disclosure covering writer, editor, and publisher: Long GLD. No positions in any of the companies or ETF sponsors mentioned. No income, revenue, or other compensation (either directly or indirectly) received from, or on behalf of, any of the companies or ETF sponsors mentioned.