UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
☒
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended January 31, 2025
or
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File No. 001-36459
VANECK MERK GOLD ETF
(Exact name of registrant as specified in its charter)
New York | | 46-6582016 |
(State or Other Jurisdiction of
Incorporation or Organization) | | (I.R.S. Employer
Identification No.) |
c/o Merk Investments LLC
1150 Chestnut St, Menlo Park, California | | 94025 |
(Address of principal executive offices) | | (Zip Code) |
(650) 323-4341
(Registrant’s Telephone Number, Including
Area Code)
Securities registered pursuant to Section 12(b)
of the Act:
Title of each class | | Trading Symbol | | Name of each exchange on which registered |
VanEck Merk Gold Shares | | OUNZ | | NYSE Arca |
Securities registered pursuant to Section 12(g)
of the Act: None
Indicate by check mark if
the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☒ No
☐
Indicate by check mark if
the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No
☒
Indicate by checkmark whether
the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether
the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T
(§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit
such files). Yes ☒ No ☐
Indicate by check mark whether
the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or emerging growth
company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,”
and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer | ☒ | Accelerated filer | ☐ |
Non-accelerated filer | ☐ | Smaller reporting company | ☐ |
| | Emerging growth company | ☐ |
If an emerging growth company,
indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial
accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether
the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control
over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm
that prepared or issued its audit report. ☒
If securities are registered
pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing
reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether
any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the
registrant’s executive officers during the relevant recovery period pursuant to § 240.10D-1(b). ☐
Indicate by check mark whether
the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
☒
As of July 31, 2024, the aggregate
market value of the VanEck Merk Gold Shares held by non-affiliates of the registrant was approximately $1,010,877,057.00
As of March 26, 2025, there were 50,124,781 VanEck Merk Gold Shares
outstanding.
Documents incorporated by
reference: None.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K (the “Report”)
includes statements which relate to future events or future performance. In some cases, you can identify such forward-looking statements
by terminology such as “may,” “will,” “should,” “expect,” “plan,” “anticipate,”
“believe,” “estimate,” “predict,” “potential” or the negative of these terms or other
comparable terminology. All statements (other than statements of historical fact) included in this Report that address activities, events
or developments that may occur in the future, including such matters as changes in commodity prices and market conditions (for gold and
the shares), the operations of VanEck Merk Gold ETF (the “Trust”), the plans of Merk Investments LLC, the sponsor of the Trust
(the “Sponsor”), and references to the Trust’s future success and other similar matters are forward-looking statements.
These statements are only predictions. Actual events or results may differ materially. These statements are based upon certain assumptions
and analyses made by the Sponsor on the basis of its perception of historical trends, current conditions and expected future developments,
as well as other factors it believes are appropriate in the circumstances. Whether or not actual results and developments will conform
to the Sponsor’s expectations and predictions is subject to a number of risks and uncertainties, including the special considerations
referenced in this Report, general economic, market and business conditions, changes in laws or regulations, including those concerning
taxes, and other world economic and political developments. Consequently, all the forward-looking statements made in this Report are qualified
by these cautionary statements and there can be no assurance that the actual results or developments the Sponsor anticipates will be realized
or, even if substantially realized, that they will result in the expected consequences to, or have the expected effects on, the Trust’s
operations or the value of the shares issued by the Trust. Moreover, neither the Sponsor, nor any other person assumes responsibility
for the accuracy or completeness of the forward-looking statements. Neither the Trust nor the Sponsor undertakes an obligation to publicly
update or conform to actual results any forward-looking statement, whether as a result of new information, future developments or otherwise,
except as required by law.
VANECK MERK GOLD ETF
ANNUAL REPORT ON FORM 10-K
TABLE OF CONTENTS
PART I
References in this Annual Report on Form 10-K
(“Report”) to the “Trust” refer to the VanEck Merk Gold ETF, and references to the “Sponsor” refer
to Merk Investments LLC, the sponsor of the Trust. References in this Report to the “Trustee” refer to The Bank of New York
Mellon, the trustee of the Trust, and references to the “Custodian” refer to JPMorgan Chase Bank N.A., London branch, the
custodian of the Trust. As used in this Report: (i) an “Ounce” means one troy ounce, equal to 31.103 grams; (ii) a “Fine
Ounce” means an Ounce of 100% pure gold; (iii) “LBMA” means the London Bullion Markets Association; and (iv) “NYSE
Arca” means the NYSE Arca Marketplace operated by NYSE Arca Equities, Inc.
Item 1. Business
The Trust is an investment trust formed on May
6, 2014 under New York State law pursuant to the Depositary Trust Agreement (“Trust Agreement”), which was amended effective
October 26, 2015, to effectuate a name change to Van Eck Merk Gold Trust. The Trust Agreement was further amended on April 28, 2016, to
effectuate a second name change to VanEck Merk Gold Trust, and was further amended on August 20, 2024, to effectuate a third name change
to VanEck Merk Gold ETF. The purpose of the Trust is to own gold transferred to the Trust in exchange for shares issued by the Trust (the
“Shares”). Each Share represents a fractional undivided beneficial interest in and ownership of the Trust. Shares are issued
by the Trust in blocks of 50,000 called “Baskets” in exchange for gold from certain registered broker-dealers or other securities
market participants (“Authorized Participants”). Baskets may be redeemed by the Trust in exchange for the amount of gold corresponding
to their redemption value. The Trust issues and redeems Baskets on an ongoing basis at net asset value to Authorized Participants who
have entered into a contract with the Sponsor and the Trustee. The assets of the Trust are anticipated to consist solely of gold bullion.
On May 6, 2014, the date the Trust was formed, Virtu Financial (the “Initial Purchaser”) contributed 1,000 Ounces of gold
in exchange for 100,000 Shares (or two Baskets). At contribution, the value of the gold deposited with the Trust was based on the price
of an Ounce of gold of $1,306.25. The Initial Purchaser is not affiliated with the Sponsor or the Trustee.
The redeemable per share value of the Shares increased
from $19.69 at January 31, 2024 to $27.01 at January 31, 2025, the Trust’s fiscal year end. Outstanding Shares in the Trust increased
from 39,626,030 Shares at January 31, 2024 to 48,664,686 Shares outstanding at January 31, 2025.
The Trust is not managed like a corporation or
an active investment vehicle. It does not have any officers, directors or employees and is administered by the Trustee pursuant to the
Trust Agreement. The Trust is not registered as an investment company under the Investment Company Act of 1940, as amended (the “1940
Act”), and is not required to register under such act. The Trust does not and will not hold or trade in commodities futures contracts
regulated by the Commodity Exchange Act, as amended (the “CEA”), as administered by the Commodity Futures Trading Commission
(the “CFTC”). The Trust is not a commodity pool for purposes of the CEA and neither the Sponsor nor the Trustee is subject
to regulation as a commodity pool operator or a commodity trading advisor in connection with the Shares. The Trust has no fixed termination
date.
The gold held by the Trust will only be distributed
to Authorized Participants (defined below) in connection with the redemption of Baskets or sold (1) on an as-needed basis to pay Trust
expenses not assumed by the Sponsor, (2) in the event the Trust terminates and liquidates its assets, or (3) as otherwise required by
law or regulation.
The Sponsor of the registrant maintains an Internet
website at www.merkfunds.com and www.merkgold.com, through which the registrant’s Annual Reports on Form 10-K, Quarterly Reports
on Form 10-Q, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of
1934, as amended (the “Exchange Act”), are made available free of charge after they have been filed or furnished to the Securities
and Exchange Commission (the “SEC”). Additional information regarding the Trust may also be found on the SEC’s EDGAR
database at www.sec.gov.
Trust Objective
The primary objective of the Trust is to provide
investors with an opportunity to invest in gold through the Shares and be able to take delivery of physical gold in exchange for their
Shares. The Trust’s secondary objective is for the Shares to reflect the performance of the price of gold less the expenses of the
Trust’s operations. The Trust is not actively managed. It does not engage in any activities designed to obtain a profit from, or
to compensate investors for losses caused by, changes in the price of gold.
Each Share represents a fractional undivided beneficial
interest in the Trust’s net assets. The Trust’s assets consist of gold held on the Trust’s behalf in financial institutions
for safekeeping. Physical gold that the Trust will hold includes “London Bars” and, for the limited purposes described herein,
other gold bars and coins, without numismatic value, having a minimum fineness (or purity) of 995 parts per 1,000 (99.5%) or, for American
Gold Eagle gold coins, with a minimum fineness of 91.67%. The Trust receives gold deposited by Authorized Participants in exchange for
the creation of Baskets and delivers gold to Authorized Participants in exchange for Baskets surrendered to it for redemption. In connection
with the delivery of Shares by a Delivery Applicant as described below, the Sponsor may engage in over-the-counter transactions with a
precious metals dealer to exchange gold for physical gold of different specifications.
Investors may contact their broker-dealer to purchase
and sell Shares. An investor who would like to take delivery of physical gold for its Shares is referred to as a Delivery Applicant:
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A Delivery Applicant wishing to deliver Shares in exchange for physical gold must submit to the Sponsor a delivery application (“Delivery Application”) and payment for (1) the applicable processing fees, and (2) the applicable delivery fees to cover the cost of preparing and transporting physical gold from the Custodian or the precious metals dealer from which they were obtained to the location specified by the Delivery Applicant in the Delivery Application. The number of Shares to be delivered must (i) correspond to at least one Fine Ounce of gold and (ii) have a minimum dollar value in an amount that is specified by the Sponsor from time to time on the Trust’s website. Taking delivery of physical gold is subject to guidelines intended to minimize the amount of cash that will be distributed with physical gold. The Delivery Application is not binding until the Shares are delivered to the Trust. |
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Upon pre-approval of the Delivery Application by the Sponsor, a Delivery Applicant shall instruct its broker dealer to submit the Delivery Application and transfer the Shares to the Trustee; the submission and transfer by the broker-dealer will be a binding and irrevocable request to take delivery of physical gold in exchange for Shares based on instructions in the Delivery Application (a “Share Submission”). |
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Once the Trustee has received a Delivery Applicant’s Share Submission, a number of Fine Ounces of physical gold not exceeding the Fine Ounces represented by the Shares surrendered will be delivered to the Delivery Applicant based on instructions in the Delivery Application. To the extent a Delivery Application specifies London Bars, physical gold will be delivered by the Custodian; to the extent the Delivery Application specifies physical gold other than London Bars, if available, gold held by the Trust will be exchanged with the help of a precious metals dealer and delivered to the Delivery Applicant. The Delivery Application process is designed to keep the Fine Ounces represented by the Share Submission as close as possible to the Fine Ounces of the gold delivered. Any excess Fine Ounces included in the Share Submission will be sold by the Custodian and the Trustee will deliver proceeds to DTC with instructions to credit the Delivery Applicant’s brokerage account. |
The Shares are intended to constitute a cost-efficient
mechanism for investors to make an investment in gold. Although the Shares are not the exact equivalent of an investment in gold, they
provide investors with an alternative that allows a level of participation in the gold market through the securities market. The Shares
are:
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Listed and trade on NYSE Arca like other exchange-traded securities under the symbol “OUNZ.” |
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Easily accessible to investors through traditional brokerage accounts. |
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Backed by allocated gold held by the Custodian and no more than 430 Fine Ounces of unallocated gold held with the Custodian. |
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Different from other financial products that gain exposure to gold in that other financial products may use derivatives to gain exposure to the price of gold. |
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Cost efficient because the expenses involved in an investment in physical gold are dispersed among all investors in the Shares. |
Overview of the Gold Industry (unaudited)
Gold demand
Today, gold is used as both a commodity and a
store of value. The first category includes gold jewelry and the gold that has been manufactured into industrial products. The second
category includes gold reserves held by the official sector and private investors.
Jewelry demand
Jewelry demand has historically accounted for
the largest component of total gold demand. At the end of 2017, the estimated total existing above-ground stock of gold amounted to 6.1
billion Ounces1, and about half of the estimated total has been used in jewelry.
The motivation behind gold jewelry demand differs
in various regions of the world. In the developed countries, gold jewelry is primarily bought for adornment purposes, while in the developing
world, gold jewelry has also been used as a store of value. India, East Asia (excluding Japan) and the Middle East are the major gold
jewelry markets by volume in the developing world; gold jewelry is generally of higher cartage and the price more closely reflects the
value of gold in these regions compared to developed countries.
Gold jewelry demand on average has been around
70.1 million Ounces per year from the period of 2010 to 2024. Total annual jewelry demand amounted to 64.4 million Ounces in 2024. The
largest decline was in 2020, down 38.5% or 21.9 million Ounces. Gold jewelry demand, as a proportion of total gold demand was 60.4% in
2013 before falling to 44% in 2024. In 2024, gold jewelry demand, as a proportion of total demand, decreased by 4.8% from 2023.
Industrial and medical demand
In addition to its application in jewelry, gold
has been widely used in manufacturing and medical treatment. In 2024, 7.2% of gold demand came from industrial fabrication. From the period
of 2010 to 2024, over 70% of industrial demand has been derived from electronic component manufacturing, in large part due to gold’s
high electronic conductivity and natural resistance to corrosion. Gold is also used for industrial decoration, such as gold plating and
coating.
Gold is primarily used for industrial purposes
in developed countries, while in developing nations, it is mainly used for jewelry. Demand for gold in electronics manufacturing fell
sharply in 2009, dropping 11.7% from 2008 due to weak economic conditions, but rebounded by 17.3% in 2010. From 2010 to 2016, electronics-related
gold demand declined annually before fluctuating in the following years: 8.7 million Ounces in 2017, 8.8 million in 2018, 8.6 million
in 2019, 8.2 million in 2020, 9.0 million in 2021, 8.3 million in 2022, 8.0 million in 2023, and rising again to 8.7 million Ounces in
2024.
Additionally, gold has long been used for medical
and dental purposes. Its outstanding bio-compatibility, malleability and resistance to bacterial colonization make it a well-suited material
for various biomedical applications in the human body. Dental use is the primary medical application. Other medical uses include gold
wires used in heart transplants and gold-plated stents to support blood vessels. Demand for gold from this sector was down slightly in
recent years.
Investment demand
As of 2024, around 2.8 billion Ounces of above-ground
gold was held as an investment or store of value, accounting for 40.0% of the estimated total, under half of which was held by the official
sector. In 2024, the official stock purchased by the official sector was 33.9 million Ounces.
Central banks and supranational organizations
(e.g., the International Monetary Fund (the “IMF”) and Bank of International Settlements (the “BIS”) hold
gold as part of their reserve assets. Central banks affect the gold market through buying, selling and lending, as well as swaps and other
derivative activities.
1 |
Source: World Gold Council (also for subsequent industry data, unless otherwise annotated) |
Gold is a preferred store of value and investment in the private sector.
Unlike equities, bonds, and currencies, it carries no risk of issuer default or mismanagement and is independent of government or corporate
liabilities. Many investors view gold as a safe-haven asset, a portfolio diversifier, and a hedge against inflation.
Over the past decade, there has been a steady
rise in the number of investors worldwide holding gold. A large part of this trend has been the advent and proliferation of gold-tracking
exchange-traded funds, which allow investors greater access to investments in gold. In 2024, ETF investment demand was -0.2% of the total
annual gold demand, as compared to -5.4% in 2023.
Sources of gold supply
Sources of gold supply include mine production,
secondary supply from recycled gold and official sector sales.
Mine production
The largest portion of gold supply comes from
mine production, including gold produced both from primary deposits and from secondary deposits where the gold is mined as a by-product.
All the recorded gold ever mined in human history amounts to approximately 6.9 billion Ounces, or 216,265 metric tons. To put this in
perspective, if every single ounce of this gold were placed next to each other, the resulting cube of pure gold would only measure around
22 meters on each side, says World Gold Council.
Gold is produced from mines on every continent
except Antarctica (where mining is forbidden by the Antarctica Treaty). South Africa used to be the world’s largest gold producing
country. At its peak in the early 1970s, South Africa contributed over 70% of world production. However, over the past four decades, South
African output has been declining while other countries have expanded gold mining considerably.
Over recent years, gold has been increasingly
mined in developing countries; China is currently the world’s largest gold producing country. Other notable gold producing countries
include Australia, Russia and South Africa. In 2024, global mine production amounted to 117.7 million Ounces, which was 0.6 million Ounces
more than the year prior.
Recycled gold
Recycled gold, or scrap gold, is the second largest
source of gold supply. Gold’s indestructibility means it can be recovered from recycled jewelry and industrial products. This gold
can then be melted, refined and cast into bullion bars for resale in the gold market. Supplies emanating from recycled gold have risen
steadily in the past two decades and are predominantly sourced from recycled gold jewelry.
Recycled gold supply is highly affected by gold
prices and economic conditions. Supplies reached elevated levels during the 1997–1998 Asian financial crisis and hit a record of
53.7 million Ounces in 2010, spurred by the global financial crisis and rising gold prices. Since then, the total amount of scrap gold
has decreased to 44.0 million Ounces in 2024.
In 2016, the most recent year for which comprehensive
data is available, China, India, and Turkey are the three largest countries supplying recycled gold, accounting for 34.8% of total recycled
gold recovered. China is now the largest scrap-supplying nation, supplying 7.5 million Ounces, or 18.3% of total secondary supply, in
2016. India and Turkey contributed 10.4% and 6.1% to the total secondary gold supply, respectively, in 2016.
Official sector sales
Approximately 17.5%2 of total above-ground
gold stock is held by the official sector, a proportion that had declined over recent years before the global financial crisis. During
1989–2007, official sector sales outstripped annual purchases, meaning the official sector became a net seller of gold to the private
sector.
2 |
Source: World Gold Council |
From 1989 to 2007, the official sector supplied
an approximate total of 238.8 million Ounces in gold to the private sector. In 1999, the European Central Bank and 14 other central banks
signed the first Central Bank Gold Agreement (a “CBGA”). The signatory institutions agreed not to enter the gold market as
sellers except for already decided sales. In the second CBGA, Bank of Greece replaced the Bank of England. In August 2009, 19 central
banks announced the third CBGA. Under this agreement, the annual ceiling for gold sales was reduced to 12.9 million Ounces.
Since the onset of the financial crisis, the official
sector reversed its role as a net seller over the previous nineteen years. From 2008 to 2013, the official sector was a net purchaser
of 60.0 million Ounces of gold. Central banks of major developing economies, including the People’s Bank of China, the Reserve Bank
of India and the Russian central bank, have substantially increased gold reserves. In September 2009, the IMF Executive Board approved
the sale of 13.0 million Ounces, approximately one-eighth of the Fund’s total holdings of gold, to help boost its lending resources.
The IMF completed the gold sales program in December 2010. In 2024, Kazakhstan decreased their gold reserves by 10.2 million Ounces and
Turkey increased their gold reserves by 79.7 million Ounces, in 2024.
The gold market and price movement
Global gold trade consists of the over-the-counter
(“OTC”) market, the futures and options markets and the London interbank market.
OTC market
The OTC market accounts for the largest percentage
of global gold trading volume. It trades on a 24-hour per business day continuous basis and provides a relatively flexible market in terms
of quotes, size, price, destinations for delivery and other factors. The standard trade size ranges between 5,000 and 10,000 Ounces.
OTC market makers include the nine market-making
members of the LBMA, and the main centers are London, New York and Zurich. Market participants include jewelry manufacturers, mining companies,
central banks, investors and speculators. Liquidity in the OTC market varies during the day, with the most liquid time periods generally
occurring in New York business day mornings, when trading hours in European time zones overlap with trading hours in the United States.
The London Bullion Market is the largest wholesale
OTC market for gold and is operated by the LBMA, which acts as the principal point of contact between the market and its regulators. Gold
bars must meet the requirements defined by the LBMA.
Futures and options exchanges
Major gold futures and options exchanges include
the New York Commodities Exchange (“COMEX”), an affiliate of the Chicago Mercantile Exchange, Inc., as well as the Multi Commodity
Exchange of India (“MCX”), the Tokyo Commodities Exchange (“Tocom”), and the Shanghai Futures Exchange (“SHFE”).
Other key exchanges for gold derivatives include NYSE Liffe and the Dubai Gold & Commodities Exchange. Gold futures and options on
these platforms are traded in standardized sizes and delivery dates, with only a small fraction resulting in physical delivery.
The COMEX is the largest gold futures and options
exchange. In 2024, total gold futures and options contract volume amounted to 60.2 million and 12.2 million contracts, respectively3.
In 2007, the Chicago Mercantile Exchange merged with the CBOT to form the Chicago Mercantile Exchange Group (the “CME Group”),
and in 2008 the CME Group acquired the COMEX.
In November 2013, the Intercontinental Exchange
acquired NYSE Liffe, the sixth largest exchange for gold futures trading, as part of the acquisition of NYSE Euronext.
3 |
Source: CME Group (Dec. 2024) |
Allocated and Unallocated Gold
Allocated gold is stored in a vault under a custody
arrangement, and the individual bars are the property of the owner. When held in this fashion, allocated gold is neither an asset, nor
a liability, of a financial institution. As it is typically held under a custody relationship, storage fees and insurance premiums are
common when holding gold in allocated form.
From an investor’s standpoint, unallocated
gold (sometimes referred to as “paper gold”) is a claim on a non-specific pool of gold held by a financial institution. It
is typically held in a gold account at the financial institution. There are no tangible gold bars stored in the investor’s name;
rather, the investor has a claim on the financial institution’s assets (the underlying gold).
Both methods of investing give investors exposure
to gold. However, some have been cautious of utilizing unallocated gold, as it represents a liability from a financial institution’s
standpoint and such a financial institution may lend out the underlying gold an investor has a claim on.
Historical movements in the gold price
The following chart illustrates the historical
movements in the price of gold for the period January 1970 to January 2025, measured in U.S. dollar per Ounce.

Gold hit a 20-year low of just over $250 per Ounce
in mid-1999 before gradually rising due to increasing physical demand, particularly in major markets like China, Egypt, India, and Japan.
This upward trend continued from 2001 until May 2006.
Following a peak around $725 per Ounce in May
2006, the gold price fell to just over $560 in October 2006. Investors’ concerns that monetary authorities would move to counter
the threat of rising inflation by aggressively raising interest rates is frequently cited as the reason for this price correction.
However, as the Federal Reserve Bank began to reduce interest rates in response to the subprime mortgage crisis in August 2007, the gold price rallied again. The continued reduction in the Federal Funds rate may have helped drive the price of gold to a fresh high above $1,010 in March 2008.
As the subprime mortgage problems escalated into a global financial crisis in late 2008 and the Eurozone debt crisis deepened in 2011, the gold price successively reached new record highs. The gold price reached a historically high level of $1,900.20 on September 5, 2011. Market concerns surrounding the implications of monetary policies, political uncertainty, sovereign credit risks and U.S. dollar weakness may have underpinned gold demand as a store of value through this period.
Following its peak in September 2011, the gold price entered a period of decline, influenced by changing investor sentiment. The Federal Reserve’s indications of monetary policy normalization, including potential reductions in asset purchases, contributed to the price softening. By mid-2013, gold had fallen to $1,200 per Ounce, reflecting reduced demand for safe-haven assets amid a stronger economic outlook.
Between 2014 and 2018, gold prices fluctuated within a broad range, shaped by global economic conditions, central bank policies, and geopolitical events. A strengthening U.S. dollar and rising interest rates, particularly as the Federal Reserve increased benchmark rates between 2015 and 2018, placed some downward pressure on gold. However, continued central bank purchases and periodic geopolitical uncertainties provided support.
In 2019, gold prices began trending upward, influenced by concerns over slowing global economic growth, ongoing trade tensions between the U.S. and China, and central banks shifting toward more accommodative policies. This trend continued into 2020 as the COVID-19 pandemic led to economic disruptions and increased stimulus measures, bringing gold above $2,000 per Ounce for the first time in August 2020.
After reaching its 2020 peak, gold prices saw periods of volatility between 2021 and 2023, reflecting inflationary pressures, changing interest rate expectations, and geopolitical developments. While a stronger dollar and rising interest rates weighed on gold at times, economic uncertainty and renewed demand for safe-haven assets helped support prices leading into 2024.
In 2024, Gold started off at the year at $2,062.98 per Ounce. The metal reached a high of $2,787.61 per Ounce on October 30, 2024. The low for 2024 was $1,992.33 on February 14, 2024 and ended the year at $2,624.50 per Ounce.
Volatility
Annualized Standard Deviation
| |
S&P 500 | | |
Spot Gold | | |
Spot Silver | |
1991–1995 | |
| 10.1 | % | |
| 9.8 | % | |
| 23.2 | % |
1996–2000 | |
| 16.0 | % | |
| 13.0 | % | |
| 22.4 | % |
2001–2005 | |
| 14.9 | % | |
| 13.5 | % | |
| 24.1 | % |
2006–2010 | |
| 17.8 | % | |
| 19.5 | % | |
| 34.5 | % |
2011–2015 | |
| 11.7 | % | |
| 18.4 | % | |
| 35.5 | % |
2016–2024 | |
| 15.5 | % | |
| 13.8 | % | |
| 27.7 | % |
Source: Bloomberg, Merk Investments LLC
Gold price volatility was 9.8% during 1991–1995
and rose to 13.0% for the period of 1996–2000, 13.5% for 2001–2005 and 19.5% for 2006–2010. Gold price volatility declined
to 18.4% during the 2011–2015 period. In 2016-2024, gold price volatility came down further to 13.8%. The price of gold has historically
been less volatile than other commodities such as silver. This lower volatility may reflect gold’s role as a financial asset and
the much broader liquid financial market that gold has compared to other commodities.
Valuation of Gold and Computation of Net Asset
Value
On each business day that the NYSE Arca is open
for regular trading, as promptly as practicable after 4:00 PM (New York time) the Trustee will value the gold held by the Trust and will
determine the net asset value (“NAV”) of the Trust, as described below.
