I will share here my criteria to choose gold funds, and offer my selection. This was written after a reader's question in a previous article (read it here): Why do I prefer "other funds" rather than GLD?
Keeping gold at home or in a local bank safe may be the best solution in theory, but it depends on the country, place of residence and on a sedentary lifestyle. Precious metal funds may be a safer alternative. However, all funds have not been created equal.
My selection criteria:
- 95% of Net Asset Value or more in bullion.
- Premium below 5% (difference between Market Value and NAV).
- A good reputation of management.
- Low fees.
- Metal stored by institutions that have not been involved in gold or silver price manipulation complaints.
- Metal stored outside the USA and European Union. Gold is better out of reach of broke governments. Some countries have already enforced a stronger tracking on gold transactions.
My short list of gold funds:
- Central Gold Trust (GTU)
- Central Fund of Canada (CEF, mixed gold and silver)
- Funds by the Zürcher Kantonal Bank (SIX: ZGLDUS etc... Different products depending on the currency and hedging policy. Some of them have Pink Sheet proxies in the US).
- Funds by the Julius Bär Bank (SIX: JBGOCA, SIX: JBGOEX, etc...)
The metal backing CEF and GTU is at the Calgary branch of the Canadian Imperial Bank of Commerce (CM). CEF is dedicated to investors looking for a permanently rebalanced exposition to gold and silver (about 55% in gold).
The Julius Bär and ZKB series have their metal stored in Swiss custodial facilities. Both have only 12.5 kg bars, which is not the best solution if you plan to take possession of your metal. The share price is affordable for an individual investor. ZKB is among the Swiss banks whose assets still have a 100% guarantee by a cantonal state.
I think that these Canadian and Swiss funds are safer solutions to own gold than any other fund like GLD, SGOL, AGOL, etc... and for most individual investors safer than keeping gold at home. Their premiums are usually lower than Sprott Physical Gold Trust (PHYS), which otherwise could have been another good candidate. ZKB has also physical metal funds for silver, palladium and platinum for those who are wary of SLV, PALL and PPLT.
All these funds have higher spreads than the usual ETFs. As a consequence they are not day-trading instruments. The possibility to buy them may depend on your country.
To clarify my position, I'm bullish on the long term, but not a gold bug. I put much more energy and time in probabilistic strategies (methodology here) than in precious metals analysis.
Additional disclosure: I am also long ZGLD and ZSIL on the Swiss Market. I have no interest in promoting any fund or financial company.