(IAU) iShares Gold Trust - Ratings and Ratios

The iShares Gold Trust (IAU) is designed to track the price of gold, minus its operational fees. It’s a straightforward, passive investment vehicle that doesn’t aim to profit from gold price fluctuations or hedge against losses. Instead, it provides a cost-efficient way to gain exposure to gold without the complexities of directly owning and managing physical gold.

IAU is structured as a grantor trust, domiciled in the United States. It holds physical gold bars in vaults, with JPMorgan Chase Bank, N.A. serving as the custodian. The trust issues shares that represent a fraction of an ounce of gold. Each share corresponds to about 1/100th of an ounce of gold, making it more accessible than larger gold instruments like the SPDR Gold Shares (GLD), which represents 1/10th of an ounce.

Investors should note that IAU is not actively managed. Its sole purpose is to mirror the performance of gold, less expenses. This makes it a low-cost option for those seeking gold exposure. The trust’s expenses are covered by its assets, and there’s no attempt to time the gold market or use derivatives to amplify returns. This simplicity can appeal to long-term investors seeking a stable, non-correlated asset in their portfolios.

Physical gold ownership often comes with logistical challenges—assaying, transporting, storing, and insuring the metal. IAU eliminates these hassles by offering a tradable security that reflects gold’s value. It’s listed on the NYSE Arca, providing liquidity and ease of access. However, it’s important to recognize that IAU shares are not the same as owning gold outright. They represent a claim on the trust’s gold holdings, and like any security, they carry risks such as market volatility and potential tracking error.

For fund managers and institutional investors, IAU can serve as a tactical tool for hedging against inflation, currency depreciation, or market downturns. Its low expense ratio and tight bid-ask spreads make it a practical choice for implementing gold exposure in a portfolio. Additionally, its transparency and simplicity align with the preferences of many investors who prioritize clarity and cost-efficiency in their investments.