The NAV of the Trust is the aggregate value of
gold and other assets, if any, of the Trust (other than any amounts credited to the Trust’s reserve account, if any) and cash, if
any, less liabilities of the Trust, which include estimated accrued but unpaid fees, expenses and other liabilities.
All gold is valued based on its Fine Ounce content,
calculated by multiplying the weight of gold by its purity; the same methodology is applied independent of the type of gold held by the
Trust; similarly, the value of up to 430 Fine Ounces of unallocated gold the Trust may hold is calculated by multiplying the number of
Fine Ounces with the price of gold determined by the Trustee as follows. Prior to August 7, 2023 (the “Index Change Date”),
the Trustee valued the gold held by the Trust based on the afternoon session of the twice daily fix of the price of a Fine Ounce of gold
which starts at 3:00 PM London, England time and is performed in London by the ICE Benchmark Administration as an independent third-party
administrator (the “LBMA PM Gold Price”).
On the Index Change Date, the pricing index the
Sponsor uses in relation to the Shares issued by the Trust changed to reference the Solactive Gold Spot Index (the “Solactive Index”)
in lieu of the LBMA PM Gold Price.
Following the Index Change Date, the Trustee values
the gold held by the trust based on the Solactive Index. Solactive AG (“Solactive”) owns, calculates, and disseminates the
Solactive Index. The Solactive Index is a U.S. Dollar denominated index that aims to provide a price fixing for the gold spot price quoted
as U.S. Dollars per Troy Ounce (“XAU”) and determined for the close of trading on the New York Stock Exchange (“NYSE”).
The Solactive Index calculates gold bullion fixing prices by taking Time Weighted Average Prices (“TWAP”) of XAU trading prices
provided via ICE Data Services (“IDS”) data feed.
Specifically, the Solactive Index uses a TWAP
calculation to determine an average price that is time-weighted, using price values of actual transactions (“Trade Ticks”)
for two specified time periods around the scheduled close of trading on the NYSE (generally, 4:00 PM Eastern Time). The TWAP is derived
for (1) the period ahead of the fixing (“Time Period 1”), which consists of the five minutes before the close of trading,
and (2) the period directly after the fixing (“Time Period 2”), which consists of the six seconds after the close of trading.
The TWAPs for Time Period 1 and Time Period 2 are then aggregated, with 90% weighting given to Time Period 1 and 10% weighting given to
Time Period 2, to calculate the Solactive Index. The TWAPs for Time Period 1 and Time Period 2 are then added together to establish the
Solactive Index price.
For any calculation day t, the Solactive
Index (Indext), is determined in accordance with the following formula:

The Solactive Index is calculated and published
by Solactive no later than 30 minutes following the close of trading on the NYSE, disseminated to major financial data providers, and
made publicly available via the Trust’s website.
The Solactive Index calculation is based on XAU
market data from IDS, which is a major provider of financial market data. The data is available through IDS’s data streaming service,
which covers 2,700 spot rates and over 7,500 forwards and non-deliverable forwards, with an average of over 130 million updates per day
for spot. IDS compiles data from over 100 sources, including market makers, execution venues, banks and brokers from across the globe,
and every updating Trade Tick of spot streaming data is available via IDS’s Integrated Data Viewer service in a file-based format.
It is unlikely that, on any given trading day
for the Shares, there would be no Trade Ticks recorded for XAU in either Time Period 1 or Time Period 2, such that the Solactive Index
calculation could not be performed on such day. Trade Ticks representing XAU are the closing prices for specific gold bullion transactions
posted in a 24-hour, global, over-the-counter gold bullion market, which is not subject to trading suspensions, trading halts, or market
closures. However, in the unlikely event that IDS is unable to publish pricing information for XAU, for whatever reason, during either
Time Period 1 or Time Period 2 on a given trading day, the last available Solactive Index calculation will be used in accordance with
Solactive’s published and publicly available disruption policy.
If the Sponsor determines that such price is inappropriate
to use, it shall identify an alternate basis for evaluation to be employed by the Trustee. The Sponsor may instruct the Trustee to use
a different publicly available price which the Sponsor determines to fairly represent the commercial value of the Trust’s gold.
The Trustee’s estimation of accrued but
unpaid fees, expenses and liabilities will be conclusive upon all persons interested in the Trust, and no revision or correction in any
computation made under the Trust Agreement will be required by reason of any difference in amounts estimated from those actually paid.
The Sponsor and the investors may rely on any
evaluation or determination of any amount made by the Trustee, and except for any determination by the Sponsor as to the price to be used
to evaluate gold, the Sponsor will have no responsibility for the evaluation’s accuracy. The determinations the Trustee makes will
be made in good faith upon the basis of, and the Trustee will not be liable for any errors contained in, information reasonably available
to it. The Trustee will not be liable to the Sponsor, Authorized Participants, the investors or any other person for errors in judgment.
However, the preceding liability exclusion will not protect the Trustee against any liability resulting from bad faith or gross negligence
in the performance of its duties.
Trust Expenses
The Trust’s only ordinary recurring expense
is the remuneration due to the Sponsor of 0.25% of the NAV of the Trust (the “Sponsor’s Fee”). In exchange for the Sponsor’s
Fee, the Sponsor has agreed to assume the following administrative and marketing expenses incurred by the Trust: the Trustee’s monthly
fee and out-of-pocket expenses; the Custodian’s fee; the fees and expenses of Foreside Fund Services, LLC; expenses reimbursable
under the Trust’s Custody Agreement with the Custodian (the “Custody Agreement”); the precious metals dealer’s
fees and expenses reimbursable under its agreement with the Sponsor; exchange listing fees; SEC registration fees; printing and mailing
costs; maintenance expenses for the Trust’s website; audit fees and up to $100,000 per annum in legal expenses. The Sponsor also
paid the costs of the Trust’s organization and the initial sale of the Shares, including applicable SEC registration fees.
The Sponsor’s Fee will accrue daily based
on the prior business day’s NAV and will be payable in Shares corresponding to the NAV of the Shares at the time of payment on a
monthly basis in arrears. The fee will be paid by delivering that number of Shares which equals the daily accrual of the Sponsor’s
Fee for such prior month based on the NAV of the Shares on the first business day of the following month.
In addition to the Sponsor’s Fee, the Sponsor
receives the exchange fee paid by Delivery Applicants in the exchange process. Such fees are used to recoup the expenses the Sponsor bears
for over-the-counter transactions. The Sponsor may earn a profit on its fees.
From time to time, the Sponsor may waive all or
a portion of the Sponsor’s Fee at its discretion. The Sponsor is under no obligation to continue a waiver after the end of a stated
period, and if such waiver is not continued, the Sponsor’s Fee will thereafter be paid in full. Presently, the Sponsor does not
intend to waive any of its fees.
Furthermore, the Sponsor may, in its sole discretion,
agree to rebate all or a portion of the Sponsor’s Fee attributable to Shares held by certain institutional investors subject to
minimum share holding and lock up requirements as determined by the Sponsor to foster stability in the Trust’s asset levels. Any
such rebate will be subject to negotiation and written agreement between the Sponsor and the investor on a case by case basis. The Sponsor
is under no obligation to provide any rebates of the Sponsor’s Fee. Neither the Trust nor the Trustee will be a party to any Sponsor’s
Fee rebate arrangements negotiated by the Sponsor.
The Sponsor will assume certain extraordinary
expenses which are not usually incurred during the normal course of business, such as litigation expenses, subject to a total of $100,000
per annum. Extraordinary expenses of the Trust that are not assumed by the Sponsor may be paid by the Sponsor at its sole discretion and
reimbursed by the Trust in Shares corresponding to the value of gold at the time of reimbursement.
Otherwise, the Trustee will, when directed by
the Sponsor, and, in the absence of such direction, in its discretion, sell gold in such quantity and at such times as may be necessary
to permit payment in cash of the Trust’s extraordinary expenses not assumed by the Sponsor. The Trustee is authorized to sell gold
as directed by the Sponsor or otherwise at such times and in the smallest amounts required to permit such payments as they become due,
it being the intention to avoid or minimize the Trust’s holdings of assets other than gold. Accordingly, the amount of gold to be
sold will vary from time to time depending on the level of the Trust’s expenses and the market price of gold. The Custodian may
purchase from the Trust, at the request of the Trustee, gold needed to cover Trust expenses not assumed by the Sponsor at the price used
by the Trustee to determine the value of gold held by the Trust on the date of the sale.
Cash held by the Trustee pending payment of the
Trust’s expenses will not bear any interest.
The Sponsor’s Fee for the year ended January
31, 2025 was $2,578,699.
Creations and Redemption of Shares
Authorized Participants
The Trust issues and redeems Baskets only to Authorized
Participants. The creation and redemption of Baskets will only be made in exchange for the delivery to the Trust or the distribution by
the Trust of the amount of gold represented by the Baskets being created or redeemed, the amount of which will be based on the combined
Fine Ounces represented by the number of Shares included in the Baskets being created or redeemed determined on the day the order to create
or redeem Baskets is properly received.
Orders to create and redeem Baskets may be placed
only by Authorized Participants. An Authorized Participant must: (1) be a registered broker-dealer or other securities market participant,
such as a bank or other financial institution, which, but for an exclusion from registration, would be required to register as a broker-dealer
to engage in securities transactions; (2) be a participant in the Depository Trust Company (“DTC”); and (3) must have an agreement
with the Custodian establishing an unallocated account in London or have an existing unallocated account meeting the standards described
in the Trust Agreement. To become an Authorized Participant, a person must enter into an Authorized Participant Agreement with the Sponsor
and the Trustee (“Authorized Participant Agreement”). The Authorized Participant Agreement provides the procedures for the
creation and redemption of Baskets and for the delivery of the gold required for such creations and redemptions. The Authorized Participant
Agreement and the related procedures attached thereto may be amended by the Trustee and the Sponsor, without the consent of any investor
or Authorized Participant. A transaction fee of $500 will be assessed on all creation and redemption transactions. Multiple Baskets may
be created on the same day, provided each Basket meets the requirements described below and that the Custodian is able to allocate gold
to the Trust allocated account (the “Trust Allocated Account”) such that the Trust’s unallocated account (the “Trust
Unallocated Account”) holds no more than 430 Fine Ounces of gold at the close of a business day.
Authorized Participants who make deposits with
the Trust in exchange for Baskets will receive no fees, commissions or other form of compensation or inducement of any kind from either
the Sponsor or the Trust, and no such person has any obligation or responsibility to the Sponsor or the Trust to effect any sale or resale
of Shares.
Delivery Applicants
In exchange for its Shares and payment of a processing
fee, a Delivery Applicant will be entitled to one or more bars or coins of physical gold having approximately the total Fine Ounces represented
by the Shares on the day on which the Delivery Applicant’s broker-dealer submits his or her Shares to the Trust in exchange for
physical gold (a “Share Submission Day”). As it is unlikely that the total Fine Ounces of physical gold will exactly correspond
to the Fine Ounces represented by a specific number of Shares, a Delivery Applicant will likely receive some cash representing the net
sale proceeds of any excess Fine Ounces (i.e., the cash proceeds). To minimize the cash proceeds of any exchange, the Delivery Application
requires that the number of Shares submitted closely correspond in Fine Ounces to the Fine Ounces of physical gold that is held or that
is to be acquired by the Trust for which the delivery is sought. Share submissions are processed in the order approved.
Creation Procedures—Authorized Participants
On any business day, an Authorized Participant
may place an order with the Trustee to create one or more Baskets. For purposes of processing both purchase and redemption orders, a “business
day” means any day other than a day: (1) when the NYSE Arca is closed for regular trading; or (2) if the order or other transaction
requires the receipt or delivery, or the confirmation of receipt or delivery, of gold in the United Kingdom or in some other jurisdiction
on a particular day, (A) when banks are authorized to close in the United Kingdom or in such other jurisdiction or when the London gold
market is closed or (B) when banks in the United Kingdom or in such other jurisdiction are, or the London gold market is, not open for
a full business day and the order or other transaction requires the execution or completion of procedures which cannot be executed or
completed by the close of the business day. Purchase orders must be placed by 3:59:59 PM (New York time). The day on which the Trustee
receives a valid purchase order is the purchase order date.
By placing a purchase order, an Authorized Participant
agrees to deposit gold with the Trust, as described below. Prior to the delivery of Baskets for a purchase order, the Authorized Participant
also must have wired to the Trustee the amount of the non-refundable transaction fee due for the purchase order and an amount equal to
all taxes, governmental charges and fees payable in connection with such deposit, the transfer of gold and the issuance and delivery of
Shares.
Determination of Required Deposits
The amount of the required gold deposit for a
Basket is determined by dividing the number of Fine Ounces of gold held by the Trust by the number of Baskets outstanding, as adjusted
for the amount of gold constituting estimated accrued but unpaid fees and expenses of the Trust. The number of Baskets outstanding is
determined by dividing the number of Shares outstanding by 50,000 (or other number of Shares in a Basket for such business day).
Fractions of a Fine Ounce of gold smaller than
0.001 of a Fine Ounce included in the gold deposit amount are disregarded in the foregoing calculation. All questions as to the composition
of a gold deposit for a Basket will be finally determined by the Trustee. The Trustee’s determination of the required gold deposit
for a Basket shall be final and binding on all persons interested in the Trust.
Delivery of Required Deposits
An Authorized Participant who places a purchase
order is responsible for crediting its unallocated account, if held at the Custodian, with the required gold deposit amount in gold and,
if the Authorized Participant does not maintain its unallocated account with the Custodian, causing the required gold deposit to be transferred
to the Custodian, by 11:00 AM, London, England time, on the third business day following the purchase order date. No Shares are issued
unless and until the Custodian has informed the Trustee that it has credited to the Trust Allocated Account at the Custodian the corresponding
amount of gold. If the Custodian has notified the Trustee and the Sponsor that it is unable to move the gold from the Trust Unallocated
Account to the Trust Allocated Account in connection with a particular purchase order or generally, the Trustee will, unless otherwise
instructed by the Sponsor, reject the particular purchase order as well as any other subsequent purchase orders on the same business day.
Upon receipt of the gold deposit amount, the Custodian, after receiving appropriate instructions from the Authorized Participant and the
Trustee, will use commercially reasonable endeavors to transfer by 2:00 PM (London, England time) on the third business day following
the purchase order date the gold deposit amount in gold to the Trust Unallocated Account, and on the same business day, acting on standing
instructions given by the Trustee, the gold deposit amount from Trust Unallocated Account to the Trust Allocated Account by allocating
specific bars of gold such that no more than 430 Fine Ounces remain in the Trust Unallocated Account. Upon transfer of the gold deposit
amount to the Trust Allocated Account, the Trustee will direct DTC to credit the number of Baskets ordered to the Authorized Participant’s
DTC account. The expense and risk of delivery, ownership and safekeeping of gold until such gold has been received by the Trust shall
be borne solely by the Authorized Participant.
Because gold is allocated only in multiples of
whole bars, the amount of gold allocated from the Trust Unallocated Account to the Trust Allocated Account may be less than the total
Fine Ounces credited to the Trust Unallocated Account. Any balance will be held in the Trust Unallocated Account. The Custodian may hold
no more than 430 Fine Ounces of gold (maximum weight corresponding to one London Bar) in the Trust Unallocated Account at the close of
a business day.
Rejection of purchase orders
The Trustee may reject a gold deposit at any time
when the Trustee’s transfer books are closed or if the Sponsor thinks it necessary or advisable for any reason. None of the Trustee,
the Sponsor or the Custodian will be liable for the rejection of any purchase order or gold deposit.
Redemption Procedures—Authorized Participants
The procedures by which an Authorized Participant
can redeem one or more Baskets mirror the procedures for the creation of Baskets. On any business day, an Authorized Participant may place
an order with the Trustee to redeem one or more Baskets. Redemption orders must be placed no later than 3:59:59 PM (New York time) on
each business day the NYSE Arca is open for regular trading. A redemption order so received is effective on the date it is received in
satisfactory form by the Trustee. The redemption procedures allow only Authorized Participants to redeem Baskets. An investor may not
redeem Baskets other than through an Authorized Participant.
By placing a redemption order, an Authorized Participant
agrees to deliver the Baskets to be redeemed through DTC’s book-entry system to the Trust no later than the third business day following
the effective date of the redemption order. Prior to the delivery of the redemption distribution for a redemption order, the Authorized
Participant must also have wired to the Trustee the non-refundable transaction fee due for the redemption order.
The redemption distribution from the Trust will
consist of a credit to the redeeming Authorized Participant’s unallocated account representing the amount of the gold held by the
Trust evidenced by the Shares being redeemed as of the date of the redemption order. Fractions of a Fine Ounce included in the redemption
distribution smaller than 0.001 of a Fine Ounce are disregarded. Redemption distributions will be subject to the deduction of any applicable
tax, fees or other governmental charge that may be due, as well as any charges or fees in connection with the transfer of gold and the
issuance and delivery of Shares, and any expense associated with the delivery of gold other than by credit to an Authorized Participant’s
unallocated account with the Custodian.
Delivery of redemption distribution
The redemption distribution due from the Trust
is delivered to the Authorized Participant on the third business day following the redemption order date if, by 9:00 AM (New York time)
on such third business day, the Trustee’s DTC account has been credited with the Baskets to be redeemed.
The Custodian will arrange for the redemption
amount in gold to be transferred from the Trust Allocated Account to the Trust Unallocated Account and, thereafter, to the redeeming Authorized
Participant’s unallocated account. The Authorized Participant and the Trust each are at risk in respect of gold credited to their
respective unallocated accounts in the event of the Custodian’s insolvency. See “Risk Factors—The Trust Would Be An
Unsecured Creditor of the Custodian in the Event of Insolvency.”
As with the allocation of gold to the Trust Allocated
Account that occurs upon a purchase order, if in transferring gold from the Trust Allocated Account to the Trust Unallocated Account in
connection with a redemption order there is an excess amount of gold transferred to the Trust Unallocated Account, the excess over the
gold redemption amount will be held in the Trust Unallocated Account. The Custodian may hold no more than 430 Fine Ounces of gold (maximum
weight corresponding to one London Bar) in the Trust Unallocated Account at the close of each business day.
Suspension or rejection of redemption orders
The Trustee may, in its discretion, and will when
directed by the Sponsor, suspend the right of redemption, or postpone the redemption settlement date or reject a particular redemption
order (1) for any period during which the NYSE Arca is closed other than customary weekend or holiday closings, or trading on the NYSE
Arca is suspended or restricted or (2) for any period during which an emergency exists as a result of which delivery, disposal or evaluation
of gold is not reasonably practicable. Neither the Sponsor nor the Trustee will be liable to any person or in any way for any loss or
damages that may result from any such suspension or postponement.
The Trustee will reject a redemption order if
the order is not in proper form as described in the Authorized Participant Agreement or if the fulfillment of the order, in the opinion
of its counsel, might be unlawful.
The Sponsor
The Sponsor, Merk Investments LLC, is a Delaware
limited liability company. The Sponsor’s office is located at 1150 Chestnut St. Menlo Park, CA 94025. The Sponsor has provided investment
advisory services to mutual funds since 2005. As of December 31, 2024, the Sponsor had approximately $1,618.00 million of assets under
management. The Sponsor’s role is discussed below, and it has undertaken the responsibilities set forth below.
The Sponsor’s Role
The Sponsor arranged for the creation of the Trust,
the registration of the Shares for their public offering in the United States and the listing of the Shares on the NYSE Arca. In exchange
for the Sponsor’s Fee, the Sponsor has agreed to assume the following administrative and marketing expenses incurred by the Trust:
the Trustee’s monthly fee and out-of-pocket expenses; the Custodian’s fee; the fees and expenses of Foreside Fund Services,
LLC and other marketing expenses; expenses reimbursable under the Custody Agreement; the precious metals dealer’s fees and expenses
reimbursable under its agreement with the Sponsor; exchange listing fees; SEC registration fees; printing and mailing costs; maintenance
expenses for the Trust’s website; audit fees and up to $100,000 per annum in legal expenses. The Sponsor is paid in Shares in lieu
of cash.
The Sponsor will not exercise day-to-day oversight
over the Trustee or the other service providers to the Trust. The Sponsor may remove the Trustee and appoint a successor Trustee if: (1)
the Trustee ceases to meet certain objective requirements (including the requirement that it have capital, surplus and undivided profits
of at least $150 million); (2) having received written notice of a material breach of its obligations under the Trust Agreement, the Trustee
has not cured the breach within 30 days; or (3) the Trustee fails to consent to the implementation of an amendment to the Trust’s
initial Internal Control Over Financial Reporting deemed necessary by the Sponsor and, after consultations with the Sponsor, the Sponsor
and the Trustee fail to resolve their differences regarding the proposed amendment. The Sponsor also has the right to replace the Trustee
during the 90 days following any merger, consolidation or conversion in which the Trustee is not the surviving entity or, in its discretion,
on the fifth anniversary of the creation of the Trust or on any subsequent third anniversary thereafter. The Sponsor also has the right
to direct the Trustee to appoint any new or additional Custodians that the Sponsor selects.
The Sponsor: (1) will develop a marketing plan
for the Trust on an ongoing basis; (2) will prepare marketing materials regarding the Shares; (3) will maintain the Trust’s website;
(4) may engage in over-the-counter transactions with a precious metals dealer to exchange the Trust’s gold for gold of different
specifications as requested by a Delivery Applicant in a Delivery Application; (5) may provide instructions for assaying gold, and other
instructions relating to custody of the Trust’s gold, as necessary; (6) may request the Trustee to order Custodian audits (to the
extent permitted under the Custody Agreement); and (7) will review Delivery Applications from Delivery Applicants wishing to take delivery
of physical gold for their Shares and coordinate the delivery of physical gold to the Delivery Applicants.
The Sponsor periodically engages in over-the-counter
transactions to exchange London Bars for physical gold of other specifications. The Sponsor engages in such transactions pursuant to instructions
from a Delivery Applicant who requests 10 Ounce Bars (containing 10 Fine Ounces of gold), 1 Ounce Bars (containing 1 Fine Ounce of gold)
and gold coins in exchange for their Shares. The Sponsor pays for such conversion but seeks to recover these costs by charging an exchange
fee to Delivery Applicants exchanging Shares for physical gold. The exchange fee will not exactly reflect the actual cost of conversion
to the Sponsor and may reflect a markup to compensate the Sponsor for the risk the Sponsor is taking on by exchanging physical gold for
physical gold other than London Bars before knowing investor demand for delivery or market conditions at the time investor demand for
delivery changes. The Sponsor selects the precious metals dealers with whom it seeks to exchange the Trust’s physical gold.
The Trustee
The Bank of New York Mellon, a banking corporation
organized under New York State law with trust powers, serves as the Trustee. The Trustee has a trust office at 240 Greenwich Street, 22W,
New York, NY 10286. The Trustee is subject to supervision by the New York State Financial Services Department and the Board of Governors
of the Federal Reserve System. Information regarding creation and redemption Basket composition, NAV of the Trust, transaction fees for
the creation and redemption of Baskets and the names of the parties that have executed an Authorized Participant Agreement may be obtained
from the Trustee. A copy of the Trust Agreement is available for inspection at the Trustee’s trust office identified above. Under
the Trust Agreement, the Trustee is required to maintain capital, surplus and undivided profits of at least $150 million.
The Trustee’s Role
The Trustee is generally responsible for the day-to-day
administration of the Trust, including keeping the Trust’s operational records. The Trustee’s principal responsibilities include:
(1) valuing the Trust’s gold and calculating the NAV per share of the Trust, (2) supplying inventory information to the Sponsor
for the Trust’s website; (3) receiving and processing orders from Authorized Participants for the creation and redemption of Baskets;
(4) coordinating the processing of orders from Authorized Participants with the Custodian and DTC, including coordinating with the Custodian
the receipt of unallocated gold transferred to the Trust in connection with each issuance of Baskets; (5) cooperating with the Sponsor,
the Custodian and the precious metals dealer in connection with the delivery of physical gold to Delivery Applicants in exchange for their
Shares; (6) issuing and allocating Shares to the Sponsor in lieu of paying the Sponsor’s Fee in cash; (7) issuing and allocating
Shares to the Sponsor to reimburse cash payments owed by the Trust, but undertaken by the Sponsor; (8) selling the Trust’s gold
pursuant to the Sponsor’s direction or otherwise as needed to pay any extraordinary Trust expenses that are not assumed by the Sponsor;
(9) holding the Trust’s cash and other financial assets, if any; (10) when appropriate, making distributions of cash or other property
to investors; and (11) receiving and reviewing reports on the custody of and transactions in the Trust’s gold from the Custodian
and taking such other actions in connection with the custody of gold as the Sponsor instructs. The Trustee shall, with respect to directing
the Custodian, act in accordance with the instructions of the Sponsor. If the Custodian resigns, the Trustee shall appoint any replacement
Custodian selected by the Sponsor in accordance with the Trust Agreement. Under the agreement with the Custodian, the Trustee, the Sponsor
and the Sponsor’s auditors and inspectors may visit the premises of the Custodian for the purpose of examining the Trust’s
gold and certain related records maintained by the Custodian.
The Trustee intends to regularly communicate with
the Sponsor in connection with the administration of the Trust. The Trustee does not monitor the performance of the Custodian other than
to review the reports provided by the Custodian pursuant to the Custody Agreement. The Trustee, along with the Sponsor, will liaise with
the Trust’s legal, accounting and other professional service providers as needed. The Trustee will assist and support the Sponsor
with the preparation of all periodic reports required to be filed with the SEC on behalf of the Trust. The Trustee’s monthly fees
and out-of-pocket expenses will be paid by the Sponsor. Affiliates of the Trustee may from time to time act as Authorized Participants
or purchase or sell gold or Shares for their own account, as agent for their customers and for accounts over which they exercise investment
discretion.
