August 23, 2013 / 5:19 PM / 5 years ago

ETF Securities to let investors swap shares for Royal Mint coins

LONDON, Aug 23 (Reuters) - ETF Securities, a pioneer of exchange traded funds (ETF) as a tool for investors to buy into gold at a time when prices were rising, offered to let them swap shares for coins subject to a fee charged by Britain’s Royal Mint.

The fund provider teamed up with the Royal Mint to offer retail investors a chance to exchange shares in its gold-backed ETF for the mint’s Sovereign or Britannia bullion coins, it said in a statement on Friday.

“These are coins coming from a government-backed organisation and alleviate some concerns that investors may have, like ‘how do we know there is gold in your vaults?’,” Frank Spiteri, head of retail distribution strategy at ETF Securities, said.

“There’s also a tax advantage because gold coins...are capital-gains-tax free for UK residents and shares are not.”

The offer is chiefly designed to allow retail investors to redeem smaller amount of their holdings in exchange for physical metal than before, when they could only sell holdings equivalent to the value of entire 400-ounce gold bars.

“There wasn’t a minimum redemption amount but the value of a whole gold bar was the minimum ... (and) a $750 redemption fee would apply in exchange for cash,” Spiteri said.

UK-based ETF Securities launched its gold ETF Gold Bullion Securities (GBS) in 2004. The product, listed on the London Stock Exchange (LSE), is backed by bars held in vaults by HSBC Bank USA, which acts as custodian, with $4.6 billion of assets under management.

The Royal Mint applies a 4.5 percent fee for exchange of gold coins for the securities.

According to a calculator based on price, the minimum number of gold bullion securities that investors could exchange for 10 Britannia coins as of Friday was 109, and for 25 Sovereign coins it was 64. ()

Gold holdings in global ETFs have sharply fallen since the start of the year, posting net outflows for the first time since inception in 2003 at around 600 tonnes so far, as gold prices dropped below $1,200 an ounce for the first time in two years.

Lower metal prices have made gold more affordable, prompting a sharp increase in physical demand for bullion coins and bars to 900 tonnes in the first six months of the year, compared to 630 tonnes in the first half of 2012, according to World Gold Council data.

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