Analyse: ZKB Gold ETF (CHF)

Dieses Produkt steht für die Schweizer Exportschlager: Goldprodukte als Sondervermögen.

Ben Johnson 10.01.2012
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Rolle im Portfolio

Gold is traditionally sought after as a store of value in times of severe economic dislocation, an insurance policy against financial Armageddon. Most notably, gold has in the past proven a useful hedge against inflation. Its value as an inflation hedge and its low- to negative- correlations with most broad asset classes can make gold a worthwhile investment for a small portion of an investor’s portfolio. While gold has exhibited a low level of volatility relative to equities over the past quarter century, the massive price swings experienced from the early 1970s through the mid-1980s serve as a worthwhile exhibit to the effects fickle investor sentiment can have on the value of the yellow metal. It also underscores why an allocation to gold should probably only occupy a small portion of a well-diversified portfolio. As for an investment in physical gold through an exchange traded product (ETP), we think that gold ETPs are easily some of the least costly and most liquid vehicles for one’s gilded aspirations.

Fundamentale Analyse

Gold has no intrinsic value. The yellow metal does not produce earnings or cash flows which it can share with investors, like equities. Nor does it throw off fixed or floating coupon payments, as a bond does. Financial theory tells us that a security’s intrinsic worth is equivalent to the present value of the future cash flows it will generate. With no cash flows to project and discount back to today, gold is a purely speculative instrument: it is only worth what someone else is willing to pay for it.

The speculative nature of an investment in gold doesn’t differentiate it from other commodities like oil or wheat, which like gold, have no clear future cash flows. What makes gold different from most commodities is that it has little practical use. Gold cannot fuel an automobile or provide nourishment. According to the World Gold Council, only about 12% of current gold demand comes in the form of practical uses--such as in dentistry and electronics. The majority of gold demand (about 57%) comes from the jewelry industry, with India and China being the most notable drivers of incremental consumption in recent years. Meanwhile, the remainder (about 32%) of the global appetite for the yellow metal comes from investors. Investment demand for gold has surged in recent years as concerns over paper currencies have flared and the world’s most precious metal has been made increasingly accessible to the masses, thanks to a handful of industrious ETP providers.

While the demand for gold for use in industrial and dental applications and for jewelry has historically exhibited normal cyclical behaviour, investment demand for gold appears to be in a secular uptrend. Gold is now more accessible than ever (when else in history has gold been sold from vending machines?) and its popularity as a safe-haven seems to grow by the day, which could signal that prices have trended too high. On the other hand, bloated sovereign balance sheets and a massive bout of recent monetary stimulus have many convinced that gold is in fact the world’s one true currency, and perhaps its value will only climb higher. While gold has recently notched record high price levels in nominal terms, it remains well below its inflation-adjusted record price of $2,358 per troy ounce--reached in January of 1981. Whether the price of gold will soon tumble or spiral higher is nearly impossible to tell. Though the gold price has demonstrated limited volatility in recent years, past experience has been marked by episodes of massive price declines. Nearly two years after the aforementioned all-time record real price for the yellow metal was reached, the value of bullion had fallen by two-thirds. What we can say for certain is that the ETPs backed by physical gold are an excellent way to gain exposure to the yellow metal for investors and speculators alike.


The ZKB Gold ETF invests directly in physical gold, it will track movements in the spot price of the yellow metal, less fees. The security is benchmarked to the P.M. London Gold Fixing. The London Gold Fixing takes place twice each business day at 10:30 A.M. and 3:00 P.M London time. The fixing process determines the settlement price for contracts arranged amongst the members of the London Bullion Market. This price--which is expressed in terms of U.S dollars per troy ounce--is in turn used as a benchmark for the vast majority of the gold products and gold-related derivatives around the globe.


The fund is denominated in U.S. dollars and invests directly in physical gold. The fund’s gold is held by Zurcher Kantonalbank or its representatives in Switzerland. The fund does not use commodity derivatives. The issue price of the USD, GBP and EUR versions of the fund corresponds to approximately one ounce of gold. The issue price of the CHF version of the fund corresponds to 100 grams of gold. Because gold does not generate cash income to defray any expenses or commissions incurred by the fund, these levies will gradually reduce the amount of physical gold held per unit of the fund over the long term. In kind redemption is typically limited to an amount equivalent to the “good delivery” standard gold bar of approximately 12.5 kg with a purity of 995/1000 or greater. A redemption commission of 1% and a delivery charge of 0.20% apply to the value of redeemed standard gold bars. Other commonly traded units may be available upon request, subject to availability and associated expenses. Deliveries of physical gold will only be made within Switzerland. Currency hedged versions (there are CHF-, EUR-, and GBP-hedged versions available) will incur additional costs related to maintaining currency hedges, which are executed through the use of basic swaps and forwards. These costs are not explicitly broken out, but will be reflected in the performance of these funds.


The fund levies an annual expense ratio of 0.40%. The Swiss Financial Market Supervisory Authority (FINMA) obliges the fund’s manager to maintain a reasonable spread between the fund’s net asset value and the price at which it is traded on the SIX Swiss Exchange. This commitment is in turn carried out by an agreement between the fund company and the fund’s market makers, which are obliged to maintain a market for the fund’s shares on the SIX Swiss Exchange. The applicable spread for gold is generally around 2%--or 1% on either side of the fund’s intraday net asset value.


Gold ETPs are an alternative to a direct investment in physical gold. Relative to owning bullion or coins outright, gold ETPs offer the benefits of lower carrying costs and superior liquidity.

There is a broad menu of physical gold ETPs. In our opinion, TER and custody and storage fees (in aggregate, carrying costs) are key differentiating factors for physical metals funds--with lower TERs and fees obviously being better. Given the nature of these funds, carrying costs are the chief source of tracking difference relative to the spot price movements of the metal, and thus the primary determinant of relative performance amongst competing products.

In the case of all physical gold ETPs--with the notable exception of Xetra Gold--the TER is inclusive of all custody and storage fees.

In the case of the ZKB Gold ETF, its TER of 0.40% puts it near the back of the pack from an expense ratio perspective, roughly inline with the Julius Baer’s Physical Gold ETF and ETFS Physical Gold (which have respective TERs of 0.40% and 0.39%) but behind competitive offerings from the likes of Source, RBS (whose physical gold ETCs have TERs of 0.29%), and iShares (0.25%).

There are also a variety of other either currency-denominated or currency-hedged versions of this and other physical gold ETPs available to those looking to either take on or eliminate currency risk from their gold exposure.

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Über den Autor

Ben Johnson  Ben Johnson is Morningstar’s Director of European ETF Research.