The Trustee will keep proper books of registration
and transfer of Shares at its office located in New York or such office as it may subsequently designate. These books and records are
open to inspection by any person who establishes to the Trustee’s satisfaction that such person is an investor at all reasonable
times during the usual business hours of the Trustee. The Trustee will keep a copy of the Trust Agreement on file in its office which
will be available for inspection on reasonable advance notice at all reasonable times during its usual business hours by any investor.
The Custodian
JPMorgan serves as the Custodian for the Trust.
The Custodian is a national banking association organized under the laws of the United States. The Custodian is subject to supervision
by the Federal Reserve Bank of New York and the Federal Deposit Insurance Corporation. The Custodian’s office is located at 25 Bank
Street, Canary Wharf, London E14 SJP. In addition to supervision and examination by the federal banking authorities, London custodian
operations are generally subject to supervision by the Financial Services Authority.
The Custodian’s Role
The Custodian is responsible for holding the Trust’s
allocated gold as well as receiving and converting allocated and unallocated gold on behalf of the Trust. Unless otherwise agreed between
the Trustee (as instructed by the Sponsor) and the Custodian, physical gold must be held by the Custodian at its London vault premises.
At the end of each business day, the Custodian will hold no more than 430 Fine Ounces of unallocated gold for the Trust, which corresponds
to the maximum Fine Ounce weight of a London Bar. The Custodian converts the Trust’s gold between allocated and unallocated gold
when: (1) Authorized Participants engage in creation and redemption transactions with the Trust; (2) gold is sold to pay Trust expenses;
or (3) physical gold is converted into unallocated form to facilitate the exchange of Shares by a Delivery Applicant for gold. The Custodian
will facilitate the transfer of gold in and out of the Trust through the unallocated gold accounts it may maintain for each Authorized
Participant and the precious metals dealer and through the unallocated gold accounts it will maintain for the Trust. The Custodian is
responsible for allocating specific bars of gold to the Trust Allocated Account.
The Custodian will provide the Trustee with regular
reports detailing the gold transfers in and out of the Trust Unallocated Account with the Custodian and identifying the gold bars held
in the Trust Allocated Account.
The Custodian’s fees and expenses are paid
by the Sponsor. The Custodian and its affiliates may from time to time act as Authorized Participants or purchase or sell gold or Shares
for their own account, as an agent for their customers and for accounts over which they exercise investment discretion. The Trustee, on
behalf of the Trust, has entered into the Custody Agreement with the Custodian, under which the Custodian maintains the Trust Unallocated
Account and the Trust Allocated Account.
Pursuant to the Trust Agreement, if, upon the
resignation of the Custodian, there would be no custodian acting pursuant to the Custody Agreement, the Trustee shall, promptly after
receiving notice of such resignation, appoint a substitute custodian or custodians selected by the Sponsor pursuant to custody agreement(s)
approved by the Sponsor (provided, however, that the rights and duties of the Trustee under the Trust Agreement and the custody agreement(s)
shall not be materially altered without its consent). When directed by the Sponsor, and to the extent permitted by, and in the manner
provided by, the Custody Agreement, the Trustee shall remove the Custodian and appoint a substitute or additional custodian or custodians
selected by the Sponsor. After the entry into the Custody Agreement(s), the Trustee shall not enter into or amend any Custody Agreement
with a custodian without the written approval of the Sponsor (which approval shall not be unreasonably withheld or delayed). When instructed
by the Sponsor, the Trustee shall demand that a custodian of the Trust deliver such of the Trust’s gold held by it as is requested
of it to any other custodian or such substitute or additional custodian or custodians directed by the Sponsor. Each such substitute or
additional custodian shall, forthwith upon its appointment, enter into a Custody Agreement in form and substance approved by the Sponsor.
Under the Trust Agreement, the Sponsor is responsible
for appointing accountants or other inspectors to monitor the accounts and operations of the Custodian and any successor custodian or
additional custodian and for enforcing the obligations of each such custodian as is necessary to protect the Trust and the rights and
interests of the investors. The Trustee has no obligation to monitor the activities of the Custodian other than to receive and review
such reports of the gold held for the Trust by such Custodian and of transactions in gold held for the account of the Trust made by such
Custodian pursuant to the Custody Agreement.
When instructed by the Sponsor, the Trustee will
take action to remove gold from one custodian to another custodian selected by the Sponsor. In connection with such transfer of physical
gold, the Trustee will, at the direction of the Sponsor, cause the physical gold to be weighed or assayed. The Trustee shall have no liability
for any transfer of physical gold or weighing or assaying of delivered physical gold as directed by the Sponsor, and in the absence of
such direction shall have no obligation to effect such a delivery or to cause the delivered physical gold to be weighed, assayed or otherwise
validated.
Inspection of Gold
Under the Custody Agreement, the Custodian will
allow the Sponsor and the Trustee and their physical gold auditors (currently Inspectorate), access to its premises during normal business
hours, to examine the physical gold and such records as they may reasonably require to perform their respective duties with regard to
investors in Shares. The Trustee agrees that any such access shall be subject to execution of a confidentiality agreement and agreement
to the Custodian’s security procedures, and any such audit shall be at the Trust’s expense.
The Sponsor exercised its right to visit the Custodian’s
premises and inspect the Trust’s gold and related records most recently on July 3, 2024.
During the fiscal year that ended January 31,
2025, Inspectorate International Limited, a leading commodity inspection and testing company, conducted a physical gold audit of the Trust
on October 16, 2024. Due to unavailability of time slots at the vault, Inspectorate was unable to perform a physical inspection of the
Trust’s gold on January 31, 2025. Inspectorate was able to conduct a physical gold audit of the Trust on February 5, 2025.
Description of the Shares
General
The Trustee is authorized under the Trust Agreement
to create and issue an unlimited number of Shares. The Trustee will create Shares in Baskets (a Basket equals a block of 50,000 Shares)
only upon the order of an Authorized Participant. The Shares represent units of fractional undivided beneficial interest in the net assets
of the Trust and have no par value. The Trust also may issue Shares to compensate and reimburse the Sponsor in Shares rather than in cash.
Description of Limited Rights
The Shares do not represent a traditional investment
and you should not view them as similar to “shares” of a corporation operating a business enterprise with management and a
board of directors. As an investor, you will not have the statutory rights normally associated with the ownership of Shares of a corporation,
including, for example, the right to bring “oppression” or “derivative” actions. All Shares are of the same class
with equal rights and privileges. Each share is transferable, is fully paid and non-assessable and entitles the holder to vote on the
limited matters upon which investors may vote under the Trust Agreement. The Shares are entitled to be redeemed or exchanged for gold
as described in this Report. The Shares do not entitle their holders to any conversion or pre-emptive rights or redemption rights for
single Shares.
Redemption of and Taking Delivery of Physical
Gold in Exchange for the Shares
The Shares may be redeemed by or through an Authorized
Participant in Baskets. Investors may also take delivery of physical gold in exchange for their Shares. See “Creations and Redemption
of Shares” for details.
Distributions
If the Trust is terminated and liquidated, the
Trustee will distribute to the investors any amounts remaining after the satisfaction of all outstanding liabilities of the Trust and
the establishment of such reserves for applicable taxes, other governmental charges and contingent or future liabilities as the Trustee
shall determine. Investors of record on the record date fixed by the Trustee for a distribution will be entitled to receive their pro
rata portion of any distribution.
Voting Rights
Under the Trust Agreement, except in limited circumstances,
investors do not have voting rights. However, registered holders of at least 25% of the Shares have the right to require the Trustee to
cure any material breach by it of the Trust Agreement, and registered holders of at least 75% of the Shares have the right to require
the Trustee to terminate the Trust Agreement. In addition, certain amendments to the Trust Agreement require advance notice to the investors
before the effectiveness of such amendments, but no investor vote or approval is required for any amendment to the Trust Agreement.
Book-Entry Form
Individual certificates will not be issued for
the Shares. Instead, one or more global certificates will be deposited by the Trustee with DTC and registered in the name of Cede &
Co., as nominee for DTC. The global certificates will evidence all of the Shares outstanding at any time. Under the Trust Agreement, investors
may only hold Shares through (1) participants in DTC, such as a bank, broker-dealer or trust company (“DTC Participants”),
(2) those who maintain, either directly or indirectly, a custodial relationship with a DTC Participant (“Indirect Participants”),
and (3) those banks, brokers, dealers, trust companies and others who hold interests in the Shares through DTC Participants or Indirect
Participants. The Shares are only transferable through the book-entry system of DTC. Investors who are not DTC Participants may transfer
their Shares through DTC by instructing the DTC Participant holding their Shares (or by instructing the Indirect Participant or other
entity through which their Shares are held) to transfer the Shares. Transfers will be made in accordance with standard securities industry
practices.
DTC may decide to discontinue providing its service
with respect to Baskets and/or the Shares by giving notice to the Trustee and the Sponsor. Under such circumstances, the Sponsor will
find a replacement for DTC to perform its functions at a comparable cost or, if a replacement is unavailable, the Trustee will terminate
the Trust.
The rights of the investors generally must be
exercised by DTC Participants acting on their behalf in accordance with the rules and procedures of DTC. Because the Shares can only be
held in book-entry form through DTC and DTC Participants, investors must rely on DTC, DTC Participants and any other financial intermediary
through which they hold the Shares to receive the benefits and exercise the rights described in this section. Investors should consult
with their broker or financial institution to find out about procedures and requirements for securities held in book-entry form through
DTC.
United States Federal Income Tax Consequences
This section summarizes the material federal income
tax consequences that generally will apply to the purchase, ownership and disposition of Shares by a “U.S. Investor” (as defined
below) and certain federal tax consequences that may apply to the purchase, ownership and disposition of Shares by a “non-U.S. Investor”
(as defined below). The following discussion represents, insofar as it describes conclusions regarding federal tax law and subject to
the limitations and qualifications described therein, the opinion of K&L Gates LLP, special federal income tax counsel to the Sponsor.
The discussion is based on the Internal Revenue Code of 1986, as amended (the “Code”), and final and temporary Treasury regulations
promulgated thereunder as in effect on the date of this Report and judicial and administrative interpretations thereof publicly available
at that date; no assurance can be given that future legislation, regulations, court decisions and/or administrative pronouncements will
not significantly change applicable law and materially affect the conclusions expressed herein, and any such change, even though made
after an investor has invested in the Trust, could be applied retroactively. This discussion does not purport to be complete or to deal
with all aspects of federal income taxation that may be relevant to an investor in light of its particular circumstances or to an investor
mentioned in the second sentence of the next paragraph.
The tax treatment of investors may vary depending
on their own particular circumstances. Certain investors - including banks, thrift institutions and certain other financial institutions,
insurance companies, tax-exempt organizations, brokers and dealers in securities or currencies, certain securities traders, persons holding
Shares as a position in a “hedging,” “straddle,” “conversion” or “constructive sale” transaction
(as those terms are defined in the authorities mentioned above), qualified pension and profit-sharing plans, individual retirement accounts
(“IRAs”), certain other tax-deferred accounts, U.S. expatriates, persons whose “functional currency” is not the
U.S. dollar, persons subject to the federal alternative minimum tax, foreign investors (except as specifically provided under “Income
Taxation of Non-U.S. Investors” and “Estate and Gift Tax Considerations for Non-U.S. Investors” below) and other investors
with special circumstances - may be subject to special rules not discussed below. In addition, the following discussion applies only to
investors who will hold Shares as “capital assets” (as defined in section 1221 of the Code).
The discussion below does not address the
effect of any state, local or foreign tax law on an investor. Purchasers of Shares are urged to consult their own tax advisers with respect
to all federal, state, local and foreign tax law considerations potentially applicable to their investment in Shares.
For purposes of this discussion, a “U.S.
Investor” is an investor who or that is:
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An individual who is treated as a citizen or resident of the United States for federal tax purposes; |
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A corporation or partnership (or other entity treated as such for those purposes) that is created or organized in the United States or under the laws of the United States or any state thereof or the District of Columbia; |
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An estate other than an estate the income of which, from non-U.S. sources that is not effectively connected with the conduct of a trade or business within the United States, is not includible in gross income; |
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A trust if a court within the United States is able to exercise primary supervision over the administration of the trust and one or more persons described in any of the three preceding clauses have the authority to control all substantial decisions of the trust; or |
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An eligible trust that has made a valid election under applicable Treasury regulations to continue to be treated as a domestic trust. |
An investor that is not a U.S. Investor as so
defined is referred to below as a “non-U.S. Investor.” For federal tax purposes, the treatment of any beneficial owner of
an interest in a partnership (including any entity classified as such for those purposes) will generally depend on the partner’s
status and the partnership’s activities. Partnerships and partners should consult their tax advisers about the federal income tax
consequences of purchasing, owning and disposing of Shares.
Taxation of the Trust
The Trust is treated as a “grantor trust”
for federal tax purposes. As a result, the Trust itself is not subject to federal income tax. Instead, the Trust’s income and expenses
“flow through” to its investors, and the Trustee reports the Trust’s income, gains, losses and deductions to the Internal
Revenue Service (“IRS”) on that basis. There can be no assurance that the IRS will agree with that treatment, and it is possible
that the IRS or another tax authority could assert a position contrary thereto and that a court could sustain that contrary position.
Neither the Sponsor nor the Trustee has requested or will request a ruling from the IRS with respect to the classification or treatment
of the Trust for federal tax purposes. If the IRS were to assert successfully that the Trust is not a “grantor trust,” the
Trust would be classified as a partnership for those purposes, which may affect timing and other tax consequences to its investors.
Taxation of U.S. Investors
An investor in the Trust is treated, for federal
tax purposes, as if it directly owns a pro rata share of the Trust’s assets and directly receives that share of any Trust
income and incurs that share of the Trust’s expenses. In the case of an investor that purchases Shares for cash, its initial tax
basis in its pro rata share of the assets held in the Trust at the time it acquires its Shares will be equal to its cost of acquiring
the Shares. In the case of an investor that acquires its Shares as part of the creation of a Basket, the delivery of gold to the Trust
in exchange for a pro rata share of the underlying gold the Trust holds at the time it acquires its Shares will not be a taxable
event to the investor, and the investor’s tax basis in and holding period for that share of the Trust’s gold will be the same
as its tax basis in and holding period for the gold delivered in exchange therefor. For purposes of this discussion, and unless stated
otherwise, it is assumed that all of an investor’s Shares are acquired on the same date and at the same price per Share. Investors
that hold multiple lots of Shares, or that are contemplating acquiring multiple lots of Shares, should consult their own tax advisers
as to the determination of the tax basis in and holding period for the underlying gold represented by such Shares.
If the Trust sells gold, for example to generate
cash to pay its fees or expenses, an investor will recognize gain or loss in an amount equal to the difference between (1) the investor’s
pro rata share of the amount the Trust realizes on the sale and (2) the investor’s tax basis in its pro rata share
of the gold that was sold. Although it is not entirely free from doubt, the Trust treats the issuance of Shares to the Sponsor as payment
of the Sponsor’s Fee and/or reimbursement of the Trust’s expenses and/or liabilities as a taxable exchange by the Trust of
the portion of the underlying gold represented by those Shares and thus also constitutes a taxable event for investors. An investor’s
tax basis in its share of any gold sold or exchanged by the Trust generally is determined by multiplying the investor’s total basis
in its share of all the gold held in the Trust immediately prior to the sale or exchange by a fraction, the numerator of which is the
amount of gold sold or exchanged and the denominator of which is the total amount of all the gold so held. After any such sale or exchange,
an investor’s tax basis in its pro rata share of the gold remaining in the Trust will be equal to its tax basis in its share
of the total amount of the gold held in the Trust immediately prior to the sale or exchange less the portion of that basis allocable to
its share of the gold that was sold or exchanged.
On the sale of some or all of its Shares, an investor
will be treated as having sold the part of its pro rata share of the gold held in the Trust at that time that is attributable to
the Shares sold. Accordingly, the investor generally will recognize gain or loss on the sale in an amount equal to the difference between
(1) the amount realized pursuant to the sale of the Shares and (2) the investor’s tax basis in that attributable part, as determined
in the manner described in the preceding paragraph.
If an investor redeems (which term, and its variations,
as used in this section includes a surrender, and its variations, to the Trust by a Delivery Applicant of) some or all of its Shares in
exchange for (i.e., in order to take delivery of) the underlying gold (including American Gold Eagle gold coins, with a minimum fineness
of 91.67% (“American Gold Coins”)) represented by the redeemed Shares, the exchange will generally not be a taxable event
for the investor (except as noted below with respect to any cash proceeds). In addition, if an investor acquires its Shares as part of
the creation of a Basket by delivering to the Trust gold in specified denominations (e.g., unallocated gold), the subsequent redemption
of its Shares for gold delivered by the Trust in different denominations (e.g., LBMA gold in denominations of 350 to 430 Fine Ounces
or 10 Ounce Bars of gold or coins) will not constitute a taxable event, provided that the amount of gold received on the redemption contains
the equivalent metallic content of the gold delivered on the creation, less amounts accrued or sold to pay the Trust’s expenses
and other charges. An investor’s tax basis in the gold received on a redemption generally will be the same as the investor’s
tax basis in the portion of its pro rata share of the gold held in the Trust immediately prior to the redemption that is attributable
to the redeemed Shares. An investor’s holding period with respect to the gold received on a redemption should include the period
during which the investor held the redeemed Shares. A subsequent sale of the gold received by the investor will be a taxable event.
If an investor is entitled to any cash proceeds
on the redemption of some or all of its Shares, the investor will be treated as having sold the portion of its pro rata share of
the gold held in the Trust equal in value to the cash proceeds.
An investor’s tax basis in its pro rata
share of the gold held in the Trust immediately after any sale or redemption of less than all of the investor’s Shares generally
will equal (1) its tax basis in its share of the total amount of the gold held in the Trust immediately prior to the sale or redemption
less (2) the portion of such basis that is taken into account in determining the amount of gain or loss the investor recognizes on the
sale or, in the case of a redemption, is treated as the basis in the gold received by the investor in the redemption.
Maximum 28% Long-Term Capital Gains Tax Rate
for U.S. Investors Who Are Individuals
Gains recognized by an individual, estate or trust
(each referred to below as an “individual” unless the context requires otherwise) from the sale of “collectibles,”
which term includes gold, held for more than one year are subject to federal income tax at a maximum rate of 28% rather than the lower
maximum rates applicable to most other long-term capital gains individuals recognize (a maximum of 15% for a single individual with taxable
income not exceeding $533,400 ($600,050 for married individuals filing jointly) and 20% for individuals with taxable income exceeding
those respective amounts, which apply for 2025 and will be adjusted for inflation annually thereafter). For these purposes, gain an individual
recognizes on the sale of an interest in a “grantor trust” that holds collectibles (such as the Trust) is treated as gain
recognized on the sale of the collectibles, to the extent the gain is attributable to unrealized appreciation in value of the collectibles.
Therefore, any gain recognized by an individual U.S. Investor attributable to a sale or exchange of Shares held for more than one year,
or attributable to the Trust’s sale of any gold that the investor is treated (through his, her or its ownership of Shares) as having
held for more than one year, generally will be subject to federal income tax at a maximum rate of 28%. The tax rates for capital gains
recognized on the sale of assets held by an individual U.S. Investor for one year or less, or by a taxpayer other than an individual,
are generally the same as those at which ordinary income is taxed.
3.8% Tax on Net Investment Income
An individual is required to pay a 3.8% tax on
the lesser of (1) the excess of the individual’s “modified adjusted gross income” over a threshold amount ($250,000
for married persons filing jointly and $200,000 for single taxpayers) or (2) the individual’s “net investment income,”
which generally includes dividends, interest, and net gains from the disposition of investment property. This tax is in addition to any
other taxes due on that income. U.S. Investors should consult their own tax advisers regarding the effect, if any, this provision may
have on their investment in Shares.
Brokerage Fees and Trust Expenses
Any brokerage or other transaction fee incurred
by an investor in purchasing Shares will be included in the investor’s tax basis in the Trust’s underlying assets. Similarly,
any brokerage fee incurred by an investor in selling Shares will reduce the amount the investor realizes with respect to the sale.
Investors will be required to recognize the full
amount of gain or loss on a sale of gold by the Trust (as discussed above), even though some or all of the sale proceeds are used by the
Trustee to pay Trust expenses. An investor may deduct its respective pro rata share of each expense incurred by the Trust to the
same extent as if it directly incurred the expense. Investors who are individuals, however, may be required to treat some or all of the
expenses of the Trust as miscellaneous itemized deductions, the deductibility of which was suspended for taxable years beginning after
December 31, 2017, and before January 1, 2026, by the Tax Cuts and Jobs Act enacted in December 2017.
Investment by U.S. Tax-Exempt Investors
Certain U.S. Investors (referred to in this paragraph
as “U.S. Tax-Exempt Investors”) are subject to federal income tax only on their “unrelated business taxable income”
(“UBTI”). It is expected that, unless a U.S. Tax-Exempt Investor incurs debt to purchase Shares, it should not realize UBTI
with respect to its pro rata share of the Trust’s assets.
Investment by Regulated Investment Companies
Mutual funds and other investment vehicles that
are “regulated investment companies” within the meaning of Code section 851 should consult with their tax advisers concerning
(1) the likelihood that an investment in a Share, although it is a “security” within the meaning of the 1940 Act, may be considered
an investment in the underlying gold for purposes of Code section 851(b), and (2) the extent to which an investment in Shares might nevertheless
be consistent with preservation of their qualification under that section.
Investment by Certain Retirement Plans
Section 408(m) of the Code provides that the purchase
of a “collectible” as an investment for an IRA, or for a participant-directed account maintained under any plan that is tax-qualified
under Code section 401(a) (“Tax-Qualified Account”), is treated as a taxable distribution from the account to the owner of
the IRA, or to the participant for whom the Tax-Qualified Account is maintained, of an amount equal to the cost to the account of acquiring
the collectible. The Trust, through the Sponsor, has received a private letter ruling from the IRS that (1) the acquisition of Shares
by an IRA or a Tax-Qualified Account will not constitute the acquisition of a collectible and (2) an IRA or such an account owning Shares
will not be treated as having made a distribution to the IRA owner or plan participant under Code section 408(m) solely by virtue of owning
those Shares. If a redemption of Shares results in the delivery of gold to an IRA or Tax-Qualified Account, however, that exchange would
constitute the acquisition of a collectible to the extent provided under that section. See also “ERISA and Related Considerations.”
Income Taxation of Non-U.S. Investors
A non-U.S. Investor generally will not be subject
to federal income tax with respect to gain recognized on the sale or other disposition of Shares, or on the sale of gold by the Trust,
unless (1) the non-U.S. Investor is an individual and is present in the United States for 183 days or more during the taxable year of
the sale or other disposition and the gain is treated as being from U.S. sources or (2) the gain is effectively connected with the conduct
by the non-U.S. Investor of a trade or business in the United States and certain other conditions are met. Non-U.S. Investors are advised
to consult their own tax advisers as to the tax consequences, under the laws of any non-U.S. jurisdiction to which they are subject, of
their purchase, holding, sale and redemption of or any other dealing in Shares and, in particular, as to whether any value added tax,
other consumption tax or transfer tax is payable in relation to such purchase, holding, sale, redemption or other dealing.
Estate and Gift Tax Considerations for Non-U.S.
Investors
Individuals who are neither citizens nor residents
(as determined for federal estate and gift tax purposes) of the United States (collectively, “Non-Residents”) are subject
to estate tax on all property that has a U.S. “situs.” Shares may well be considered to have a U.S. situs for these purposes.
If Shares are so considered, they would be includible in the U.S. gross estate of a Non-Resident investor; federal estate tax is imposed
at rates of up to 40% of the fair market value of the U.S. taxable estate. In addition, the federal “generation-skipping transfer
tax” may apply in certain circumstances. The estate of a Non-Resident investor who was resident in a country that has an estate
tax treaty with the United States may be entitled to benefit from such treaty.
For Non-Residents, the federal gift tax generally
applies only to gifts of tangible personal property or real property having a U.S. situs. Tangible personal property (including gold)
has a U.S. situs if it is physically located in the United States. Although the matter is not settled, it appears that ownership of Shares
might not be considered ownership of the underlying gold for this purpose, even to the extent that gold is held in custody in the United
States. Instead, Shares might be considered intangible property, and therefore they might not be subject to U.S. gift tax if transferred
during the holder’s lifetime.
Non-Resident investors are urged to consult their
tax advisers regarding the possible application of federal estate, gift and generation-skipping transfer taxes in their particular circumstances.
U.S. Information Reporting and Withholding
The Trustee will make information available that
will enable brokers and custodians through which investors hold Shares to prepare and file certain information returns with the IRS, and
will provide certain tax-related information to investors, in connection with the Trust. To the extent required by applicable regulations,
each investor will be provided with information regarding its allocable portion of the Trust’s annual income, deductions, gains
and losses (if any). A U.S. Investor may be subject to federal backup withholding, at the rate of 24%, in certain circumstances unless
it provides its taxpayer identification number to its broker and complies with certain certification procedures; the amount of any backup
withholding will be allowed as a credit against an investor’s federal income tax liability and may entitle an investor to a refund,
provided that the required information is furnished to the IRS. A non-U.S. Investor may have to comply with certification procedures to
establish that it is not a U.S. Investor, and some non-U.S. Investors will be required to meet certain information reporting or certification
requirements imposed by the Foreign Account Tax Compliance Act, to avoid withholding.
