Merk Gold Trust Makes First Delivery
July 24th at 8:00am by Tom Lydon
The Merk Gold Trust (NYSEArca: OUNZ), which debuted in mid-May, entered a crowded arena of established gold-backed exchange traded funds.
However, OUNZ stands out from its older rivals in one noticeable way: When investors sell shares of the ETF, they have the option to take delivery of physical gold for their shares. An early OUNZ investor has done just that.
California-based Merck Funds confirmed Wednesday an “individual investor submitted 5,406 shares of OUNZ and requested the delivery of 54 American Buffalo 24-carat gold coins last week. The gold coins was delivered on Tuesday,” Reuters reported.
By giving investors the option to take physical delivery of gold, OUNZ provides tax advantages not available with old physically-backed precious metals ETFs.
“Taking delivery of gold is not a taxable event and investors merely take possession of what they already own: the gold,” according to Merk.
The IRS treats sales of other gold-backed ETFs as collectibles, meaning investors are subject to tax rate that is even more punitive than traditional capital gains.
According to Merk, investors file for a delivery application, instruct their broker to submit their OUNZ shares to take delivery of gold and the physical gold would be shipped to the investor.
However, traders do incur a processing and delivery fee, including 2.5% on 10 ounce bars or London bars, 3.5% on one ounce bars, 6% on once ounce coins and 7% on one ounce American gold eagles, with a minimum charge of $7,000, depending on the type of gold. For example, an investor would be charged $7,000 to exchange $100,000 in American eagles, and fees would be higher if the investor is exchanging ETF shares for a smaller amount of gold. [New Merk Gold ETF Debuts]
OUNZ is up 1% since coming to market and has attracted $50.6 million in assets.
ETF Trends editorial team contributed to this post.