Van Eck, the New York fund sponsor behind the Market Vectors
, filed regulatory paperwork detailing plans to bring to market two
precious metals physically backed funds that would allow investors
to redeem their shares for gold or silver-an innovation Axel Merk
proposed last year in a gold fund he registered.
The Market Vectors Redeemable Gold Trust is designed to reflect
the performance of the price of gold minus expenses-its assets will
consist of gold bullion. Similarly, the Market Vectors Redeemable
Silver Trust reflects the movements in the silver market through a
portfolio comprising silver bullion, the two separate filings
Both funds aim to provide investors an opportunity to invest in
gold and/or silver through the trusts while being able to take
delivery of gold bullion or silver bullion in exchange for their
shares, the filings said.
Indeed, shares will be issued in exchange for gold or silver
bars from registered broker-dealers or other market participants,
and investors can redeem their shares for the actual metals. It
seems both funds would allow investors of any size to exchange
their shares for gold or silver, albeit with some specification
It's not entirely clear that such redemptions, as well as the
ones contemplated in Axel Merk's Merk Gold Trust, would be any
better in terms of value than obtaining gold from, say, a dealer
who travels in physical gold or silver in the form of coins or
various kinds of ingots. Van Eck doesn't exactly disclose how the
redemption mechanism for these products will work and what the
But it does seem that it would be easier for investors trying to
redeem for actual bullion in these funds than in a fund such as the
SPDR Gold Shares (NYSEArca:GLD), which industry sources say
requires redemption amounts of at least 100,000 shares. At current
prices, that'd be a redemption worth more than $15 million, meaning
it would be off limits to most individual investors.
The number of shares to be delivered "must correspond in value
to the fine ounce content of the gold bars requested and have a
minimum dollar value in an amount that is specified by the Sponsor
from time to time," the filing detailing the gold trust says.
Similar language can be found in the prospectus for the silver
Aside from that, neither filing provides key details on the
delivery process other than to warn investors that taking delivery
of gold or silver for their shares "may take time," and bars might
not be available in the "requested sizes" at the time an investor
requests to take delivery, something that could result in a delay,
the filings said.
It is unclear who the custodian of the precious metals will be
and where the metals will be stored, or even how big these trusts
intend to get or how much they will charge, among other details.
Van Eck will provide more clarity in future filings.
"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," Van Eck said in the filing for the gold
Permalink | 'copy; Copyright 2009 IndexUniverse LLC. All rights
Don't forget to check IndexUniverse.com's ETF Data
2013 IndexUniverse LLC
. All Rights Reserved.