ERISA and Related Considerations
The Employee Retirement Income Security Act of
1974, as amended (“ERISA”), and section 4975 of the Code impose certain requirements on employee benefit plans and certain
other plans and arrangements, including IRAs and individual retirement annuities, Keogh plans and certain collective investment funds
or insurance company general or separate accounts in which such plans, accounts, annuities or arrangements are invested, that are subject
to ERISA or the Code, respectively (collectively, “Plans”), and on persons who are fiduciaries with respect to the investment
of assets treated as “plan assets” of a Plan. Investments by Plans are subject to the fiduciary requirements and the applicability
of prohibited transaction restrictions under ERISA.
Government plans and some church plans are not
subject to the fiduciary responsibility provisions of ERISA or the provisions of Code section 4975 but may be subject to substantially
similar rules under state or other federal law. Fiduciaries of any such plans are advised to consult with their counsel prior to an investment
in Shares.
In contemplating an investment of a portion of
Plan assets in Shares, the Plan fiduciary responsible for making such investment should carefully consider, taking into account the facts
and circumstances of the Plan, the “Risk Factors” discussed below and whether such investment is consistent with its fiduciary
responsibilities, including (1) whether the fiduciary has the authority to make the investment under the appropriate governing Plan instrument,
(2) whether the investment would constitute a direct or indirect non-exempt prohibited transaction with a “party in interest”
or “disqualified person,” (3) the Plan’s funding objectives, and (4) whether under the general fiduciary standards of
investment prudence and diversification such investment is appropriate for the Plan, taking into account the Plan’s overall investment
policy, the composition of its investment portfolio and its need for sufficient liquidity to pay benefits when due.
Item 1A. Risk Factors
Before making an investment decision, you should
consider carefully the risks described below, as well as the other information included in this Report.
RISKS RELATED TO GOLD
The Value of Your Shares is Directly Related
to the Price of Gold
The value of your Shares fluctuates based upon
the price of the gold held by the Trust. Fluctuations in the price of gold could materially adversely affect your investment in the Shares.
This creates the potential for losses, regardless of the period of time that you hold the Shares.
The Shares are intended to track the performance
of the price of gold. The value of the Shares relates directly to the value of the gold owned by the Trust. Therefore, the value of the
Shares will fluctuate with the price of gold. The price of gold has fluctuated widely over the past several years. This exposes your investment
in Shares to potential losses. Several factors may affect the price of gold and, as a result, the value of the Shares, including the following:
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Global supply and demand, which is influenced by factors including (1) forward selling by gold producers, (2) purchases made by gold producers to unwind gold hedge positions, (3) central bank purchases and sales, (4) production and cost levels in major gold-producing countries and (5) new production projects; |
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Global or regional political, economic or financial events and situations, especially those unexpected in nature; |
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Investors’ expectations regarding future inflation rates; |
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Currency exchange rate volatility; |
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Investment and trading activities of hedge funds and commodity funds; |
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Interest rate volatility; and |
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Other economic variables such as income growth, economic output, and monetary policies. |
The Shares have experienced significant price
fluctuations. If gold markets continue to be subject to sharp fluctuations, this may result in potential losses if you need to sell your
Shares at a time when the price of gold is lower than it was when you made your investment. Even if you are able to hold Shares for the
long-term, you may never experience a profit, since gold markets have historically experienced extended periods of flat or declining prices,
in addition to sharp fluctuations.
Investors should be advised that there is no assurance
that gold will maintain its long-term value in terms of U.S. dollar value in the future. In the event that the price of gold declines,
the Sponsor expects the value of an investment in the Shares to decline proportionately.
There is No Guarantee that the High Trading
Price of Gold Will be Sustained
The international gold market has experienced
historically high trading prices in recent years. Because there can be no assurance that this historically high trading price of gold
will be sustained, there could be significant decreases in the value of net assets and the NAV of the Trust.
Prices in the international gold market have reached
historically high levels in recent years. The price of physical gold going forward and, in turn, the future value of net assets of the
Trust, may be dependent upon factors that include global gold supply and demand, investors’ inflation expectations, exchange rate
volatility and interest rate volatility. An adverse development with regard to one or more of these, or other factors may lead to a decrease
in gold bullion currency trading prices. A decline in prices of gold would decrease the value of net assets and the NAV of the Trust.
Physical Gold Allocated to the Trust May
Not Meet the Standards of a London Bar
Physical gold allocated to the Trust in connection
with the creation of a Basket may not meet the standards of a London Bar and, if a Basket is issued against such gold, the Trust may suffer
a loss.
Neither the Trustee nor the Custodian independently
confirms the fineness of the gold allocated to the Trust in connection with the creation of a Basket. The physical gold allocated to the
Trust by the Custodian may be different from the reported fineness or weight required by the LBMA’s standards for gold bars delivered
in settlement of a gold trade (i.e., London Bars), the standards required by the Trust. If the Trustee nevertheless issues a Basket against
such gold, and if the Custodian fails to credit the Trust the amount of any deficiency, the Trust may suffer a loss.
Value of Gold in Trust Is Limited to the
Value of the Fine Ounce Content of Gold
Because gold in the Trust is valued at the
price of gold independent of location and type of gold, the value of gold in the Trust is limited to the price of gold multiplied by the
Fine Ounce content of the gold.
Gold in the Trust is valued at the price of gold
independent of location and type of gold. The price of gold commonly quoted refers to the price of a London Bar in London. Any gold that
is not a London Bar located in London may obtain a bid price when offered for sale that deviates from the price of gold. Nonetheless,
the Trust values all gold at the price of gold because the Sponsor assumes the cost of conversion of gold. Conversely, in the unlikely
event that such a conversion yields a profit, the Sponsor, not the Trust, will keep such profit. As a result, the value of gold in the
Trust is limited to the price of gold multiplied by the Fine Ounce content of the gold.
Similarly, when investors exchange their Shares
for physical gold other than London Bars, the Shares also are valued at the price of gold for purposes of calculating their Share in the
Trust. The Sponsor may recover this conversion cost as part of the Exchange Fee.
The Solactive Index is New, and Therefore,
May Have Limited Trading Data and Disruptions
Effective as of the Index Change Date, the
Trustee values the gold held by the Trust based on the Solactive Index. Potential disruptions and limited data could impact the value
of the gold held by the Trust and could have an adverse effect on the value of an investment in the Shares.
As of the Index Change Date, the Trustee values
the gold held by the Trust based on the Solactive Index, which is described under “Business – Valuation of Gold and Computation
of Net Asset Value”. The Trustee also uses the Solactive Index to determine the NAV per Share.
In the event that the Solactive Index does not
prove to be an accurate benchmark, the NAV of the Trust and the value of an investment in the Shares could be adversely impacted. Additionally,
because the Solactive Index is a new pricing mechanism, there is little trading data using the Solactive Index. It is possible that electronic
failures or other unanticipated events may occur that could result in delays in the announcement of, or the ability of Solactive to produce,
the Solactive Index on any given date. Further, any actual or perceived disruptions that result in the perception that the Solactive Index
is vulnerable to actual or attempted manipulation could adversely affect the behavior of investors and traders, which may have an effect
on the price of gold should the Solactive Index be broadly adopted. Any such disruptions in the determination of the Solactive Index may
also result in an incorrect valuation of the Trust’s gold and an inaccurate computation of the Sponsor’s fee, among other
potential effects.
Governmental Actions May Affect the Price
of Gold
Future governmental decisions may have significant
impact on the price of gold, which may result in a significant decrease or increase in the value of the net assets and the NAV of the
Trust.
Generally, gold prices reflect the supply and
demand of available gold. Governmental decisions, such as the executive order issued by the President of the United States in 1933 requiring
all persons in the United States to deliver gold to the Federal Reserve or the abandonment of the gold standard by the United States in
1971, have been viewed as having significant impact on the supply and demand of gold and the price of gold. Future governmental decisions
may have an impact on the price of gold, and may result in a significant decrease or increase in the value of the net assets and the NAV
of the Trust.
An Investment in the Trust may be More Volatile
than an Investment in a Diversified Portfolio
Because the Trust invests only in gold, an
investment in the Trust may be more volatile than an investment in a more broadly diversified portfolio.
The Trust invests only in gold. As a result, the
Trust’s holding are not diversified. Accordingly, the Trust’s NAV may be more volatile than another investment vehicle with
a more broadly diversified portfolio and may fluctuate substantially over time. The price of gold can be volatile. Fluctuations in the
price of gold are expected to have a direct impact on the value of the Shares.
Loss of or Damage to the Trust’s Gold
Gold owned by the Trust may be subject to loss,
damage, theft or restriction on access.
There is a risk that part or all of the Trust’s
gold could be lost, damaged or stolen. Access to the Trust’s gold could also be restricted by natural events (such as an earthquake)
or human actions (such as a terrorist attack). Any of these events may adversely affect the operations of the Trust and, consequently,
an investment in the Shares.
The Trust does not insure gold held by the Custodian
or delivered by the precious metals dealer. Consequently, if there is a loss of assets of the Trust through theft, destruction, fraud
or otherwise, the Trust will need to rely on insurance carried by applicable third parties, if any, or on such third party’s ability
to satisfy any claims against it. If the Trust’s gold is lost, damaged, stolen or destroyed under circumstances rendering a party
liable to the Trust, the responsible party may not have the financial resources sufficient to satisfy the Trust’s claim. For example,
as to a particular event of loss, the only source of recovery for the Trust might be limited to the Custodian, the precious metals dealer
or other responsible third parties (e.g., a thief or terrorist), any of which may not have the financial resources (including liability
insurance coverage) to satisfy a valid claim of the Trust. Moreover, losses due to nuclear accidents, terrorism, riots, acts of God, insurrections,
strikes and similar causes beyond the control of the Custodian and for which the Custodian would not be liable may be sustained by the
Trust. Any loss of gold owned by the Trust will result in a corresponding loss in the NAV, and it is reasonable to expect that such loss
will also result in a decrease in the value at which the Shares are traded on NYSE Arca.
Recovery for Damage to the Trust’s
Gold May Be Limited
In the event the Trust’s gold is lost,
damaged, stolen or destroyed, recovery may be limited to the market value of the gold at the time the loss is discovered, which may negatively
affect the value of net assets of the Trust.
If there is a loss due to theft, loss, damage,
destruction or fraud or otherwise with respect to the Trust’s gold held by the Custodian or delivered by the precious metals dealer,
and such loss is found to be the fault of the Custodian or the precious metals dealer, the Trust may not be able to recover more than
the market value of the gold at the time the loss is discovered. If the market value of gold increases between the time the loss is discovered
and the time the Trust receives payment for its loss and purchases gold to replace the losses, less gold will be acquired by the Trust
and the value of the net assets of the Trust will be negatively affected.
Gold Market Liquidity and Supply Risks
There is a risk that the Bank of England may experience
delays in delivering gold during periods of high demand. If market participants providing liquidity in the London gold market (commonly
known as clearing banks) hold gold in the Bank of England’s vaults, such delays could have broader market repercussions.
This risk has been heightened by concerns over
potential U.S. tariffs on imports from the U.K. In anticipation of these tariffs, market participants have been relocating gold from London
to the U.S. As of early 2025, much of this gold has first been sent to refiners in Switzerland for conversion into kilobars before being
shipped to COMEX warehouses in the U.S.
Market prices serve as a key clearing mechanism
for these risks. A shortage of gold in the London market would likely drive up local gold prices. Additionally, logistical bottlenecks—such
as potential delays in gold deliveries by the Bank of England—could widen the spread between gold purchase and sale prices. This,
in turn, may increase the hedging costs for market makers, potentially leading to wider bid-ask spreads on exchange-traded gold products,
including those of the Trust.
RISKS RELATED TO SHARES
Sales of Gold in the Market Could Adversely
Affect the Shares
Substantial sales of gold by central banks,
governmental agencies and multi-lateral institutions could adversely affect an investment in the Shares.
Central banks, other governmental agencies and
multi-lateral institutions buy, sell and hold gold as part of their reserve assets. This market sector holds a significant amount of gold,
some of which is static, meaning that it is held in vaults and is not bought, sold, leased or swapped or otherwise available in the open
market. Several central banks and multi-lateral institutions have sold portions of their gold reserves in recent years, with the result
being that this sector, taken as a whole, has been a net supplier of gold to the open market. In the event that future economic, political
or social conditions or pressures require members of this sector to liquidate their gold assets all at once or in an uncoordinated manner,
the demand for gold may not be sufficient to accommodate the sudden increase in the supply of gold to the market. Consequently, the price
of gold may decline which may adversely affect an investment in the Shares.
The Shares May Trade at a Discount or a
Premium
Trust Shares may trade at NAV or at a price
that is above or below NAV. Any discount or premium in the trading price relative to the NAV per Share may widen as a result of the different
trading hours of NYSE Arca and other exchanges.
Trust Shares may trade at, above or below the
NAV per Share. The NAV per Share will fluctuate with changes in the market value of the gold owned by the Trust. The trading price of
the Shares will fluctuate with changes in the NAV per Share as well as market supply and demand. The amount of the discount or premium
in the trading price relative to the NAV per Share may be influenced by non-concurrent trading hours between the NYSE Arca and major gold
markets. While the Shares will trade on the NYSE Arca until 4:00 PM (New York time), liquidity in the market for gold may be reduced after
the close of the major world gold markets, including London. As a result, during this time, trading spreads and the resulting discount
or premium on the Shares may widen. The Trust may elect to change its benchmark pricing index in the future, which may reduce the discrepancy
in the trading price.
There May Not be an Active Trading Market
for the Shares
The lack of an active trading market for the
Shares may result in losses on your investment at the time of disposition of your Shares.
Although Shares are listed for trading on NYSE
Arca, there can be no assurance that an active trading market for the Shares will develop or be maintained. If an active public market
for the Shares does not develop or continue, the market prices and liquidity of the Shares may be adversely affected. If you need to sell
your Shares at a time when no active market for them exists, the absence of an active market will most likely adversely affect the price
you receive for your Shares (assuming you are able to sell them).
The Trust is Not Actively Managed
The Trust does not actively trade gold to take
advantage of short-term market fluctuations in the price of gold. An investment in the Trust will yield long-term gains only if the value
of gold increases over time.
The Trust does not actively manage the gold it
holds. This means that the Trust does not sell gold at times when its price is high or acquire gold at low prices in the expectation of
future price increases. It also means that the Trust does not make use of any of the hedging techniques available to professional gold
investors to attempt to reduce the risks of losses resulting from price decreases. Any losses sustained by the Trust will adversely affect
the value of your Shares.
The Trust May Suspend Redemptions of Baskets
by Authorized Participants, which Could Affect the Market Price of the Shares
There may be situations where the Trust suspends
redemptions of Baskets by Authorized Participants. To the extent the value of gold declines, these delays may result in a decrease in
the value of the gold received upon redemption by an Authorized Participant, as well as a reduction in liquidity for all investors in
the secondary market.
Although Shares are redeemable by Authorized Participants
in exchange for the underlying amount of gold, redemptions by Authorized Participants may be suspended during any period while regular
trading on NYSE Arca is suspended or restricted, or in which an emergency exists that makes it reasonably impracticable to deliver, dispose
of, or evaluate gold. If any of these events occurs at the time of a redemption by an Authorized Participant, and the price of gold decreases
before the redemption occurs, an Authorized Participant will sustain a loss with respect to the amount that it would have been able to
obtain in exchange for the gold received from the Trust upon the redemption of its Shares, had the redemption taken place when it was
originally intended to occur. As a consequence, Authorized Participants may reduce their trading in Shares during periods of suspension,
decreasing the number of potential buyers of Shares in the secondary market and the price an investor may receive upon sale.
The Trust May Suspend or Reject the Surrender
of Shares for Physical Gold, which Could Affect the Market Price of the Shares
There may be situations where the Trust suspends
or rejects the surrender of Shares for physical gold. To the extent the value of gold declines, these delays may result in a decrease
in the value of the physical gold received by a Delivery Applicant, as well as a reduction in liquidity for all investors in the secondary
market.
The surrender of Shares for physical gold may
be suspended or rejected by the Trust during any period while regular trading on NYSE Arca is suspended or restricted, in which an emergency
exists that makes it reasonably impracticable to deliver, dispose of, or evaluate gold, or, with respect to the surrender of Shares by
a Delivery Applicant only, as deemed necessary or advisable by the Sponsor. In addition, the Trustee shall reject the delivery of Shares
by the Delivery Applicant: (1) if the number of Shares delivered does not correspond to the number of Shares specified in the pre-approved
Delivery Application; (2) if the delivered Shares are not accompanied by proper instructions or by a pre-approved Delivery Application;
or (3) the number of Fine Ounces represented by the delivered Shares is less than the Fine Ounces to be delivered specified in the Delivery
Application. Additionally, the Sponsor may decline to approve a Delivery Application for any reason. The delivery of physical gold shall
be suspended in the event the Sponsor resigns or is otherwise unable or unwilling to perform its obligations relating to the process of
Delivery Applicants taking delivery of physical gold. If any of these events occurs at the time that a Delivery Application has been received,
and the price of gold decreases before the Delivery Application is processed, a Delivery Applicant will sustain a loss with respect to
the amount of physical gold that it would have been able to obtain from the Trust in connection with the surrender of the Delivery Applicant’s
Shares had the surrender taken place when it was originally intended to occur. In addition, there may be a reduction in the trading of
Shares during periods of suspension, decreasing the number of potential buyers of Shares in the secondary market and the price an investor
may receive upon sale.
The Withdrawal of an Authorized Participant
and Substantial Redemptions by Authorized Participants May Affect the Liquidity of the Shares
The liquidity of the Shares also may be affected
by substantial redemptions by Authorized Participants related to or independent of the withdrawal from participation of Authorized Participants.
In the event that there are substantial redemptions
of Shares or one or more Authorized Participants with a substantial interest in the Shares withdraws from participation, the liquidity
of the Shares will likely decrease, which could adversely affect the market price of the Shares and result in your incurring a loss on
your investment.
Competition From Other Methods of Investing
in Gold
An investment in the Shares may be adversely
affected by competition from other methods of investing in gold.
The Trust competes with other financial vehicles,
including traditional debt and equity securities issued by companies in the gold industry and other securities backed by or linked to
gold, direct investments in gold and investment vehicles similar to the Trust. Market and financial conditions, and other conditions beyond
the Sponsor’s control, may make it more attractive to invest in other financial vehicles or to invest in gold directly, which could
limit the market for and reduce the liquidity of the Shares.
Other Investment Vehicles May Cause a Decline
in the Price of Gold
The price of gold may be affected by the sale
of ETVs tracking gold markets, which could negatively affect gold prices and the price and NAV of the Shares.
To the extent existing exchange traded vehicles
(“ETVs”) tracking gold markets represent a significant proportion of demand for gold, large redemptions of the securities
of these ETVs could negatively affect gold prices and the price and NAV of the Shares.
Financial Crises May Result in a Decline
in the Price of Gold
Crises may motivate large-scale sales of gold,
which could decrease the price of gold and adversely affect an investment in the Shares.
The possibility of large-scale distress sales
of gold in times of crisis may have a short-term negative impact on the price of gold and adversely affect an investment in the Shares.
For example, the 2008 financial credit crisis resulted in significantly depressed prices of gold largely due to forced sales and deleveraging
from institutional investors such as hedge funds and pension funds. Crises in the future may impair gold’s price performance which
would, in turn, adversely affect an investment in the Shares.
Factors that May Cause a Decline in the
Price of Gold
Several factors may have the effect of causing
a decline in the prices of gold and a corresponding decline in the price of Shares, including:
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A significant increase in gold hedging activity by gold producers. Should there be an increase in the level of hedge activity of gold producing companies, it could cause a decline in world gold prices, adversely affecting the price of the Shares. |
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A significant change in the attitude of speculators and investors toward gold. Should the speculative community take a negative view toward gold, it could cause a decline in world gold prices, negatively impacting the price of the Shares. |
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A widening of interest rate differentials between the cost of money and the cost of gold could negatively affect the price of gold which, in turn, could negatively affect the price of the Shares. |
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A combination of rising money interest rates and a continuation of the current low cost of borrowing gold could improve the economics of selling gold forward. This could result in an increase in hedging by gold mining companies and short selling by speculative interests, which would negatively affect the price of gold. Under such circumstances, the price of the Shares would be similarly affected. |
Payment of the Sponsor’s Fee in Shares
and the Sale of Gold by the Trust May Cause a Decline in the Value of the Shares
The amount of gold represented by each Share
will decrease when the Sponsor’s Fee is paid in Shares and when the Trustee sells the Trust’s gold to pay Trust expenses.
Without increases in the price of gold sufficient to compensate for that decrease, the price of the Shares will also decline and you will
lose money on your investment in Shares.
Although the Sponsor has agreed to assume all
organizational and certain ordinary administrative and marketing expenses incurred by the Trust, not all Trust expenses will be assumed
by the Sponsor. For example, most taxes and other governmental charges that may be imposed on the Trust’s property will not be paid
by the Sponsor. As part of its agreement to assume some of the Trust’s ordinary administrative expenses, the Sponsor has agreed
to pay legal fees and expenses of the Trust not in excess of $100,000 per annum. Any legal fees and expenses in excess of that amount
will be the responsibility of the Trust.
The Sponsor intends to accept Shares of the Trust
for the Sponsor’s Fee and reimbursement of expenses not assumed by the Sponsor. However, the Trust may be subject to certain other
liabilities (for example, as a result of litigation) which have not been assumed by the Sponsor. The Trust will sell gold to pay those
expenses, unless the Sponsor agrees to pay such expenses out of its own pocket and receive reimbursement from the Trust in the form of
Shares.
To the extent the Trust issues additional Shares
to pay the Sponsor’s Fee or sells gold to cover expenses or liabilities, the amount of gold represented by each Share will decrease.
New deposits of gold, received in exchange for new Shares issued by the Trust, would not reverse this trend. A decrease in the amount
of gold represented by each Share results in a decrease in the price of a Share even if the price of gold has not changed. To retain the
Share’s original price, the price of gold would have to increase. Without that increase, the lesser amount of gold represented by
the Share will have a correspondingly lower price. If these increases do not occur, or are not sufficient to counter the lesser amount
of gold represented by each Share, you will sustain losses on your investment in Shares. For example, assuming the Trust has not incurred
fees or expenses in excess of the amount the Sponsor has agreed to bear and the Shares trade at the same price as the Trust’s NAV,
the price of the gold represented by your Shares would need to increase by the amount of the Sponsor’s Fee between the date of your
purchase and one year later so that your Shares would have the same value on both dates, not including any transaction costs you may incur
to purchase your Shares. The Sponsor’s Fee is currently 0.25% of the NAV of the Trust. The value of your investment also may decline
if the price of the Shares is negatively affected by the Sponsor’s sale in the open market of the Shares that the Sponsor has received
from the Trust as payment of the Sponsor’s Fee.
Operational Problems May Cause a Decline
in the Trading Price of the Shares
The value of the Shares could decline if unanticipated
operational or trading problems arise.
There may be unanticipated problems or issues
with respect to the mechanics of the Trust’s operations and the trading of the Shares that could have a material adverse effect
on an investment in the Shares. In addition, to the extent that unanticipated operational or trading problems or issues arise, the Sponsor’s
past experience and qualifications may not be suitable for solving these problems or issues.
Shareholders May Terminate the Trust
Shareholders with large holdings may choose
to terminate the Trust.
Under the Trust Agreement, registered holders
of at least 75% of the Shares have the right to require the Trustee to terminate the Trust Agreement. This power may be exercised by a
relatively small number of holders of Shares. Upon any such exercise, investors who would have elected to continue to invest in gold through
ownership of Shares will be compelled to find another vehicle for such investment and may not be able to identify another vehicle that
offers the same features as the Trust.
A Share Submission is Irrevocable
An investor’s instruction to a broker-dealer
to transfer Shares to the Trust in a Share Submission cannot be changed.
A Delivery Applicant wishing to deliver Shares
of the Trust in exchange for physical gold must submit to the Sponsor a Delivery Application and the processing fees through its broker-dealer.
The Delivery Application is not binding until Shares are delivered to the Trust. Upon pre-approval of the Delivery Application by the
Sponsor, the Sponsor will send a copy of the pre-approved Delivery Application to the Trustee. A Delivery Applicant shall instruct its
broker-dealer to transfer Shares to the Trustee; the submission and transfer by the broker-dealer will be a binding and irrevocable Share
Submission in accordance with the details specified on the pre-approved Delivery Application. Once the Trustee has received a Delivery
Applicant’s Share Submission and, if the Delivery Applicant has requested physical gold other than London Bars, once the Trustee
has received a confirmation certified by the Sponsor that an over-the-counter transaction between the Sponsor and the precious metals
dealer has been entered into providing for the exchange of physical gold held by the Trust for physical gold specified by the Delivery
Applicant, physical gold will be selected or acquired by the Custodian or the precious metals dealer and then released from the Trust
for delivery to the Delivery Applicant according with the instructions in the Delivery Application. Once the Shares have been submitted,
a Share Submission may no longer be revoked by the Delivery Applicant under any circumstances, though the Share Submission may be rejected
by the Trustee or the Sponsor under certain circumstances.
Delivery of Physical Gold to Delivery Applicants
May Take Considerable Time
The Custodian or a precious metals dealer will
deliver physical gold to Delivery Applicants in exchange for their Shares. A delay in the delivery of physical gold to Delivery Applicants
could result in losses if the price of gold declines.
The Custodian or a precious metals dealer will
arrange for the delivery of physical gold to Delivery Applicants in exchange for their Shares. After a Delivery Applicant irrevocably
submits Shares to exchange for physical gold, either the Trustee will instruct the Custodian to deliver physical gold to the Delivery
Applicant or, if the Delivery Applicant requests physical gold other than London Bars, the Sponsor will enter into an over-the-counter
transaction on the business day following the Share Submission Day with a precious metals dealer to exchange physical gold the Trust holds
for physical gold specified by the Delivery Applicant. Because delivery time depends on many factors, including the types of physical
gold requested and the delivery method chosen, considerable time may elapse by the time Delivery Applicants receive their physical gold.
Further, because shipments of physical gold may be broken down into multiple smaller shipments, it may take additional time for the Delivery
Applicant to receive all of the requested physical gold. A delay in the delivery of physical gold to Delivery Applicants could result
in losses if the price of gold declines.
Suspension or Rejection of the Surrender
of Shares
If the Trust suspends or rejects a surrender
of Shares for gold, a Shareholder may have no alternative but to sell Shares on the open market and thus incur brokerage costs and be
subject to potential tax consequences.
If the Trust suspends the surrender of Shares
or rejects the delivery of Shares under a Delivery Application, a Shareholder who wishes to redeem Shares may have no alternative but
to sell Shares on the open market. Such a sale of Shares will involve brokerage costs and may result in tax consequences to the Shareholder.
The Creation and Redemption Process May
Result in a Decline in the Price of Shares
If the process of creation and redemption of
Baskets encounters any unanticipated difficulties, the possibility for arbitrage transactions intended to keep the price of the Shares
closely linked to the price of gold may not exist, and as a result, the price of the Shares may fall.
If the processes of the creation and redemption
of Shares by Authorized Participants (which depend on timely transfers of gold to and by the Custodian) encounter any unanticipated difficulties,
potential market participants who would otherwise be willing to purchase or redeem Baskets to take advantage of any arbitrage opportunity
arising from discrepancies between the price of the Shares and the price of the underlying gold may not take the risk that, as a result
of those difficulties, they may not be able to realize the profit they expect. If this is the case, the liquidity of the Shares may decline
and the price of the Shares may fluctuate independently of the price of gold and may fall.
A Delivery Applicant Bears the Risk of Loss
in Connection with the Delivery of Physical Gold
A Delivery Applicant that suffers loss of,
or damage to, its physical gold during delivery will not be able to claim damages from the Trust, the Trustee, the Custodian, the precious
metals dealer from which physical gold was obtained or the Sponsor.
Upon the release of physical gold from the Trust
for forwarding to the Delivery Applicant, the Delivery Applicant’s physical gold will be transported by either a conventional shipping
carrier such as the U.S. Postal Service, Federal Express or United Parcel Service, or an armored transportation service engaged by or
on behalf of the investor (a “Delivery Service Provider”). Because ownership of physical gold will transfer to the Delivery
Applicant at the time the Custodian or the precious metals dealer from which they were obtained surrenders physical gold to the Delivery
Service Provider, the Delivery Applicant will bear the risk of loss from the time the Delivery Service Provider assumes possession of
physical gold on the Delivery Applicant’s behalf. In the event of any loss or damage in connection with the delivery of physical
gold after such time, the Delivery Applicant will have no claim against the Trust, the Trustee, the Custodian, such precious metals dealer
or the Sponsor but may have a claim against the Delivery Service Provider.
In addition, upon receipt of physical gold, the
Delivery Applicant will have five business days, or such shorter or longer period as may be specified in the Delivery Application from
time to time, following the receipt of the physical gold to notify the Sponsor in writing of any complaints or objections concerning the
shipment, delivery or receipt of the physical gold. In the absence of any such objection or complaint, the Delivery Applicant will be
deemed to have accepted receipt of the physical gold in full satisfaction of the physical gold due the Delivery Applicant and to have
waived any and all claims the Delivery Applicant may have concerning the physical gold received by the Delivery Applicant.
Risks of Transactions with Precious Metals
Dealers
Counterparty risks associated with the Trust’s
transactions with precious metals dealers to exchange the Trust’s gold for physical gold of different specifications may expose
the Trust to potential quantity and quality deficiencies and to situations where the Trust is not be able to exchange gold for physical
gold.
If a Delivery Applicant requests physical gold
in a form other than London Bars, the Trust will enter into an over-the-counter transaction with a precious metals dealer pursuant to
which the type of physical gold requested by a Delivery Applicant will be acquired by the Trust from the precious metals dealer and the
precious metals dealer will be instructed to deliver the requested physical gold to the Delivery Applicant. However, there is no assurance
that physical gold acquired by the Trust from the precious metals dealer will meet the quantity and quality requirements of the requested
over-the-counter transaction. The precious metals dealer is responsible to the Trust for any deficiency in the amount or quality of physical
gold under a Transaction and Shipping Agreement between the Sponsor and the precious metals dealer. In addition, the Trust may enter into
exchange transactions with only one or a limited number of precious metals dealers, which may increase the Trust’s exposure to counterparty
risk. Further, there is a risk that no suitable precious metals dealers will be willing to enter into, or continue to enter into, transactions
with the Trust, and as a result, the Trust may not be able to exchange London Bars for physical gold of different specifications.
Default of a Precious Metals Dealer
The Trust will bear the risk of loss of the
amount expected to be received in an exchange of gold in the event of the default or bankruptcy of a precious metals dealer.
Although the Sponsor is responsible for selecting
the precious metals dealer and ensuring the agreement by which the precious metals dealer is engaged includes appropriate representations,
warranties and covenants of the precious metals dealer regarding completion of the over-the-counter transactions by which the Trust’s
gold is exchanged for the physical gold requested by the Delivery Applicant, the Sponsor is not responsible for the default or misconduct
of the precious metals dealer, provided the Sponsor exercises reasonable care in selecting the precious metals dealer. Under the terms
of the Sponsor’s engagement of the precious metals dealer, the precious metals dealer is responsible to the Trust for any deficiency
in the amount or quality of physical gold it is to provide to the Trust. Accordingly, the Trust will bear the risk in connection with
any loss resulting from the insolvency or any misconduct of a precious metals dealer. Physical gold that is to be exchanged for different
specifications to meet delivery requests from Delivery Applicants will be converted into unallocated gold and deposited into the precious
metals dealer’s unallocated gold account with the Custodian and, until the time that the physical gold to be delivered to a Delivery
Applicant is surrendered to the Delivery Service Provider, the Trust may bear some risk of loss to such physical gold held on the Trust’s
behalf. During those times, the Trust will have no proprietary rights to any specific bars of gold held by the precious metals dealer,
may not have possession of the physical gold held on its behalf by the precious metals dealer and will be an unsecured creditor of a precious
metals dealer. In the event the precious metals dealer becomes insolvent or a claim of misconduct is made against the precious metals
dealer, the precious metals dealer’s assets might not be adequate to satisfy a claim by the Trust.
A Failure by a Precious Metals Dealer to
Exercise Due Care with Respect to the Trust’s Gold Could Result in a Loss to the Trust
For deliveries of gold other than London Bars
to Delivery Applicants, the Trust will rely on a precious metals dealer to exchange the Trust’s gold for American Gold Eagle Coins
or another form of physical gold and to deliver physical gold to the Delivery Applicant pursuant to the Delivery Application. As a result,
a failure by the precious metals dealer to exercise due care in the exchange and delivery of the Trust’s gold could result in a
loss to the Trust.
The Trust will be reliant on a precious metals
dealer to exchange the Trust’s gold to American Gold Eagle Coins or another form of physical gold in the amount and of the quality
specified by the Sponsor in each over-the-counter transaction, and certified by the Sponsor to the Trustee in a confirmation thereof,
and to deliver physical gold to the Delivery Applicant pursuant to the instructions in the Delivery Application. Under the Transaction
and Shipping Agreement, the precious metals dealer is responsible to the Trust for any deficiency in the amount or quality of physical
gold. Although the Transaction and Shipping Agreement requires the precious metals dealer to maintain insurance to protect the Trust in
the event of a loss associated with physical gold, the Trust has no input regarding the amount, validity or adequacy of such insurance.
Any failure by the precious metals dealer to exercise due care with respect to the exchange and delivery of physical gold may not be detectable
or controllable by the Sponsor or the Trustee and, assuming the Delivery Applicant seeks recourse against the Trust, could result in a
loss to the Trust.
The Trust’s Ability to Recover Losses
from a Precious Metals Dealer may be Limited
The limited liability of a precious metals
dealer under the Transaction and Shipping Agreement with the Sponsor and New York State law may impair the ability of the Trust to recover
losses concerning its gold and any recovery may be limited, even in the event of fraud, to the market value of the gold at the time the
fraud is discovered.
The liability of the precious metals dealer is
limited under the Transaction and Shipping Agreement. Under the Transaction and Shipping Agreement, the precious metals dealer shall exercise
the same degree of care and diligence in safeguarding the Trust’s gold as any reasonably prudent person acting as a custodian would
exercise in the same circumstances and is liable for losses associated with the failure of physical gold to be in the amount and of the
quality specified by the Sponsor in an over-the-counter transaction and for physical loss or destruction of gold that results from fraud,
theft, negligence or otherwise and regardless of culpability of the precious metals dealer. However, any such liability is limited to
the market value of physical gold held by the precious metals dealer at the time such negligence, fraud or willful default is discovered
and is subject to the precious metals dealer honoring its contractual obligations.
Physical Gold May not be Available in the
Requested Sizes
There is no guarantee that physical gold will
be available in specified sizes, which may result in a Delivery Applicant paying higher or lower Processing fees.
The Trust holds London Bars. To facilitate a Delivery
Applicant’s ability to exchange Shares for physical gold, the Sponsor will engage in an over-the-counter transaction with a precious
metals dealer to exchange the Trust’s London Bars for physical gold of different specifications. There is no guarantee that at the
time that the Sponsor seeks to exchange the Trust’s London Bars for physical gold of different specifications such physical gold
will be available. As a result, it may be necessary for a Delivery Applicant to wait for such physical gold to be available. If the precious
metals dealer advises the Sponsor that the desired physical gold is not available, the Sponsor will advise the Delivery Applicant. At
that time, the Sponsor may offer the Delivery Applicant physical gold that is different from the physical gold specified in the Delivery
Application that comprises the same Fine Ounce content. If the Delivery Applicant accepts different physical gold than that specified
in the Delivery Application, a new Delivery Application would need to be completed and it may result in higher or lower processing fees.
However, it is unlikely that the cash proceeds (i.e., the difference between the value of a Delivery Applicant’s Shares and the
value of physical gold to be delivered to the Delivery Applicant) will change because the total Fine Ounce component of the physical gold
will not change unless otherwise agreed to by the Delivery Applicant. During times of high demand for coins in the market, Processing
Fees may be updated frequently and may be updated after the time a Delivery Applicant submits an application before it is pre-approved;
in this case, the Delivery Applicant may have to pay a higher Processing Fee to have the Delivery Application pre-approved.
Physical Gold Delivered upon Taking Delivery
in Exchange for Shares May Need to be Re-Assayed
If a Delivery Applicant requests that physical
gold be delivered to a destination that is outside the “chain of integrity,” the physical gold may need to be re-assayed,
which could result in additional costs for the Delivery Applicant and potential delays in assaying the physical gold.
The Trust’s London Bars are generally accepted
by institutional gold dealers without assaying because such London Bars are produced according to strict LBMA specifications and regularly
audited to ensure that specifications meet those stated. When traded exclusively among certain institutional gold dealers, London Bars
are considered to remain within the “chain of integrity.” By remaining in the chain of integrity, London Bars have historically
been available at the lowest transaction costs of any gold bullion because assay costs are minimized. However, a London Bar that leaves
the chain of integrity may need to be re-assayed. In addition to the costs associated with assaying, there may be significant delays in
assaying gold, especially during times when gold may be in high demand, due to potential backlogs.
If, upon exchanging Shares for physical gold,
a Delivery Applicant requests that the physical gold be delivered from the Custodian to another bank or a vault in the business of holding
physical gold for institutional investors, the physical gold may continue to be accepted for trading without being re-assayed while in
the custody of that institution.
If a Delivery Applicant instructs that London
Bars be delivered to a destination other than an institutional gold dealer, the London Bars delivered to the Delivery Applicant may no
longer be deemed part of the chain of integrity. This may make a future sale of such gold more difficult and expensive. In addition, the
value of any London Bars that have left the chain of integrity are likely to be at a discount from the spot price of gold.
Physical gold other than London Bars also may
need to be re-assayed should they leave the Custodian. One and 10 Ounce Bars may be accepted by some dealers without re-assaying should
the bars appear in excellent condition and/or remain in the mint’s original packaging. However, Delivery Applicants should be aware
that dealers may charge a fee to re-assay any bar for any reason.
Limited Investor Rights
As an investor, you will not have the rights
normally associated with ownership of Shares of other types of investment vehicles. For example, you will have extremely limited voting
rights in comparison to those of shareholders in traditional operating companies.
The Trust is a passive investment vehicle with
no management and no board of directors. Thus, the Shares are not entitled to the same rights as Shares issued by a corporation operating
a business enterprise with management and a board of directors. By acquiring Shares, you are not acquiring the right to elect directors,
to vote on certain matters regarding the issuer of your Shares or to take other actions normally associated with the ownership of Shares,
such as the right to bring “oppression” or “derivative” actions. You will only have the extremely limited rights
described under “Description of the Shares.”
Absence of 1940 Act and Commodity Exchange
Act Protections
Investors will not have the protections normally
associated with ownership of Shares in an investment company registered under the 1940 Act or the protections afforded by the Commodity
Exchange Act.
The Trust is not registered as an investment company
under the 1940 Act and is not required to register thereunder. Consequently, investors do not have the regulatory protections provided
to investors in investment companies. The Trust will not hold or trade in commodity futures contracts regulated by the Commodity Exchange
Act, as administered by the CFTC. Furthermore, the Trust is not a commodity pool for purposes of the Commodity Exchange Act, and the Sponsor
is not subject to regulation by the CFTC as a commodity pool operator, or a commodity trading advisor, in connection with the Shares.
Therefore, investors will not have the regulatory protections provided to investors in instruments or commodity pools regulated by the
Commodity Exchange Act.
Termination and Liquidation May Be Required
The Trust may be required to terminate and
liquidate at a time that is disadvantageous to investors.
If the Trust is required to terminate and liquidate,
such termination and liquidation could occur at a time that is disadvantageous to investors, such as when gold prices are lower than the
gold prices at the time when investors purchased their Shares. In such a case, the Trust’s gold may be sold as part of the Trust’s
liquidation and the resulting proceeds distributed to investors will be less than if gold prices were higher at the time of the sale.
RISKS RELATED TO THE CUSTODY OF GOLD
The Trust’s Ability to Recover Losses
from the Custodian is Limited
The limited liability of the Custodian under
the agreement with the Trust and U.K. law may impair the ability of the Trust to recover losses concerning its gold and any recovery may
be limited, even in the event of fraud, to the market value of the gold at the time the fraud is discovered.
The liability of the Custodian is limited under
the Custody Agreement. Under the agreements between the Trustee and the Custodian that establishes the Trust Unallocated Account and the
Trust Allocated Account, the Custodian is liable only for losses that are the direct result of its own negligence, fraud or willful default
in the performance of its duties. Any such liability is further limited to the market value of the gold held in the Trust Allocated Account
and the Trust Unallocated Account at the time such negligence, fraud or willful default is discovered by the Custodian or notified to
the Custodian by the Trustee. In addition, under an unallocated account agreement between the Authorized Participant and the Custodian
or, if the Authorized Participant uses another custodian, that custodian, the Custodian or the Authorized Participant’s custodian
may not be contractually or otherwise liable for any losses suffered by any Authorized Participant or investor. Moreover, the terms of
the Authorized Participant’s unallocated account agreement may have other terms that may limit the recovery of the Authorized Participant’s
losses from the Custodian or the Authorized Participant’s custodian.
It May Be Difficult for the Trust to Seek
Legal Redress Against the Custodian
Although the relationship between the Custodian
and the Trustee concerning the Trust’s allocated gold is expressly governed by U.K. law, a court hearing any legal dispute concerning
that arrangement may disregard that choice of law and apply U.S. law, in which case the ability of the Trust to seek legal redress against
the Custodian may be frustrated.
The obligations of the Custodian under the Custody
Agreement are governed by U.K. law. The Trust is a New York common law trust. Any United States, New York or other court situated in the
United States may have difficulty interpreting U.K. law (which, insofar as it relates to custody arrangements, is largely derived from
court rulings rather than statute), LBMA rules or the customs and practices in the London custody market. It may be difficult or impossible
for the Trust to sue the Custodian in a United States, New York or other court situated in the United States. In addition, it may be difficult,
time consuming and/or expensive for the Trust to enforce in a foreign court a judgment rendered by a United States, New York or other
court situated in the United States.
Investors Do Not have the Right to Assert
a Claim Against the Custodian
Investors and Authorized Participants lack
the right under the Custody Agreement to assert claims directly against the Custodian, which significantly limits their options for recourse.
Neither the investors nor any Authorized Participant
will have a right under the Custody Agreement to assert a claim of the Trustee against the Custodian. Claims under the Custody Agreement
may only be asserted by the Trustee on behalf of the Trust.
A Failure by the Custodian to Exercise Due
Care with Respect to Gold Could Result in a Loss to the Trust
The Trust will rely on the Custodian for the
safekeeping of essentially all of the Trust’s gold. As a result, failure by the Custodian to exercise due care in the safekeeping
of the Trust’s gold could result in a loss to the Trust.
The Trust will be reliant on the Custodian for
the safekeeping of essentially all of the Trust’s gold. The Trustee is not liable for the acts or omissions of the Custodian. The
Trustee has no obligation to monitor the activities of the Custodian other than to receive and review reports prepared by the Custodian
pursuant to the Custody Agreement. In addition, the ability to monitor the performance of the Custodian may be limited because under the
Custody Agreement the Trustee and the Sponsor and any accountants or other inspectors selected by the Sponsor have only limited rights
to visit the premises of the Custodian for the purpose of examining the Trust’s gold and certain related records maintained by the
Custodian. As a result of the above, any failure by the Custodian to exercise due care in the safekeeping of the Trust’s gold may
not be detectable or controllable by the Trustee and could result in a loss to the Trust.
The Trust Would Be An Unsecured Creditor
of the Custodian in the Event of Insolvency
Gold held in the Trust Unallocated Account
and any Authorized Participant’s unallocated account will not be segregated from the Custodian’s assets. If the Custodian
becomes insolvent, its assets may not be adequate to satisfy a claim by the Trust or any Authorized Participant.
Gold which is part of a deposit for a purchase
order or part of a redemption distribution will be held for a time in the Trust Unallocated Account and, previously or after, in the unallocated
gold account of the purchasing Authorized Participant. During those times, the Trust and the Authorized Participant, as the case may be,
will have no proprietary rights to any specific bars of gold held by the Custodian and will each be an unsecured creditor of the Custodian
with respect to the amount of gold held in such unallocated accounts. In addition, if the Custodian fails to segregate gold held by it
on behalf of the Trust, unallocated gold will not be segregated from the Custodian’s assets, and the Trust will be an unsecured
creditor of the Custodian with respect to the amount so held in the event of the insolvency of the Custodian. In the event the Custodian
becomes insolvent, the Custodian’s assets might not be adequate to satisfy a claim by the Trust or the Authorized Participant for
the amount of gold held in their respective unallocated gold accounts.
Baskets May Be Issued for More or Less Gold
than Required
In issuing Baskets, the Trustee will rely on
certain information received from the Custodian which is subject to confirmation after the Trustee has relied on the information. If such
information turns out to be incorrect, Baskets may be issued in exchange for an amount of gold that is more or less than the amount of
gold required to be deposited with the Trust.
The Custodian’s definitive records are prepared
after the close of its business day. However, when issuing Baskets, the Trustee will rely on information reporting the amount of gold
credited to the Trust’s accounts that it receives from the Custodian during the business day and which is subject to correction
during the preparation of the Custodian’s definitive records after the close of business. If the information relied upon by the
Trustee is incorrect, the amount of gold actually received by the Trust may be more or less than the amount required to be deposited for
the issuance of Baskets.
Any Indemnification that the Trust is Required
to Pay May Adversely Affect the Value of the Shares
The value of the Shares will be adversely affected
if the Trust is required to indemnify the Sponsor, the Trustee or the Custodian as contemplated in the Trust Agreement and the Custody
Agreement.
Under the Trust Agreement, each of the Sponsor
and the Trustee has a right to be indemnified from the Trust for any liability or expense it incurs without gross negligence, bad faith
or willful misconduct on its part. Similarly, the Custody Agreement provides for indemnification of the Custodian by the Trust under certain
circumstances. That means that it may be necessary to sell assets of the Trust to cover losses or liability suffered by the Sponsor, the
Trustee or the Custodian. Any sale of that kind would reduce the NAV of the Trust and the value of the Shares.
Custodian Is Not Subject to Specific Governmental
Regulatory Supervision
The gold bullion custody operations of the
Custodian are not subject to specific governmental regulatory supervision.
The Custodian is responsible for the safekeeping
of the Trust’s gold bullion that the Custodian allocates to the Trust in connection with the creation of Baskets by Authorized Participants.
The Custodian also facilitates the transfer of gold in and out of the Trust. Although the Custodian is a market maker, clearer and approved
weigher under the rules of the LBMA (which sets out good practices for participants in the bullion market), the LBMA is not an official
or governmental regulatory body. Furthermore, although the Custodian is subject to general banking regulations by U.S. regulators and
is generally regulated in the U.K. by the Prudential Regulation Authority and the FCA, such regulations do not directly cover the Custodian’s
gold bullion custody operations in the U.K. Accordingly, the Trust is dependent on the Custodian to comply with the best practices of
the LBMA and to implement satisfactory internal controls for its gold bullion custody operations in order to keep the Trust’s gold
secure.
GENERAL RISK
The Trust’s Service Providers May
Not Carry Adequate Insurance
The service providers engaged by the Trust
may not carry adequate insurance to cover claims against them by the Trust, which could adversely affect the value of net assets of the
Trust.
The Trustee, the Custodian, precious metals dealers
and other service providers engaged by the Trust maintain such insurance as they deem adequate with respect to their respective businesses.
Investors cannot be assured that any of the aforementioned parties will maintain any insurance with respect to the Trust’s assets
held or the services that such parties provide to the Trust and, if they maintain insurance, that such insurance is sufficient to satisfy
any losses incurred by them in respect of their relationship with the Trust.
Accordingly, the Trust will have to rely on the
efforts of the service provider to recover from their insurer compensation for any losses incurred by the Trust in connection with such
arrangements.
The Trust as well as the Sponsor and its
service providers are vulnerable to the effects of public health crises, such as the coronavirus pandemic (the “COVID-19 pandemic”).
Pandemics and other public health crises may cause
a curtailment of business activities which may potentially impact the ability of the Sponsor and its service providers to operate. The
COVID-19 pandemic or a similar public health threat could adversely impact the Trust by causing operating delays and disruptions, market
disruption and shutdowns (including as a result of government regulation and prevention measures). The COVID-19 pandemic, for example,
had substantive effects on social, economic and financial systems, including significant uncertainty and volatility in the financial markets.
The Trust as well as the Sponsor and its
service providers are vulnerable to the effects of geopolitical events, including the conflict in the Middle East, the continuation of
the war in Ukraine and other hostilities.
Geopolitical events, including the conflict in
the Middle East, the continuation of the war in Ukraine and other hostilities could disrupt and potentially impact the business activities
of the Sponsor and its service providers and have an adverse effect on the Trust.
On October 7, 2023, militants from Gaza attacked
Israeli towns, killed Israeli civilians and soldiers and took hostages. In response to the attack, Israel declared war against Hamas,
attacking Hamas and Islamic targets in Gaza. The conflict has escalated in the past year, and Israel is fighting adversaries across the
Middle East, including Hezbollah in Lebanon and the Houthis in Yemen and Iran. The responses of countries and political bodies to these
events, the larger overarching tensions, Israel’s military response and the potential for wider conflict may increase financial
market volatility generally, have adverse effects on regional and global economic markets, and cause volatility in the price of gold and
the price of the Shares. In addition, the conflict, along with any global political fallout and implications including sanctions, collateral
war damage, and a potential expansion of the conflict, could disturb the gold market.
Russia launched a large-scale invasion of Ukraine
on February 24, 2022. The extent and duration of the military action, resulting sanctions and economic impacts are impossible to predict.
These and any related events could cause volatility in precious metals prices and have significant impact on Trust performance and the
value of an investment in the Shares. Russia is a significant producer of gold. On March 7, 2022, in response to the Russian hostilities
in the Ukraine, LBMA suspended six Russian refiners; as a result, new production by such refiners were no longer be accepted as “Good
Delivery” by the London Bullion market. The bars these refiners previously produced will still be considered Good Delivery, consistent
with past suspensions of refiners by the LBMA. However, fewer suppliers to the LBMA may lead to a lower supply of Good Delivery gold and
further volatility in the price of gold.
Following an announcement at the G7 Summit to
collectively ban the import of Russian gold, the UK passed regulations which prohibit the direct or indirect (i) import of gold that originated
in Russia, (ii) acquisition of gold that originated in Russia or is located in Russia and (iii) supply or delivery of gold that originated
in Russia, all after July 21, 2022. Similarly, U.S. regulations prohibit the import of gold of Russian origin into the United States on
or after June 28, 2022 and European Union regulations prohibit the direct or indirect import, purchase or transfer of gold if it originates
in Russia and has been exported from Russia after July 22, 2022. On August 3, 2022, Switzerland announced sanctions that ban buying, importing
or transporting gold and gold products from Russia, as well as services in connection with said gold and gold products. Although it is
not possible to predict the impact that these sanctions may have, such sanctions could impact the operations of the Trust and its service
providers and could significantly harm the value of the Trust’s Shares.
The responses of countries and political bodies
to Russia’s actions, the larger overarching tensions, and Ukraine’s military response and the potential for wider conflict
may increase financial market volatility generally, have adverse effects on regional and global economic markets, and cause volatility
in the price of gold and the price of the Shares. In addition, the conflict in Ukraine, along with global political fallout and implications
including sanctions, collateral war damage, and a potential expansion of the conflict beyond Ukraine’s borders, could disturb the
gold market.
Information system disruptions could adversely
affect the Trust’s record keeping and operations
The Trust relies on the information and technology
systems of the Trustee, the Custodian, the Marketing Agent, the Sponsor, the Authorized Participants, the listing exchange, and the Trust’s
other service providers and counterparties (referred to herein as the “Service Providers”), each of which could be directly
or indirectly adversely affected by information systems interruptions, cybersecurity attacks or other disruptions, which in turn could
have a material adverse effect on the Trust.
The Trust and the Service Providers are susceptible
to operational, information security and related cybersecurity risks both directly and through their own service providers. Cyber incidents
can result from deliberate attacks or unintentional events. They include, but are not limited to, gaining unauthorized access to systems,
corrupting or destroying data, and causing operational disruption. Geopolitical tensions may increase the scale and sophistication of
deliberate attacks, particularly those from nation-states or from entities with nation-state backing.
Cybersecurity incidents may cause disruptions
and impact business operations. They may result in any of the following: financial losses (including loss or theft of Trust assets), interference
with the Trust’s ability to calculate its NAV, disclosure of confidential information, impediments to trading, submission of erroneous
trades or erroneous creation or redemption orders, the inability of the Trust or the Service Providers to transact business, violations
of applicable privacy and other laws, regulatory fines, penalties, reputational damage, reimbursement or other compensation costs, and
other legal and compliance costs. In addition, cyber incidents may render records of Trust assets and transactions, Shareholder ownership
of the Shares, and other data integral to the functioning of the Trust inaccessible, inaccurate or incomplete. The Trust may incur substantial
costs in order to resolve or prevent cyber incidents.
Item 1B. Unresolved Staff Comments
None.
Item 1C. Cybersecurity
The Sponsor’s Chief Information Security
Officer (“CISO”) is responsible for overseeing the Trust’s cybersecurity practices. The CISO also manages IT affecting
the Trust. The CISO is responsible for overseeing the ongoing adequacy of design and effective implementation of these policies and procedures
and to review these procedures at least annually. The CISO is trained as a computer scientist (Master of Science) with extensive programming
and system administration experience. The CISO’s background includes study of many of the IT building blocks of a modern office
infrastructure, including the study and programming of network protocols, information theory, public key cryptography.
Information Systems Security
The Sponsor’s CISO oversees the maintenance
of an inventory of information systems (“Information Systems”) employed by the Sponsor of the Trust either directly or through
a vendor. Information Systems include electronic and physical systems used to store, process or transmit information either directly or
through a service provider. This includes all methods of data processing, transmission, and retention, both electronic and physical. Electronic
Information Systems used by on behalf of the Trust must, at a minimum, adequately address security elements consistent with applicable
state and local regulatory requirements and best practices pertaining to:
The adequacy of security measures used by service
providers for internal information will be evaluated in connection with the risk assessment process outlined below in the section labeled
Risk Assessment. The CISO is responsible for classifying information, identifying risks, and identifying risk mitigation strategies. The
CISO is also responsible for evaluating the adequacy of risk mitigation strategies prior to deploying any Information System. Externally
hosted applications (those not installed on the Sponsor’s local network and servers) are reviewed by the CISO at least annually
thereafter.
Risk Identification
The CISO will identify reasonably foreseeable
risks to the security or integrity of each Information System. The risk identification process will consider appropriate internal and
external threat scenarios based on people, process or technology vulnerabilities that could cause the Information System to be compromised,
damaged, tampered with or otherwise impaired.
Risk Mitigation
The CISO will identify processes or controls to
mitigate identified risks to the security or integrity of each Information System. The computer system security requirements set forth
below in this policy may adequately mitigate certain identified risks. Other processes or controls may be required to adequately mitigate
other risks.
Risk Assessment
As part of the Sponsor’s ISSP for the Trust,
the CISO will document in a risk assessment the Information Systems for the Trust, risks identified in Information Systems, and related
risk mitigation processes and controls. Included in the risk assessment will be an assessment of each risk’s potential impact on
the operations affecting the Trust, on the security of the Trust’s data, and also potential business consequences of each risk.
The CISO will review and update the risk assessment at least annually. Additionally, at least annually (for external hosted applications)
and following any significant change in operations (for all applications), the CISO is responsible for gathering information about the
operation of previously identified risk mitigation strategies and any changes to information classification, identified risks or risk
mitigation strategies. The CISO must evaluate the risk mitigation strategies for ongoing adequacy. The evaluation must be documented in
a form prescribed by the CISO. If the CISO concludes that risk mitigation strategies are inadequate for an Information System containing
confidential or internal information, action will be taken to either correct the inadequacy in a timely manner or discontinue use of the
Information System.
Cybersecurity Procedures
The Sponsor has adopted procedures to implement
the cybersecurity policy applicable to the Trust, which include the following:
|
● |
The Sponsor maintains system access rights and controls for the Trust including: |
|
- |
restricting Supervised Persons’ (a “Supervised Person” is each employee, officer, member, and other persons who are subject to the Sponsor’s supervision and control) network resources access to the systems which are necessary for their business functions, |
|
- |
authentication of users, and |
|
- |
secure remote access protocols; |
|
● |
The Sponsor maintains its systems carrying Trust data with appropriate updates and virus protections; |
|
● |
The Sponsor promptly eliminates access to all networks, devices, and resources as part of its HR procedures in the event a Supervised Person resigns or is terminated. Such Supervised Person is required to immediately return all Sponsor-related equipment and information to the CISO; |
|
● |
The Sponsor has adopted procedures governing the use of mobile devices for the business purposes affecting the Trust; |
|
● |
The Sponsor prohibits Supervised Persons from installing software on company owned equipment without first obtaining approval from the CISO or other designated person(s); |
|
● |
The CISO or other designated person(s) conducts periodic monitoring of the networks affecting the Trust to detect potential cybersecurity events; |
|
● |
The CISO or other designated person(s) conducts periodic monitoring of the networks affecting the Trust to detect unauthorized data transfers; |
|
● |
Security procedures to protect information that is electronically stored or transmitted include authentication protocols; secure access control measures, and encryption of all transmitted files; |
|
● |
All suspicious activity involving the Information Systems affecting the Trust recognized or uncovered by personnel should be promptly reported to his or her supervisor and/or the CISO; and |
| ● | A Supervised Person must immediately notify his or her supervisor and/or the CISO to report a lost or stolen laptop, mobile device, and/or flash drive. |
There have been no cybersecurity incidents since
the Trust has been founded.
Item 2. Properties
Not applicable.
Item 3. Legal Proceedings
None.
Item 4. Mine Safety Disclosures
Not applicable.
PART II
Item 5. Market for Registrant’s Common
Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
(a)
The Trust was formed on May 6, 2014 (the “Date
of Inception”) following an initial deposit of gold. The Trust’s Shares have been listed on the NYSE Arca under the symbol
OUNZ since May 16, 2014.
(b)
Not applicable.
(c)
Although the Trust does not purchase Shares directly
from its investors in connection with Delivery Applications or the redemption of Baskets, the Trust redeemed Shares as follows during
the year ended January 31, 2025:
Period | |
Total Shares Redeemed | | |
Average Ounces of Gold Per Share | |
First Quarter | |
| 14,797 | | |
| 0.00966751 | |
Second Quarter | |
| 24,845 | | |
| 0.00966152 | |
Third Quarter | |
| 26,527 | | |
| 0.00965550 | |
Fourth Quarter | |
| 302,800 | | |
| 0.00964955 | |
Total | |
| 368,969 | | |
| | |
Item 6. [Reserved]
Item 7. Management’s Discussion and Analysis
of Financial Condition and Results of Operations
This information should be read together with
the financial statements and notes to the financial statements included in this Report. The discussion and analysis that follows may contain
forward-looking statements, such as those that relate to future events or future performance. In some cases, such forward-looking statements
can be identified by terminology such as “may,” “should,” “expect,” “plan,” “anticipate,”
“believe,” “estimate,” “predict,” “potential” or the negative of these terms or other
comparable terminology. Neither the Sponsor, nor any other person assumes responsibility for the accuracy or completeness of forward-looking
statements. Except as required by applicable law, neither the Trust nor the Sponsor is under a duty to update any of the forward-looking
statements to conform such statements to actual results or to a change in the Sponsor’s expectations or predictions.
Introduction
The Trust is an exchange-traded fund formed on
May 6, 2014 under New York law pursuant to the Trust Agreement. The Trust is not managed like a corporation or an active investment vehicle.
It does not have any officers, directors, or employees and is administered by the Trustee pursuant to the Trust Agreement. The Trust is
not registered as an investment company under the Investment Company Act of 1940, as amended, and is not required to register under such
act. It will not hold or trade in commodity futures contracts, nor is it a commodity pool, or subject to regulation as a commodity pool
operator or a commodity trading adviser in connection with issuing shares. After consideration of Financial Accounting Standards Topic
946, however, the Sponsor has concluded the Trust meets the fundamental characteristics of an investment company. In addition, while the
Trust does not currently possess all of the typical characteristics of an investment company, it believes its activities are consistent
with those of an investment company and will therefore apply the guidance in Financial Accounting Standards Topic 946, including disclosure
of the financial support contractually required to be provided by an investment company to any of its investees. The Sponsor is responsible
for, among other things, overseeing the performance of the Trustee and the Trust’s principal service providers, including the preparation
of financial statements. The Trustee is responsible for the day-to-day administration of the Trust.
The Initial Purchaser contributed 1,000 Ounces
of gold in exchange for 100,000 Shares on May 6, 2014. At contribution, the value of the gold deposited with the Trust was based on the
price of an Ounce of gold of $1,306.25. The Initial Purchaser is not affiliated with the Sponsor or the Trustee.
The Trust’s primary objective is to provide
investors with an opportunity to invest in gold through the Shares and be able to take delivery of physical gold in exchange for their
Shares. The Trust’s secondary objective is for the Shares to reflect the performance of the price of gold less the expenses of the
Trust’s operations. The Trust is not actively managed.
The fiscal year end of the Trust is January 31st.
Shares of the Trust trade on the NYSE Arca under
the symbol “OUNZ.”
Investing in the Shares does not insulate the
investor from certain risks, including price volatility. The following table illustrates the movement in the NAV of the Shares against
the corresponding gold price (per 1/100 of an oz. of gold) since inception:
NAV per Share vs. 1/100th Gold Fix from the Date
of Inception to January 31, 2025.
The divergence of the NAV per Share from the gold
price over time reflects the cumulative effect of the Trust expenses that arise if an investment had been held since inception.
Critical Accounting Policies
In preparing financial statements in conformity
with accounting principles generally accepted in the United States of America (“GAAP”), management makes estimates and assumptions
that affect the reported amounts of assets, liabilities and disclosures of contingent assets and liabilities at the date of the financial
statements, as well as the reported amount of revenue and expenses reported during the period. Actual results could differ from these
estimates.
The following is a summary of significant accounting
policies followed by the Trust. Please refer to Note 2 to the Financial Statements included elsewhere in this Report for further discussion
of our accounting policies.
Valuation of Gold
Various inputs are used in determining the fair
value of the Trust’s assets or liabilities. These inputs are categorized into three broad levels. Level 1 includes unadjusted prices
in active markets for identical assets or liabilities. Level 2 includes other significant observable market based inputs (including prices
for similar securities, interest rates, prepayment speed, and credit risk). Level 3 includes unobservable inputs, which may include management’s
own assumptions in determining the fair value of investments. The Trust does not hold any derivative instruments, and its assets only
consist of allocated gold bullion and gold receivable; representing gold covered by contractually binding orders for the creation of shares
where the gold has not yet been transferred to the Trust’s account and, from time to time, cash, which is used to pay expenses.
London Gold Delivery Bars are held by the Custodian,
on behalf of the Trust, at the London, United Kingdom vaulting premises. All gold is valued based on its Fine Ounce content, calculated
by multiplying the weight of gold by its purity; the same methodology is applied independent of the type of gold held by the Trust; similarly,
the value of up to 430 Fine Ounces of unallocated gold the Trust may hold is calculated by multiplying the number of Fine Ounces with
the price of gold determined by the Trustee as follows. The Trustee determines the NAV of the Trust on each day that NYSE Arca is open
for regular trading, as promptly as practical after 4:00 PM New York time. The NAV of the Trust is the aggregate value of the Trust’s
assets less its estimated accrued but unpaid liabilities (which include accrued expenses). The Trustee computes the NAV per Share by dividing
the net assets of the Trust by the number of the shares outstanding on the date the computation is made.
In determining the Trust’s NAV, prior to
the Index Change Date, the Trustee valued the gold held by the Trust based on the LBMA PM Gold Price, and after the Index Change Date,
the Trustee valued the gold held by the Trust based on the Solactive Index. Prior to March 20, 2015, the Trustee utilized the daily fix
of the price of a Fine Ounce of gold as performed by the five members of the London gold fix, which has now been replaced by the ICE Benchmark
Administration as an independent third-party administrator.
If the Sponsor determines that such price is inappropriate
to use, it shall identify an alternate basis for evaluation to be employed by the Trustee. The Sponsor may instruct the Trustee to use
a different publicly available price which the Sponsor determines to fairly represent the commercial value of the Trust’s gold.
| |
Ounces | | |
Fair Value | |
Beginning balance as of February 1, 2024 | |
| 383,204 | | |
$ | 780,184,353 | |
Gold bullion contributed | |
| 89,807 | | |
$ | 227,982,044 | |
Gold bullion distributed | |
| (3,561 | ) | |
$ | (9,295,825 | ) |
Realized gain from gold distributed from in-kind | |
| - | | |
$ | 2,788,531 | |
Change in unrealized appreciation (depreciation) | |
| - | | |
$ | 312,938,300 | |
Ending balance as of January 31, 2025 | |
| 469,450 | | |
$ | 1,314,597,403 | |
Under the Custody Agreement, the Trustee, the
Sponsor and the Sponsor’s auditors and inspectors may visit the premises of the Custodian for the purpose of examining the Trust’s
gold and certain related records maintained by the Custodian.
The Sponsor exercised its right to visit the Custodian’s
premises and inspect the Trust’s gold and related records most recently on July 3, 2024.
During the fiscal year that ended January 31,
2025, Inspectorate International Limited, a leading commodity inspection and testing company, conducted a physical gold audit of the Trust
on October 16, 2024. Due to unavailability of time slots at the vault, Inspectorate was unable to perform a physical inspection of the
Trust’s gold on January 31, 2025. Inspectorate was able to conduct a physical gold audit of the Trust on February 5, 2025.
Change in Pricing Index
On the Index Change Date, the pricing index the
Sponsor uses in relation to the Shares issued by the Trust changed to reference the Solactive Index in lieu of the LBMA PM Gold Price.
Following the Index Change Date, the Trustee values
the gold held by the trust based on the Solactive Index. Solactive will own, calculate, and disseminate the Solactive Index. The Solactive
Index is a U.S. Dollar denominated index that aims to provide a price fixing for the gold spot price quoted as U.S. Dollars per Troy Ounce
and determined for the close of trading on the NYSE. The Solactive Index calculates gold bullion fixing prices by taking TWAP of XAU trading
prices provided via IDS data feed.
Specifically, the Solactive Index uses a TWAP
calculation to determine an average price that is time-weighted, using Trade Ticks for two specified time periods around the scheduled
close of trading on the NYSE (generally, 4:00 PM Eastern Time). The TWAP is derived for (1) the Time Period 1, which consists of the five
minutes before the close of trading, and (2) Time Period 2, which consists of the six seconds after the close of trading. The TWAPs for
Time Period 1 and Time Period 2 are then aggregated, with 90% weighting given to Time Period 1 and 10% weighting given to Time Period
2, to calculate the Solactive Index. The TWAPs for Time Period 1 and Time Period 2 are then added together to establish the Solactive
Index price.
For any calculation day t, the Solactive
Index (Indext), is determined in accordance with the following formula:

The Solactive Index is calculated and published
by Solactive no later than 30 minutes following the close of trading on the NYSE, disseminated to major financial data providers, and
made publicly available via the Trust’s website.
The Solactive Index calculation is based on XAU
market data from IDS, which is a major provider of financial market data. The data is available through IDS’s data streaming service,
which covers 2,700 spot rates and over 7,500 forwards and non-deliverable forwards, with an average of over 130 million updates per day
for spot. IDS compiles data from over 100 sources, including market makers, execution venues, banks and brokers from across the globe,
and every updating Trade Tick of spot streaming data is available via IDS’s Integrated Data Viewer service in a file-based format.
It is unlikely that, on any given trading day
for the Shares, there would be no Trade Ticks recorded for XAU in either Time Period 1 or Time Period 2, such that the Solactive Index
calculation could not be performed on such day. Trade Ticks representing XAU are the closing prices for specific gold bullion transactions
posted in a 24-hour, global, over-the-counter gold bullion market, which is not subject to trading suspensions, trading halts, or market
closures. However, in the unlikely event that IDS is unable to publish pricing information for XAU, for whatever reason, during either
Time Period 1 or Time Period 2 on a given trading day, the last available Solactive Index calculation will be used in accordance with
Solactive’s published and publicly available disruption policy.
If the Sponsor determines that such price is inappropriate
to use, it shall identify an alternate basis for evaluation to be employed by the Trustee. The Sponsor may instruct the Trustee to use
a different publicly available price which the Sponsor determines to fairly represent the commercial value of the Trust’s gold.
The Trustee’s estimation of accrued but
unpaid fees, expenses and liabilities will be conclusive upon all persons interested in the Trust, and no revision or correction in any
computation made under the Trust Agreement will be required by reason of any difference in amounts estimated from those actually paid.
The Sponsor and the investors may rely on any
evaluation or determination of any amount made by the Trustee, and except for any determination by the Sponsor as to the price to be used
to evaluate gold, the Sponsor will have no responsibility for the evaluation’s accuracy. The determinations the Trustee makes will
be made in good faith upon the basis of, and the Trustee will not be liable for any errors contained in, information reasonably available
to it. The Trustee will not be liable to the Sponsor, Authorized Participants, the investors or any other person for errors in judgment.
However, the preceding liability exclusion will not protect the Trustee against any liability resulting from bad faith or gross negligence
in the performance of its duties.
Marketing Agent Agreement and Name Change
On October 22, 2015, the Sponsor and the Trustee
entered into a First Amendment To Depositary Trust Agreement (the “First Trust Amendment”), amending the Trust Agreement to
effectuate a change in the name of the Trust from “Merk Gold Trust” to “Van Eck Merk Gold Trust,” effective as
of October 26, 2015. As a result of the name change, all references to “Merk Gold Trust” in the Trust Agreement were amended
to read “Van Eck Merk Gold Trust,” and the shares offered by the Trust were known as the “Van Eck Merk Gold Shares”.
On October 22, 2015, the Sponsor, for the benefit
of the Trust, entered into a Marketing Agent Agreement (the “Marketing Agreement”) with Van Eck Securities Corporation (“VanEck”
or “Marketing Agent”). Pursuant to the Marketing Agreement, VanEck now provides assistance in the marketing of the Shares.
The obligations created by the Marketing Agreement are obligations of the Sponsor of the Trust and any fees payable under the Marketing
Agreement to VanEck are payable from the Sponsor’s fee (as calculated and defined in the Trust Agreement). The Trust will not incur
additional financial or other performance obligations pursuant to the Marketing Agreement.
The Sponsor entered into the First Trust Amendment
and effectuated the name change of the Trust in satisfaction of a term of the Marketing Agreement. The Marketing Agreement further grants
VanEck the right to elect to replace Merk as the sponsor of the Trust under specific qualifying circumstances, subject to the execution
and consummation of definitive agreements addressing all regulatory requirements applicable to such transaction and satisfaction of such
requirements, and announcement and related reporting at such time. Specifically, VanEck has a right of first refusal for the purchase
of the sponsorship of the Trust, and all rights attributable thereto, upon the earlier of a commitment for a change of control of Merk
or 15 years from the date of the Marketing Agreement. Additionally, VanEck may elect to replace Merk as the sponsor of the Trust upon
the earlier of the average daily net assets of the Trust during a calendar quarter not attributable to Shares held by Merk or its affiliates
(“Third Party Assets”) equaling $500 million, or VanEck’s compensation under the fee provisions of the Marketing Agreement
reaching in aggregate 10% of the gross proceeds from sale of the Shares (the “Maximum Fee”).
Merk further agreed that if the Third Party Assets
equal or exceed $500 million, for such period as Merk remains sponsor of the Trust, VanEck may propose the rate of the Sponsor’s
fee to Merk, which Merk shall not unreasonably reject and shall timely adopt if reasonable, provided, VanEck acknowledges that only the
formal named sponsor of the Trust shall have the right to set the Sponsor’s fee at any time.
On April 28, 2016, the Sponsor and the Trustee
entered into a Second Amendment to Depositary Trust Agreement, amending the Trust Agreement to effectuate a second change in the name
of the Trust from “Van Eck Merk Gold Trust” to “VanEck Merk Gold Trust,” at the request of the Marketing Agent
to reflect its rebranding as “VanEck”. As a result of the name change, all references to “Van Eck Merk Gold Trust”
in the Trust Agreement were amended to read “VanEck Merk Gold Trust,” and the shares offered by the Trust are now known as
the “VanEck Merk Gold Shares”. On August 30, 2024, the Sponsor and the Trust entered into a Third Amendment to the Depository
Trust Agreement (the “Third Trust Amendment”), amending the Trust Agreement to effectuate a third change in the name of the
Trust from “VanEck Merk Gold Trust” to “VanEck Merk Gold ETF.” The shares offered by the Trust remain known as
the “VanEck Merk Gold Shares.” Except for the name change effected pursuant to the Third Trust Amendment, the Trust Agreement
remains in full force and effect on its existing terms.
Change in Settlement Cycle and Amendment to
Authorized Participant Agreements
On March 22, 2017, the Securities and Exchange
Commission adopted an amendment to reduce by one business day the standard settlement cycle for most broker-dealer securities transactions.
Prior to the implementation of the shorter settlement cycle, the standard settlement cycle for such transactions was three business days,
known as T+3. The amended rule shortens the settlement cycle to two business days, or T+2. This change in the settlement cycle affects
both the creation and redemption procedures for Baskets and trading in the shares. Compliance with the new settlement cycle went into
effect on September 5, 2017.
Due to the fact that the aforementioned creation
and redemption procedures are addressed in the Authorized Participant Agreements by among the Authorized Participants, the Trustee and
the Sponsor, the Trustee and the Sponsor exercised their rights to amend each such agreement to address the new T+2 settlement cycle and
executed First Amendments to each of the Authorized Participant Agreements, effective as of September 5, 2017, and provided timely notice
of such amendment to the Authorized Participants. Except for the foregoing amendments, the Authorized Participant Agreements remain in
full force and effect on their existing terms.
Review of Financial Results
The NAV of the Trust is obtained by subtracting
the Trust’s expenses and liabilities on any day from the value of the gold owned by the Trust on that day; the NAV per Share is
obtained by dividing the NAV of the Trust on a given day by the number of Shares outstanding on that day.
Comparison of the Fiscal Years Ended January
31, 2025 and 2024
The Trust’s NAV increased from $780,184,347 on January 31, 2024
to $1,314,597,389 on January 31, 2025, a 68.50% increase for the fiscal year. The increase in the Trust’s NAV resulted primarily
from the appreciation of gold. There was also an increase in the number of Shares issued during the period, which rose from 39,626,030
Shares issued and outstanding on January 31, 2024 to 48,664,686 Shares issued and outstanding on January 31, 2025.
NAV per Share increased 37.18% from $19.69 on
January 31, 2024 to $27.01 on January 31, 2025. The Trust’s NAV per Share increased slightly less than the price per Ounce of gold
on a percentage basis due to the Sponsor’s Fee, which was $2,578,699 for the year, or 0.20% of the Trust’s net assets on an
annualized basis.
The NAV per Share of $27.01 on January 31, 2025
was the highest during the year, compared with a low of $19.25 on February 14, 2024.
Net increase in net assets resulting from operations for the year ended
January 31, 2025 was $313,148,132, resulting from a net realized gain of $2,788,531 from gold bullion distributed for redemptions and
an increase in unrealized appreciation on gold of $312,938,300 offset by the Sponsor’s Fee of $2,578,699. Other than the Sponsor’s
Fee, the Trust had no expenses during the year ended January 31, 2025.
For the calendar year ended December 31, 2023,
the Marketing Agent earned a fee of $298,771. For the calendar year ended December 31, 2024, the Marketing Agent earned a fee of $630,549.
The total fees earned by the Marketing Agent since the initiation of the Marketing Agent’s efforts through December 31, 2024 are
$1,666,878, which at that time represented 1.54% of the Maximum Fee potentially payable to the Marketing Agent pursuant to the Marketing
Agent Agreement. The fee earned in a calendar quarter is paid in the subsequent calendar quarter.
Comparison of the Fiscal Years Ended January
31, 2024 and 2023
The Trust’s NAV increased from $656,592,798
on January 31, 2023 to $780,184,347 on January 31, 2024, an 18.82% increase for the fiscal year. The increase in the Trust’s NAV
resulted primarily from an increase in the number of Shares issued during the period, which rose from 35,203,259 Shares issued and outstanding
on January 31, 2023 to 39,626,030 Shares issued and outstanding on January 31, 2024.
NAV per Share increased 5.58% from $18.65 on January
31, 2023 to $19.69 on January 31, 2024. The Trust’s NAV per Share increased slightly less than the price per Ounce of gold on a
percentage basis due to the Sponsor’s Fee, which was $1,798,880 for the year, or 0.23% of the Trust’s net assets on an annualized
basis.
The NAV per Share of $20.10 on December 27, 2023
was the highest during the year, compared with a low of $17.55 on February 24, 2023.
Net increase in net assets resulting from operations for the year ended
January 31, 2024 was $37,899,085, resulting from a net realized gain of $3,399,475 from gold bullion distributed for redemptions and an
increase in unrealized appreciation on gold of $36,298,490 offset by the Sponsor’s Fee of $1,798,880. Other than the Sponsor’s
Fee, the Trust had no expenses during the year ended January 31, 2024.
For the calendar year ended December 31, 2022,
the Marketing Agent earned a fee of $322,287. For the calendar year ended December 31, 2023, the Marketing Agent earned a fee of $298,771.
The total fees earned by the Marketing Agent since the initiation of the Marketing Agent’s efforts through December 31, 2023 are
$1,036,329, which at that time represented 1.2% of the Maximum Fee potentially payable to the Marketing Agent pursuant to the Marketing
Agent Agreement. The fee earned in a calendar quarter is paid in the subsequent calendar quarter.
Comparison of the Fiscal Years Ended January
31, 2023 and 2022
The Trust’s NAV increased from $586,245,772
on January 31, 2022 to $656,592,798 on January 31, 2023, a 12% increase for the fiscal year. The increase in the Trust’s NAV resulted
primarily from an increase in the number of Shares issued during the period, which rose from 33,599,843 Shares issued and outstanding
on January 31, 2022 to 35,203,259 Shares issued and outstanding on January 31, 2023.
NAV per Share increased 6.88% from $17.45 on January
31, 2022 to $18.65 on January 31, 2023. The Trust’s NAV per Share increased slightly less than the price per Ounce of gold on a
percentage basis due to the Sponsor’s Fee, which was $1,557,794 for the year, or 0.24% of the Trust’s net assets on an annualized
basis.
The NAV per Share of $19.81 on March 8, 2022 was
the highest during the year, compared with a low of $15.80 on November 3, 2022.
Net increase in net assets resulting from
operations for the year ended January 31, 2023 was $31,614,263, resulting from a net realized gain of $1,178,406 from gold bullion
distributed for redemptions and an increase in unrealized appreciation on gold of $31,993,651 offset by the Sponsor’s Fee of
$1,557,794. Other than the Sponsor’s Fee, the Trust had no expenses during the year ended January 31, 2023.
For the calendar year ended December 31, 2021,
the Marketing Agent earned a fee of $233,426. For the calendar year ended December 31, 2022, the Marketing Agent earned a fee of $322,287.
The total fees earned by the Marketing Agent since the initiation of the Marketing Agent’s efforts through December 31, 2022 are
$737,557, which at that time represented 0.97% of the Maximum Fee potentially payable to the Marketing Agent pursuant to the Marketing
Agent Agreement. The fee earned in a calendar quarter is paid in the subsequent calendar quarter.
Liquidity
The Trust is not aware of any trends, demands,
conditions or events that are reasonably likely to result in material changes to its liquidity needs. In exchange for the Sponsor’s
Fee, the Sponsor has agreed to assume most of the expenses incurred by the Trust. As a result, the only expense of the Trust during the
period covered by this Report was the Sponsor’s Fee. The Trustee will not sell gold to pay the Sponsor’s Fee but will pay
the Sponsor’s Fee through Share creation. At January 31, 2025, the Trust did not have any cash balances.
Item 7A. Quantitative and Qualitative Disclosures
about Market Risk
Not applicable.
Item 8. Financial Statements
The audited financial statements required by Regulation
S-X, with the report of the Trust’s independent registered public accounting firm, appear on pages F-1 to F-13 of this Report and
are incorporated in this Item 8 by reference to such information.
VanEck Merk Gold ETF
Quarterly Statements of Operations
For the year ended January 31, 2025
| |
(unaudited) | | |
| |
| |
Three Months ended April 30, 2024 | | |
Three Months ended July 31, 2024 | | |
Three Months ended October 31, 2024 | | |
Three Months ended January 31, 2025 | | |
Year ended January 31, 2025 | |
EXPENSES | |
| | |
| | |
| | |
| | |
| |
Sponsor’s fees | |
$ | 516,393 | | |
$ | 606,009 | | |
$ | 695,993 | | |
$ | 760,304 | | |
$ | 2,578,699 | |
Total expenses | |
| 516,393 | | |
| 606,009 | | |
| 695,993 | | |
| 760,304 | | |
| 2,578,699 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Net Investment loss | |
| (516,393 | ) | |
| (606,009 | ) | |
| (695,993 | ) | |
| (760,304 | ) | |
| (2,578,699 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Net Realized and Unrealized Gain (Loss) | |
| | | |
| | | |
| | | |
| | | |
| | |
Net realized gain (loss) from gold bullion distributed for redemptions | |
| 62,679 | | |
| 133,437 | | |
| 216,650 | | |
| 2,375,765 | | |
| 2,788,531 | |
Net change in unrealized appreciation (depreciation) on investment in gold bullion | |
| 97,950,683 | | |
| 64,214,008 | | |
| 128,338,192 | | |
| 22,435,417 | | |
| 312,938,300 | |
Net realized and unrealized gain (loss) from operations | |
| 98,013,362 | | |
| 64,347,445 | | |
| 128,554,842 | | |
| 24,811,182 | | |
| 315,726,831 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Net Increase (Decrease) in Net Assets resulting from operations | |
$ | 97,496,969 | | |
$ | 63,741,436 | | |
$ | 127,858,849 | | |
$ | 24,050,878 | | |
$ | 313,148,132 | |
VanEck Merk Gold ETF
Quarterly Statements of Operations
For the year ended January 31, 2024
| |
(unaudited) | | |
| |
| |
Three Months ended April 30, 2023 | | |
Three Months ended July 31, 2023 | | |
Three Months ended October 31, 2023 | | |
Three Months ended January 31, 2024 | | |
Year ended January 31, 2024 | |
EXPENSES | |
| | |
| | |
| | |
| | |
| |
Sponsor’s fees | |
$ | 409,800 | | |
$ | 458,754 | | |
$ | 451,271 | | |
$ | 479,055 | | |
$ | 1,798,880 | |
Total expenses | |
| 409,800 | | |
| 458,754 | | |
| 451,271 | | |
| 479,055 | | |
| 1,798,880 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Net Investment loss | |
| (409,800 | ) | |
| (458,754 | ) | |
| (451,271 | ) | |
| (479,055 | ) | |
| (1,798,880 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Net Realized and Unrealized Gain (Loss) | |
| | | |
| | | |
| | | |
| | | |
| | |
Net realized gain (loss) from gold bullion distributed for redemptions | |
| 609,442 | | |
| - | | |
| 935,883 | | |
| 1,854,150 | | |
| 3,399,475 | |
Net change in unrealized appreciation (depreciation) on investment in gold bullion | |
| 19,860,745 | | |
| (4,488,011 | ) | |
| 3,903,440 | | |
| 17,022,316 | | |
| 36,298,490 | |
Net realized and unrealized gain (loss) from operations | |
| 20,470,187 | | |
| (4,488,011 | ) | |
| 4,839,323 | | |
| 18,876,466 | | |
| 39,697,965 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Net Increase (Decrease) in Net Assets resulting from operations | |
$ | 20,060,387 | | |
$ | (4,946,765 | ) | |
$ | 4,388,052 | | |
$ | 18,397,411 | | |
$ | 37,899,085 | |
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure
There have been no changes in accountants and
no disagreements with accountants during the year ended January 31, 2025.
Item 9A. Controls and Procedures
Conclusion Regarding the Effectiveness of
Disclosure Controls and Procedures
The Trust maintains disclosure controls and procedures
that are designed to ensure that information required to be disclosed in its Exchange Act reports is recorded, processed, summarized and
reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated
to the principal executive officer and principal financial officer of the Sponsor, who performs functions similar to those a principal
executive officer and principal financial officer of the Trust would perform if the Trust had officers, to allow timely decisions regarding
required disclosure.
Under the supervision and with the participation
of the principal executive officer and principal financial officer of the Sponsor, the Sponsor conducted an evaluation of the Trust’s
disclosure controls and procedures, as defined under Exchange Act Rule 13a-15(e), as of January 31, 2025. Based on this evaluation, the
principal executive officer and principal financial officer of the Sponsor concluded that the Trust’s disclosure controls and procedures
were effective as of January 31, 2025.
Management’s Report on Internal Control
over Financial Reporting
The Sponsor’s management is responsible
for establishing and maintaining adequate internal control over financial reporting, as defined under Exchange Act Rules 13a-15(f)
and 15d-15(f). The Trust’s internal control over financial reporting is a process designed to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting
principles generally accepted in the United States. Internal control over financial reporting includes those policies and procedures that:
(1) |
pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the Trust’s assets; |
(2) |
provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that the Trust’s receipts and expenditures are being made only in accordance with appropriate authorizations; and |
(3) |
provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Trust’s assets that could have a material effect on the financial statements. |
Because of its inherent limitations, internal
control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become ineffective because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.
The Principal Executive Officer of the Sponsor
assessed the effectiveness of the Trust’s internal control over financial reporting as of January 31, 2025. In making this assessment,
he used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control—Integrated
Framework (2013). His assessment included an evaluation of the design of the Trust’s internal control over financial reporting and
testing of the operational effectiveness of its internal control over financial reporting. Based on his assessment and those criteria,
the Principal Executive Officer of the Sponsor concluded that the Trust maintained effective internal control over financial reporting
as of January 31, 2025.
Cohen & Company, Ltd., the independent registered public accounting
firm that audited and reported on the financial statements as of and for the year ended January 31, 2025 included in this Form 10-K,
as stated in their report which is included herein, and issued an attestation report on the effectiveness of the Trust’s internal
control over financial reporting as of January 31, 2025.
March 28, 2025
Item 9B. Other Information
Not applicable.
Item 9C. Disclosure Regarding Foreign Jurisdictions
that Prevent Inspections
Not applicable.
PART III
Item 10. Directors, Executive Officers and
Corporate Governance
The Trust has no directors or executive officers.
The biography of the President and Chief Investment Officer of the Sponsor is set out below:
Axel Merk, President and Chief Investment Officer
Mr. Merk is the founder of the Sponsor
and has served as President, Chief Investment Officer and Manager of the Sponsor since its inception in December 2000. Mr. Merk oversees
and directs the Sponsor’s business and operations, including its fulfillment of its obligations to the Trust. Mr. Merk founded Merk
Investments AG in 1994, and served as Chief Investment Officer from 1994 to 2001, during which time he provided investment advisory services.
In October 2001, Merk Investments AG transferred its advisory functions to the Sponsor, where Mr. Merk continues to provide advisory services
and, since 2005, manages a family of currency mutual funds. Mr. Merk earned a B.A. in Economics (magna cum laude) and a M. Sc. in Computer
Science from Brown University in 1991 and 1992, respectively. Mr. Merk is 55 years old.
Policies of the Sponsor
The Sponsor has adopted an insider trading policy to prevent the misuse
of material non-public information in accordance with federal securities laws, including provisions of the Investment Advisers Act of
1940. This policy applies to the Sponsor, including its directors, officers, employees, and other individuals under its supervision. The
Trust itself does not have a separate insider trading policy, as it does not engage in active management or trading.
The policy prohibits individuals subject to it from trading in any
securities while in possession of material non-public information obtained through their role at the Sponsor. The Sponsor maintains a
list of restricted securities for which trading is not permitted due to potential access to confidential or non-public information.
Individuals covered by the policy are required to disclose all personal
securities accounts and provide reports of their securities transactions on a periodic basis. The Sponsor’s compliance team monitors
trading activity to ensure adherence to the policy. Any financial, business, or personal relationships that may provide access to non-public
information must be disclosed to the compliance team.
Violations of the policy may result in disciplinary action, including
termination of employment and, where applicable, referral to regulatory authorities. The policy is reviewed periodically and updated as
needed to comply with applicable regulations and best practices. A copy of the Sponsor’s insider trading policy is filed as Exhibit
19.1 to this report.
The Sponsor has adopted a code of ethics. This code of ethics applies
to the Sponsor, including its officers. The Trust itself does not have a separate code of ethics.
Item 11. Executive Compensation
The Trust does not have directors or executive
officers. The only ordinary expense paid by the Trust is the Sponsor’s Fee.
Item 12. Security Ownership of Certain Beneficial
Owners and Management and Related Stockholder Matters Security Ownership of Certain Beneficial Owners
Change of Control Arrangements
The Marketing Agreement grants VanEck the right
to elect to replace Merk as the sponsor of the Trust under specific qualifying circumstances, subject to the execution and consummation
of definitive agreements addressing all regulatory requirements applicable to such transaction and satisfaction of such requirements,
and announcement and related reporting at such time. Specifically, VanEck has a right of first refusal for the purchase of the sponsorship
of the Trust, and all rights attributable thereto, upon the earlier of a commitment for a change of control of Merk or 15 years from the
date of the Marketing Agreement. Additionally, VanEck may elect to replace Merk as the sponsor of the Trust upon the earlier of the Third
Party Assets equaling $500 million, or VanEck’s compensation under the fee provisions of the Marketing Agreement reaching in aggregate
10% of the gross proceeds from sale of the Shares. See “Marketing Agent Agreement and Name Change” under Item 7.
Securities Authorized for Issuance under
Equity Incentive Plans
Not applicable.
Item 13. Certain Relationships and Related Transactions, and Director
Independence.
Not applicable.
Item 14. Principal Accounting Fees and Services.
Fees for services performed by Cohen & Company,
Ltd., as paid by the Sponsor from the Sponsor’s Fee, for the years ending January 31, 2025 and January 31, 2024:
| |
2025 | | |
2024 | |
Audit fees | |
$ | 64,000 | | |
$ | 61,500 | |
Audit-related fees | |
| — | | |
| — | |
Total | |
$ | 64,000 | | |
$ | 61,500 | |
PART IV
Item 15. Exhibits, Financial Statement Schedules.
(a)(1) Financial Statements
See Index to Financial Statements on Page F-1
for a list of the financial statements being filed herein.
(a)(2) Financial Statement Schedules
Schedules have been omitted since they are either
not required, not applicable, or the information has otherwise been included.
(a)(3) Exhibits
Exhibit No. |
|
Exhibit Description |
4.1(a) |
|
Form of Depositary Trust Agreement between Merk Investments LLC, as sponsor, and The Bank of New York Mellon, as trustee (incorporated by reference to Exhibit 4.1 filed with Registration Statement No. 333-180868 on April 15, 2014) |
4.1(b) |
|
First Amendment To Depositary Trust Agreement, dated as of October 22, 2015, by and between Merk Investments LLC, as sponsor of the Trust, and The Bank of New York Mellon, as trustee of the Trust (incorporated by reference to Exhibit 4.1 filed with Current Report on Form 8-K on October 26, 2015) |
4.1(c) |
|
Second Amendment to the Depositary Trust Agreement, dated as of April 28, 2016, by and between Merk Investments LLC, as sponsor of the Trust, and The Bank of New York Mellon, as trustee of the Trust (incorporated by reference to Exhibit 4.1(c) filed with Annual Report on Form 10-K/A on April 29, 2016) |
4.1(d) |
|
Third Amendment to the Depository Trust Agreement, dated as of August 20, 2024, by and between Merk Investments LLC, as sponsor of the Trust and the Bank of New York Mellon, as trustee of the Trust (incorporated by reference to Exhibit 4.1 filed with the Current Report on Form 8-K on August 20, 2024). |
4.2 |
|
Form of Authorized Participant Agreement (incorporated by reference to Exhibit 4.2 filed with Registration Statement No. 333-180868 on March 20, 2014) |
4.3 |
|
Form of Certificate of Shares of the Trust (included as Exhibit A to the Depositary Trust Agreement) |
4.4 |
|
Form of First Amendment to Authorized Participant Agreement, dated as of August 8, 2017, adopted by Merk Investments LLC, as sponsor of the Trust, and The Bank of New York Mellon, as trustee of the Trust (incorporated by reference to Exhibit 4.2 filed with Quarterly Report on Form 10-Q for the quarter ended July 31, 2017 on September 6, 2017) |
4.5 |
|
Description of the Registrant’s Securities Registered Under Section 12 of the Securities Exchange Act of 1934 |
10.1 |
|
Allocated Account Agreement between JPMorgan Chase Bank, N.A., as custodian, and The Bank of New York Mellon, solely in its capacity as trustee of the Merk Gold Trust, dated May 6, 2014 (incorporated by reference to Exhibit 10.1 filed with Registration Statement No. 333-180868 on May 7, 2014) |
10.2 |
|
Unallocated Account Agreement between JPMorgan Chase Bank, N.A., as custodian, and The Bank of New York Mellon, solely in its capacity as trustee of the Merk Gold Trust, dated May 6, 2014 (incorporated by reference to Exhibit 10.2 filed with Registration Statement No. 333-180868 on May 7, 2014) |
10.3 |
|
Transaction and Shipping Agreement by and between Merk Investments LLC, as sponsor of the Merk Gold Trust, and Coins ‘N Things Inc., dated May 2, 2014 (incorporated by reference to Exhibit 10.4 filed with Registration Statement No. 333-180868 on May 7, 2014) |
10.4 |
|
Marketing Agent Agreement between Merk Investments LLC, as sponsor of the Trust, and Van Eck Securities Corporation, dated October 22, 2015 (incorporated by reference to Exhibit 10.1 filed with Current Report on Form 8-K on October 26, 2015) |
10.4.1 |
|
Amendment to Marketing Agent Agreement, dated as of July 24, 2020, by and between Merk Investments LLC and Van Eck Securities Corporation (incorporated by reference to Exhibit 10.4.1 filed with Quarterly Report on Form 10-Q for the quarter ending July 31, 2020 on September 4, 2020) |
23.1 |
|
Consent of Cohen & Company, Ltd., Independent Registered Public Accounting Firm. |
31.1 |
|
Certification of Principal Executive Officer and Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
32.1 |
|
Certification by Principal Executive Officer and Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
97.1 |
|
Incentive-Based Compensation Recovery Policy (incorporated by reference to Exhibit 97.1 of the Annual Report on Form 10-K filed by the Registrant on March 29, 2024) |
101.INS |
|
Inline XBRL Instance Document |
101.SCH |
|
Inline XBRL Taxonomy Extension Schema Document. |
101.CAL |
|
Inline XBRL Taxonomy Extension Calculation Linkbase Document. |
101.DEF |
|
Inline XBRL Taxonomy Extension Definition Linkbase Document. |
101.LAB |
|
Inline XBRL Taxonomy Extension Label Linkbase Document. |
101.PRE |
|
Inline XBRL Taxonomy Extension Presentation Linkbase Document. |
104 |
|
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). |
Item 16. Form 10-K Summary.
None.
VANECK MERK GOLD ETF
FINANCIAL STATEMENTS AS OF JANUARY 31, 2024
INDEX
| | Page |
Report of Cohen & Company, Ltd., an Independent Registered Public Accounting Firm located in Philadelphia, PA (PCAOB #925) | | F-2 |
Audited Statements of Assets and Liabilities at January 31, 2025 and 2024 | | F-4 |
Audited Statements of Operations for the Years Ended January 31, 2025, 2024, and 2023 | | F-5 |
Audited Statements of Changes in Net Assets for the Years Ended January 31, 2025, 2024, and 2023 | | F-6 |
Audited Schedules of Investment at January 31, 2025 and 2024 | | F-7 |
Notes to Financial Statements | | F-8 |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM
To the Sponsor, Trustee, and Shareholders of VanEck Merk Gold ETF
Opinions on the Financial Statements and Internal
Control over Financial Reporting
We have audited the accompanying statements of assets and liabilities,
including the schedules of investment, of VanEck Merk Gold ETF (formerly, VanEck Merk Gold Trust, the “Trust”) as of January
31, 2025 and 2024, and the related statements of operations and changes in net assets for each of the years in the three-year period ended
January 31, 2025, and the related notes (collectively referred to as the “financial statements”). We have also audited the
Trust’s internal control over financial reporting as of January 31, 2025, based on criteria established in Internal Control—Integrated
Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of the Trust as of January 31, 2025 and 2024, and the results of its operations
and changes in its net assets for each of the years in the three-year period ended January 31, 2025, in conformity with accounting principles
generally accepted in the United States of America. Also, in our opinion, the Trust maintained, in all material respects, effective internal
control over financial reporting as of January 31, 2025, based on criteria established in Internal Control—Integrated Framework
(2013) issued by COSO.
Basis for Opinions
The Trust’s management is responsible
for these financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the
effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal
Control over Financial Reporting. Our responsibility is to express an opinion on the Trust’s financial statements and an
opinion on the Trust’s internal control over financial reporting based on our audits. We are a public accounting firm
registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be
independent with respect to the Trust in accordance with the U.S. federal securities laws and the applicable rules and regulations
of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB.
Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are
free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained
in all material respects.
Our audits of the financial statements included performing procedures
to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that
respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial
statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as
evaluating the overall presentation of the financial statements. Our audit of internal control over financial reporting included obtaining
an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating
the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other
procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
Definition and Limitations of Internal Control
over Financial Reporting
A company’s internal control over financial reporting is a process
designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements
for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting
includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded
as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts
and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and
(3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s
assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial
reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject
to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or
procedures may deteriorate.
Critical Audit Matters
Critical audit matters are matters arising from the current period
audit of the financial statements that were communicated or required to be communicated to those charged with governance and that: (1)
relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective,
or complex judgments. We determined that there are no critical audit matters.
We have served as the VanEck Merk Gold ETF’s
auditor since 2023.

COHEN & COMPANY, LTD.
Philadelphia, Pennsylvania
March 28, 2025
VanEck Merk Gold ETF
Statements of Assets and Liabilities
| |
January 31, 2025 | | |
January 31, 2024 | |
Assets | |
| | |
| |
Investments in gold bullion (cost $880,891,128 and $659,416,378, respectively) | |
$ | 1,314,597,403 | | |
$ | 780,184,353 | |
Capital shares receivable | |
| 13,758,562 | | |
| 5,906,605 | |
Other receivable | |
| - | | |
| 4 | |
Total Assets | |
| 1,328,355,965 | | |
| 786,090,962 | |
| |
| | | |
| | |
Liabilities | |
| | | |
| | |
Gold Bullion purchased payable | |
| 13,506,499 | | |
| 5,906,609 | |
Sponsor’s fee payable | |
| 252,077 | | |
| 6 | |
Total Liabilities | |
| 13,758,576 | | |
| 5,906,615 | |
| |
| | | |
| | |
Net Assets | |
$ | 1,314,597,389 | | |
$ | 780,184,347 | |
| |
| | | |
| | |
Net Assets Consists of: | |
| | | |
| | |
Paid-in-capital | |
$ | 878,374,184 | | |
$ | 657,109,274 | |
Accumulated earnings | |
| 436,223,205 | | |
| 123,075,073 | |
| |
$ | 1,314,597,389 | | |
$ | 780,184,347 | |
| |
| | | |
| | |
Shares issued and outstanding (no par value) | |
| 48,664,686 | | |
| 39,626,030 | |
Net asset value per share | |
$ | 27.01 | | |
$ | 19.69 | |
See notes to financial statements.
VanEck Merk Gold ETF
Statements of Operations
| |
For the Year ended January 31, 2025 | | |
For the Year ended January 31, 2024 | | |
For the Year ended January 31, 2023 | |
Expenses | |
| | |
| | |
| |
Sponsor’s fees | |
$ | 2,578,699 | | |
$ | 1,798,880 | | |
$ | 1,557,794 | |
Total expenses | |
| 2,578,699 | | |
| 1,798,880 | | |
| 1,557,794 | |
| |
| | | |
| | | |
| | |
Net investment loss | |
| (2,578,699 | ) | |
| (1,798,880 | ) | |
| (1,557,794 | ) |
| |
| | | |
| | | |
| | |
Net Realized and Unrealized Gain (Loss) | |
| | | |
| | | |
| | |
Net realized gain from gold bullion distributed for redemptions | |
| 2,788,531 | | |
| 3,399,475 | | |
| 1,178,406 | |
Net change in unrealized appreciation (depreciation) on investment in gold bullion | |
| 312,938,300 | | |
| 36,298,490 | | |
| 31,993,651 | |
Net realized and unrealized gain (loss) from operations | |
| 315,726,831 | | |
| 39,697,965 | | |
| 33,172,057 | |
| |
| | | |
| | | |
| | |
Net Increase (Decrease) in Net Assets resulting from operations | |
$ | 313,148,132 | | |
$ | 37,899,085 | | |
$ | 31,614,263 | |
See notes to financial statements.
VanEck Merk Gold ETF
Statements of Changes in Net Assets
| |
For the Year ended January 31, 2025 | | |
For the Year ended January 31, 2024 | | |
For the Year ended January 31, 2023 | |
Net Assets—beginning of year | |
$ | 780,184,347 | | |
$ | 656,592,798 | | |
$ | 586,245,772 | |
Creations | |
| 230,560,739 | | |
| 114,227,672 | | |
| 137,482,147 | |
Redemptions | |
| (9,295,829 | ) | |
| (28,535,208 | ) | |
| (98,749,384 | ) |
Net investment loss | |
| (2,578,699 | ) | |
| (1,798,880 | ) | |
| (1,557,794 | ) |
Net realized gain from gold bullion distributed for redemptions | |
| 2,788,531 | | |
| 3,399,475 | | |
| 1,178,406 | |
Net change in unrealized appreciation (depreciation) on investment in gold bullion | |
| 312,938,300 | | |
| 36,298,490 | | |
| 31,993,651 | |
Net Assets—end of year | |
$ | 1,314,597,389 | | |
$ | 780,184,347 | | |
$ | 656,592,798 | |
See notes to financial statements.
VanEck Merk Gold ETF
Schedules of Investment
January 31, 2025
| |
Fine Ounces | | |
Cost | | |
Value | | |
% of Net Assets | |
Gold Bullion | |
| 469,450 | | |
$ | 880,891,128 | | |
$ | 1,314,597,403 | | |
| 100.00 | % |
Total Investments | |
| 469,450 | | |
$ | 880,891,128 | | |
$ | 1,314,597,403 | | |
| 100.00 | % |
Liabilities in excess of other assets | |
| | | |
| | | |
| (14 | ) | |
| (0.00 | )%(a) |
Net Assets | |
| | | |
| | | |
$ | 1,314,597,389 | | |
| 100.00 | % |
January 31, 2024
|
|
Fine
Ounces |
|
|
Cost |
|
|
Value |
|
|
% of
Net Assets |
|
Gold Bullion |
|
|
383,204 |
|
|
$ |
659,416,378 |
|
|
$ |
780,184,353 |
|
|
|
100.00 |
% |
Total Investments |
|
|
383,204 |
|
|
$ |
659,416,378 |
|
|
$ |
780,184,353 |
|
|
|
100.00 |
% |
Liabilities in excess of other assets |
|
|
|
|
|
|
|
|
|
|
(6 |
) |
|
|
(0.00 |
)%(a) |
Net Assets |
|
|
|
|
|
|
|
|
|
$ |
780,184,347 |
|
|
|
100.00 |
% |
See notes to financial statements.
VanEck Merk Gold ETF
Notes to Financial Statements
1. ORGANIZATION
The VanEck Merk Gold ETF (the “Trust”;
known as the Merk Gold Trust prior to October 26, 2015 and then as the Van Eck Merk Gold Trust prior to April 28, 2016, and then as the
VanEck Merk Gold Trust prior to August 30, 2024) is an exchange-traded fund formed on May 6, 2014 under New York law pursuant to a depositary
trust agreement (the “Trust Agreement”). After consideration of Financial Accounting Standards Topic 946, Merk Investments
LLC (the “Sponsor”) has concluded the Trust meets the fundamental characteristics of an investment company. In addition, while
the Trust does not currently possess all of the typical characteristics of an investment company, it believes its activities are consistent
with those of an investment company and will therefore apply the guidance in Financial Accounting Standards Topic 946, including disclosure
of the financial support contractually required to be provided by an investment company to any of its investees. The Sponsor is responsible
for, among other things, overseeing the performance of The Bank of New York Mellon (the “Trustee”) and the Trust’s principal
service providers, including the preparation of financial statements. The Trustee is responsible for the day-to-day administration of
the Trust.
Virtu Financial, also known as the Lead Market
Maker, was the Initial Purchaser and contributed 1,000 Ounces of Gold in exchange for 100,000 shares on May 6, 2014. At contribution,
the value of the gold deposited with the Trust was based on the price of an Ounce of Gold of $1,306.25. The Initial Purchaser is not affiliated
with the Sponsor or the Trustee.
The Trust’s primary objective is to provide
investors with an opportunity to invest in gold through the shares and be able to take delivery of physical gold bullion and gold coins
(physical gold) in exchange for their shares (the “Shares”). The Trust’s secondary objective is for the shares to reflect
the performance of the price of gold less the expenses of the Trust’s operations. The Trust is not actively managed.
The fiscal year end of the Trust is January 31st.
2. SIGNIFICANT ACCOUNTING POLICIES
In preparing financial statements in conformity
with accounting principles generally accepted in the United States of America (“GAAP”), management makes estimates and assumptions
that affect the reported amounts of assets, liabilities and disclosures of contingent assets and liabilities at the date of the financial
statements, as well as the reported amount of revenue and expenses reported during the period. Actual results could differ from these
estimates.
The accompanying audited financial statements
were prepared in accordance with GAAP and with the instructions for the Form 10-K and the rules and regulations of the United States Securities
and Exchange Commission. In the opinion of the Trust’s management, all adjustments (which consists of normal recurring adjustments)
necessary to present fairly the financial position and the results of operations, as presented, have been made.
The following is a summary of significant accounting
policies followed by the Trust.
2.1. Valuation of Gold
Financial Accounting Standards Board Accounting
Standards Codification 820, “Fair Value Measurements and Disclosures” (“ASC 820”), provides a single definition
of fair value, a hierarchy for measuring fair value and expanded disclosures about fair value adjustments.
Various inputs are used in determining the fair
value of the Trust’s assets or liabilities. These inputs are categorized into three broad levels. Level 1 includes unadjusted prices
in active markets for identical assets or liabilities. Level 2 includes other significant observable market based inputs (including prices
for similar securities, interest rates, prepayment speed, and credit risk). Level 3 includes unobservable inputs, which may include management’s
own assumptions in determining the fair value of investments. The Trust does not hold any derivative instruments, and its assets only
consist of allocated gold bullion and gold receivable; representing gold covered by contractually binding orders for the creation of shares
where the gold has not yet been transferred to the Trust’s account and, from time to time, cash, which is used to pay expenses.
The following table summarizes the inputs used
as of January 31, 2025 in determining the Trust’s investments at fair value for purposes of ASC 820:
| |
Level 1 | | |
Level 2 | | |
Level 3 | |
Investment in Gold | |
$ | 1,314,597,403 | | |
$ | — | | |
$ | — | |
Total | |
$ | 1,314,597,403 | | |
$ | — | | |
$ | — | |
The following table summarizes the inputs used
as of January 31, 2024 in determining the Trust’s investments at fair value for purposes of ASC 820:
| |
Level 1 | | |
Level 2 | | |
Level 3 | |
Investment in Gold | |
$ | 780,184,353 | | |
$ | — | | |
$ | — | |
Total | |
$ | 780,184,353 | | |
$ | — | | |
$ | — | |
London Gold Delivery Bars are held by JPMorgan
Chase Bank, N.A. (the “Custodian”), on behalf of the Trust, at the London, United Kingdom vaulting premises. All gold is valued
based on its Fine Ounce content, calculated by multiplying the weight of gold by its purity; the same methodology is applied independent
of the type of gold held by the Trust; similarly, the value of up to 430 Fine Ounces of unallocated gold the Trust may hold is calculated
by multiplying the number of Fine Ounces with the price of gold determined by the Trustee as follows. The Trustee determines the net asset
value (the “NAV”) of the Trust on each day that NYSE Arca is open for regular trading, as promptly as practical after 4:00
PM New York time. The NAV of the Trust is the aggregate value of the Trust’s assets less its estimated accrued but unpaid liabilities
(which include accrued expenses). The Trustee computes the NAV per Share by dividing the net assets of the Trust by the number of the
shares outstanding on the date the computation is made.
Prior to August 7, 2023 (the “Index Change
Date”), in determining the Trust’s NAV, the Trustee valued the gold held by the Trust based on the afternoon session of the
twice daily fix of the price of a Fine Ounce of gold which starts at 3:00 PM London, England time and is performed in London by the ICE
Benchmark Administration as an independent third-party administrator (the “LBMA PM Gold Price”). The Trustee also determines
the NAV per Share.
On the Index Change Date, the pricing index the
Sponsor uses in relation to the Shares issued by the Trust changed to the Solactive Gold Spot Index (the “Solactive Index”)
in lieu of the LBMA Gold Price. Since the Index Change Date, the Trustee values the gold held by the Trust based on the Solactive Index.
Solactive AG (“Solactive”) owns, calculates, and disseminates the Solactive Index. The Solactive Index is a U.S. Dollar denominated
index that aims to provide a price fixing for the gold spot price quoted as U.S. Dollars per Troy Ounce (“XAU”) and determined
for the close of trading on the New York Stock Exchange (“NYSE”). The Solactive Index calculates gold bullion fixing prices
by taking Time Weighted Average Prices (“TWAP”) of XAU trading prices provided via ICE Data Services (“IDS”) data
feed.
Specifically, the Solactive Index uses a TWAP
calculation to determine an average price that is time-weighted, using price values of actual transactions (“Trade Ticks”)
for two specified time periods around the scheduled close of trading on the NYSE (generally, 4:00 PM Eastern Time). The TWAP is derived
for (1) the period ahead of the fixing (“Time Period 1”), which consists of the five minutes before the close of trading,
and (2) the period directly after the fixing (“Time Period 2”), which consists of the six seconds after the close of trading.
The TWAPs for Time Period 1 and Time Period 2 are then aggregated, with 90% weighting given to Time Period 1 and 10% weighting given to
Time Period 2, to calculate the Solactive Index. The TWAPs for Time Period 1 and Time Period 2 are then added together to establish the
Solactive Index price.
The Solactive Index is calculated and published
by Solactive no later than 30 minutes following the close of trading on the NYSE, disseminated to major financial data providers, and
made publicly available via the Trust’s website.
The Solactive Index calculation is based on XAU
market data from IDS, which is a major provider of financial market data. The data is available through IDS’s data streaming service,
which covers 2,700 spot rates and over 7,500 forwards and non-deliverable forwards, with an average of over 130 million updates per day
for spot. IDS compiles data from over 100 sources, including market makers, execution venues, banks and brokers from across the globe,
and every updating Trade Tick of spot streaming data is available via IDS’s Integrated Data Viewer service in a file-based format.
It is unlikely that, on any given trading day
for the Shares, there would be no Trade Ticks recorded for XAU in either Time Period 1 or Time Period 2, such that the Solactive Index
calculation could not be performed on such day. Trade Ticks representing XAU are the closing prices for specific gold bullion transactions
posted in a 24-hour, global, over-the-counter gold bullion market, which is not subject to trading suspensions, trading halts, or market
closures. However, in the unlikely event that IDS is unable to publish pricing information for XAU, for whatever reason, during either
Time Period 1 or Time Period 2 on a given trading day, the last available Solactive Index calculation will be used in accordance with
Solactive’s published and publicly available disruption policy.
If the Sponsor determines that such price becomes inappropriate to
use, it shall identify an alternate basis for evaluation to be employed by the Trustee. The Sponsor may instruct the Trustee to use a
different publicly available price which the Sponsor determines to fairly represent the commercial value of the Trust’s gold.
2.2. Expenses
The Trustee issues shares to pay the Sponsor’s
fee; the Sponsor pays the Trust’s ordinary expenses. The NAV of the Trust is used to compute the Sponsor’s fee, and the Trustee
subtracts from the NAV of the Trust the amount of accrued Sponsor’s fee. To the extent the Trust issues additional shares to pay
the Sponsor’s fee or sells gold to cover expenses or liabilities, the amount of gold represented by each share will decrease. New
deposits of gold, received in exchange for new shares issued by the Trust, would not reverse this trend.
2.3. Creations and Redemptions of Shares
Shares are issued and redeemed by the Trust in
blocks of 50,000 shares called “Baskets” in exchange for gold from certain registered broker-dealers or other securities market
participants (“Authorized Participants”). Investors that are not Authorized Participants may also take delivery of physical
gold in exchange for their shares (“Delivery Applicants”).
Authorized Participants
The Trust issues and redeems Baskets only to Authorized
Participants. The creation and redemption of Baskets will only be made in exchange for the delivery to the Trust or the distribution by
the Trust of the amount of gold represented by the Baskets being created or redeemed, the amount of which will be based on the combined
Fine Ounces represented by the number of shares included in the Baskets being created or redeemed determined on the day the order to create
or redeem Baskets is properly received.
Orders to create and redeem Baskets may be placed
only by Authorized Participants. An Authorized Participant must: (1) be a registered broker-dealer or other securities market participant,
such as a bank or other financial institution, which, but for an exclusion from registration, would be required to register as a broker-dealer
to engage in securities transactions, (2) be a participant in DTC, and (3) must have an agreement with the Custodian establishing an unallocated
account in London or have an existing unallocated account meeting the standards described herein. To become an Authorized Participant,
a person must enter into an Authorized Participant Agreement with the Sponsor and the Trustee. The Authorized Participant Agreement provides
the procedures for the creation and redemption of Baskets and for the delivery of the gold required for such creations and redemptions.
The Authorized Participant Agreement and the related procedures attached thereto may be amended by the Trustee and the Sponsor, without
the consent of any investor or Authorized Participant. A transaction fee of $500 will be assessed on all creation and redemption transactions.
Multiple Baskets may be created on the same day, provided each Basket meets the requirements described below and that the Custodian is
able to allocate gold to the Trust Allocated Account such that the Trust Unallocated Account holds no more than 430 Fine Ounces of gold
at the close of a business day.
Authorized Participants who make deposits with
the Trust in exchange for Baskets will receive no fees, commissions or other form of compensation or inducement of any kind from either
the Sponsor or the Trust, and no such person has any obligation or responsibility to the Sponsor or the Trust to effect any sale or resale
of shares.
Delivery Applicants
In exchange for its shares and payment of a processing
fee, a Delivery Applicant will be entitled to one or more bars or coins of physical gold having approximately the total Fine Ounces represented
by the shares on the day on which the Delivery Applicant’s broker-dealer submits his or her shares to the Trust in exchange for
physical gold. As it is unlikely that the total Fine Ounces of physical gold will exactly correspond to the Fine Ounces represented by
a specific number of shares, a Delivery Applicant will likely receive some cash representing the net sale proceeds of any excess Fine
Ounces (the “Cash Proceeds”). To minimize the Cash Proceeds of any exchange, the delivery application requires that the number
of shares submitted closely correspond in Fine Ounces to the Fine Ounces of physical gold that is held or that is to be acquired by the
Trust for which the delivery is sought. Share submissions are processed in the order approved.
Changes in the shares for the year ending January
31, 2025 are as follows:
| |
Shares | | |
Amount | |
Shares, beginning of year at February 1, 2024 | |
| 39,626,030 | | |
$ | 657,109,274 | |
Shares issued | |
| 9,407,625 | | |
| 230,560,739 | |
Shares redeemed | |
| (368,969 | ) | |
| (9,295,829 | ) |
Shares, end of year at January 31, 2025 | |
| 48,664,686 | | |
$ | 878,374,184 | |
Changes in the shares for the year ending January
31, 2024 are as follows:
| |
Shares | | |
Amount | |
Shares, beginning of year at February 1, 2023 | |
| 35,203,259 | | |
$ | 571,416,810 | |
Shares issued | |
| 5,944,690 | | |
| 114,227,672 | |
Shares redeemed | |
| (1,521,919 | ) | |
| (28,535,208 | ) |
Shares, end of year at January 31, 2024 | |
| 39,626,030 | | |
$ | 657,109,274 | |
Changes in the shares for the year ending January
31, 2023 are as follows:
| |
Shares | | |
Amount | |
Shares, beginning of year at February 1, 2022 | |
| 33,599,843 | | |
$ | 532,684,047 | |
Shares issued | |
| 7,638,953 | | |
| 137,482,147 | |
Shares redeemed | |
| (6,035,537 | ) | |
| (98,749,384 | ) |
Shares, end of year at January 31, 2023 | |
| 35,203,259 | | |
$ | 571,416,810 | |
2.4. Income Taxes
The Trust is treated as a “grantor trust”
for U.S. federal tax purposes. As a result, the Trust itself is not subject to U.S. federal income tax. Instead, the Trust’s income
and expenses “flow through” to the shareholders and the Trustee reports the Trust’s income, gains, losses and deductions
to the Internal Revenue Service on that basis.
The Sponsor has evaluated whether or not there
are uncertain tax positions that require financial statement recognition and has determined that no reserves for uncertain tax positions
are required as of January 31, 2025.
2.5. Revenue Recognition Policy
A gain or loss is recognized based on the difference
between the selling price and the average cost method of the gold sold on a trade date basis.
2.6. Segment Reporting
The Trust adopted Financial Accounting Standards
Board Update 2023-07, Segment Reporting (Topic 280) - Improvements to Reportable Segment Disclosures (“ASU 2023-07”) during
the reporting period. The Trust’s adoption of the new standard impacted financial statement disclosures only and did not affect
the Trust’s financial position or results of operations. Operating segments are components of a public entity that engage in business
activities from which it may recognize revenues and incur expenses, have discrete financial information available, and have their operating
results regularly reviewed by the public entity’s chief operating decision maker (“CODM”) when assessing segment performance
and making decisions about segment resources. The Managing Member of the Sponsor acts as the Trust’s CODM. The CODM monitors the operating
results of the Trust as a whole, and the Trust’s asset allocation is managed in accordance with its Prospectus. The CODM has concluded
that the Trust operates as a single operating segment since the Trust has a single investment strategy. The financial information provided
to and reviewed by the CODM is presented within the Trust’s financial statements.
3. INVESTMENT IN GOLD
The following represents the changes in Ounces
of gold and the respective fair value at January 31, 2025:
| |
Ounces | | |
Fair Value | |
Beginning balance as of February 1, 2024 | |
| 383,204 | | |
$ | 780,184,353 | |
Gold bullion contributed | |
| 89,807 | | |
| 227,982,044 | |
Gold bullion distributed | |
| (3,561 | ) | |
| (9,295,825 | ) |
Realized gain (loss) from gold distributed from in-kind | |
| — | | |
| 2,788,531 | |
Change in unrealized appreciation (depreciation) | |
| — | | |
| 312,938,300 | |
| |
| | | |
| | |
Ending balance as of January 31, 2025 | |
| 469,450 | | |
$ | 1,314,597,403 | |
The following represents the changes in Ounces
of gold and the respective fair value at January 31, 2024:
| |
Ounces | | |
Fair Value | |
Beginning balance as of February 1, 2023 | |
| 341,282 | | |
$ | 656,592,807 | |
Gold bullion contributed | |
| 56,653 | | |
| 112,428,811 | |
Gold bullion distributed | |
| (14,731 | ) | |
| (28,535,230 | ) |
Realized gain (loss) from gold distributed from in-kind | |
| — | | |
| 3,399,475 | |
Change in unrealized appreciation (depreciation) | |
| — | | |
| 36,298,490 | |
| |
| | | |
| | |
Ending balance as of January 31, 2024 | |
| 383,204 | | |
$ | 780,184,353 | |
The following represents the changes in Ounces
of gold and the respective fair value at January 31, 2023:
| |
Ounces | | |
Fair Value | |
Beginning balance as of February 1, 2022 | |
| 326,554 | | |
$ | 586,245,778 | |
Gold bullion contributed | |
| 73,293 | | |
| 135,924,342 | |
Gold bullion distributed | |
| (58,565 | ) | |
| (98,749,370 | ) |
Realized gain (loss) from gold distributed from in-kind | |
| — | | |
| 1,178,406 | |
Change in unrealized appreciation (depreciation) | |
| — | | |
| 31,993,651 | |
| |
| | | |
| | |
Ending balance as of January 31, 2023 | |
| 341,282 | | |
$ | 656,592,807 | |
4. RELATED PARTIES—SPONSOR, TRUSTEE,
CUSTODIAN AND MARKETING FEES
Fees paid are to the Sponsor as compensation for
services performed under the Trust Agreement. Effective July 24, 2020, the Sponsor’s fee is payable at an annualized rate of 0.25%
of the Trust’s NAV, accrued on a daily basis computed on the prior business day’s NAV and paid monthly in arrears.
The Sponsor has agreed to assume the following
administrative and marketing expenses incurred by the Trust: the Trustee’s monthly fee and out-of-pocket expenses; the Custodian’s
fee; the marketing support fees and expenses (including the fees and expenses of Foreside Fund Services, LLC); expenses reimbursable under
the Custody Agreement; the precious metals dealer’s fees and expenses reimbursable under its agreement with the Sponsor; exchange
listing fees; Securities and Exchange Commission (the “SEC”) registration fees; printing and mailing costs; maintenance expenses
for the Trust’s website; audit fees; and up to $100,000 per annum in legal expenses.
Affiliates of the Trustee, as well as affiliates
of the Custodian may from time to time act as Authorized Participants to purchase or sell gold or shares for their own account, as agent
for their customers and for accounts over which they exercise investment discretion.
On October 22, 2015, the Sponsor, for the benefit
of the Trust, entered into a Marketing Agent Agreement (as amended to date, the “Marketing Agreement”) with Van Eck Securities
Corporation (“VanEck” or “Marketing Agent”). Pursuant to the Marketing Agreement, VanEck provides assistance in
the marketing of the shares. The obligations created by the Marketing Agreement are obligations of the Sponsor of the Trust and any fees
payable under the Marketing Agreement to VanEck are payable from the Sponsor’s fee (as calculated and defined in the Trust Agreement).
The Trust will not incur additional financial or other performance obligations pursuant to the Marketing Agreement.
5. FINANCIAL HIGHLIGHTS
The following table presents per share performance
data and other supplemental financial data for the years ended January 31, 2025, 2024, 2023, 2022 and 2021 for the shareholders.
This information has been derived from information presented in the financial statements.
VanEck Merk Gold ETF
Financial Highlights
Per Share Performance (for a share outstanding
throughout each year)
| |
For the Year Ended January 31, 2025 | | |
For the Year Ended January 31, 2024 | | |
For the Year Ended January 31, 2023 | | |
For the Year Ended January 31, 2022 | | |
For the Year Ended January 31, 2021 | |
Net asset value per share, beginning of year | |
$ | 19.69 | | |
$ | 18.65 | | |
$ | 17.45 | | |
$ | 18.16 | | |
$ | 15.48 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Net investment loss (a) | |
| (0.06 | ) | |
| (0.05 | ) | |
| (0.04 | ) | |
| (0.04 | ) | |
| (0.05 | ) |
Net realized and unrealized gain (loss) on investment in gold bullion | |
| 7.38 | | |
| 1.09 | | |
| 1.24 | | |
| (0.67 | ) | |
| 2.73 | |
Net change in net assets from operations | |
| 7.32 | | |
| 1.04 | | |
| 1.20 | | |
| (0.71 | ) | |
| 2.68 | |
Net asset value per share, end of year | |
$ | 27.01 | | |
$ | 19.69 | | |
$ | 18.65 | | |
$ | 17.45 | | |
$ | 18.16 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Total return, at net asset value | |
| 37.18 | % | |
| 5.58 | % | |
| 6.88 | % | |
| (3.91 | )% | |
| 17.31 | % |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Ratio to average net assets | |
| | | |
| | | |
| | | |
| | | |
| | |
Net investment loss | |
| (0.25 | )% | |
| (0.25 | )% | |
| (0.25 | )% | |
| (0.25 | )% | |
| (0.30 | )% |
Net expenses | |
| 0.25 | % | |
| 0.25 | % | |
| 0.25 | % | |
| 0.25 | % | |
| 0.30 | % |
6. CONCENTRATION OF RISK
The Trust’s sole business activity is the
investment in gold bullion. Several factors could affect the price of gold: (i) global gold supply and demand, which is influenced by
such factors as forward selling by gold producers, purchases made by gold producers to unwind gold hedge positions, central bank purchases
and sales, and production and cost levels in major gold-producing countries; (ii) investors’ expectations with respect to the rate
of inflation; (iii) currency exchange rates; (iv) interest rates; (v) investment and trading activities of hedge funds and commodity funds;
and (vi) global or regional political, economic or financial events and situations. In addition, there is no assurance that gold will
maintain its long-term value in terms of purchasing power in the future. In the event that the price of gold declines, the Sponsor expects
the value of an investment in the shares to decline proportionately. Each of these events could have a material adverse effect on the
Trust’s financial position and results of operations.
7. INDEMNIFICATION
Under the Trust’s organizational documents,
each of the Trustee (and its directors, employees and agents) and the Sponsor (and its members, managers, directors, officers, employees,
affiliates) is indemnified against any liability, cost or expense it incurs without gross negligence, bad faith or willful misconduct
on its part and without reckless disregard on its part of its obligations and duties under the Trust’s organizational documents.
The Trust’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the
Trust that have not yet occurred. However, based on industry experience, management believes the risk of loss is remote.
8. SUBSEQUENT EVENTS
Management has evaluated the events and transactions
that have occurred through the date the financial statements were issued and noted no items requiring adjustment of the financial statements.
* * *
This report is submitted for the general information
of the shareholders. It is not authorized for distribution to prospective investors unless preceded or accompanied by an effective prospectus,
which includes information regarding the Trust’s risks, objectives, fees and expenses and other information.
SIGNATURES
Pursuant to the requirements of Section 13 or
15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned
in its capacities* thereunto duly authorized.
|
MERK INVESTMENTS LLC |
|
Sponsor of the VanEck Merk Gold ETF |
|
|
Date: March 28, 2025 |
/s/ Axel Merk |
|
Axel Merk |
|
President and Chief Investment Officer |
|
(Principal Executive Officer and
Principal Financial Officer) |
* |
The Registrant is a trust and the person is signing in his capacity as an officer of Merk Investments LLC, the Sponsor of the Registrant. |
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We consent to the use of
our report dated March 28, 2025, with respect to the statements of assets and liabilities, including the schedules of investment, of
VanEck Merk Gold ETF (formerly, VanEck Merk Gold Trust, the “Trust”), as of January 31, 2025 and 2024, and the related statements
of operations and changes in net assets for each of the years in the three‐year period ended January 31, 2025, and the effectiveness
of internal control over financial reporting as of January 31, 2025, incorporated herein by reference.
/s/ COHEN & COMPANY, LTD.
COHEN & COMPANY, LTD.
CERTIFICATION PURSUANT
TO 18 U.S.C. SECTION 1350 AS ADOPTED PURSUANT
TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report
of VanEck Merk Gold ETF (the “Trust”) on Form 10-K for the year ended January 31, 2025 as filed with the Securities and Exchange
Commission on the date hereof (the “Report”), the undersigned, in the capacity and on the date indicated below, hereby certifies
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: