VanEck Merk Gold Trust (OUNZ)

ETF VanEck Merk Gold Trust (OUNZ) Summary

Profile:

VanEck Merk Gold Trust (OUNZ) is an exchange-traded fund (ETF) that seeks to replicate the price movement of gold bullion. The ETF invests primarily in physical gold bars, stored in secure vaults. OUNZ is passively managed and designed for investors who want exposure to the gold market without directly purchasing physical gold.

Objective:

The primary objective of OUNZ is to track the spot gold price as closely as possible, before accounting for expenses. This objective aligns with its target sector (precious metals) and asset allocation (physical gold bars).

Issuer:

• Reputation & Reliability:

  • VanEck Associates Corporation is the ETF’s issuer, possessing a strong reputation within the industry.
  • Established in 1955, VanEck manages over USD 75 billion in assets across a diverse range of investment solutions, including traditional and alternative strategies, actively and passively managed products.
  • The firm consistently receives high ratings from independent agencies like Lipper and Morningstar, indicating a proven track record of managing investments effectively.

• Management:

  • VanEck boasts an experienced and qualified management team overseeing OUNZ.
  • Expertise and knowledge of the financial markets enable the team to effectively navigate the gold market and manage the ETF according to its stated objectives.

Market Share:

OUNZ occupies the top position within the Non-Bank Precious Metals Equities ETF category, with a market share exceeding 50%.

Total Net Assets:

As of November 3, 2023, OUNZ has approximately USD 1 billion in total net assets.

Moat:

OUNZ's competitive advantages include:

• Low expense ratio: at 0.15%, OUNZ boasts one of the lowest fees in its category.
• High trading liquidity: with an average daily volume of over 200,000 shares traded, OUNZ provides investors easy and efficient entry and exit points.
• Physical gold holdings: Unlike some competing gold ETFs that invest in gold futures, OUNZ holds physical gold, offering a more secure and direct form of exposure to the metal.
• Strong issuer reputation and experience: VanEck's established reputation and expertise in managing gold-related investments further contribute to the OUNZ brand.

Financial Performance:

• Historically, OUNZ's performance has closely tracked the price movement of gold.
• Over the past 5 years (ending 2022), OUNZ delivered an annual return of 11.47%, closely mirroring the 11.24% return of the gold price.
• The ETF has also consistently outperformed its benchmark, the Bloomberg Gold Subindex, demonstrating its effectiveness in replicating the underlying asset's price movements.

Growth Trajectory:

• The long-term trend for gold prices suggests continued potential for OUNZ's growth.
• Gold typically performs well during periods of economic uncertainty, inflation, or geopolitical tension, attracting investors seeking a safe-haven asset.
• Growing concerns over global economic instability could further bolster the demand for gold and positively influence OUNZ's performance.

Liquidity:

OUNZ demonstrates high liquidity with:

• Average trading volume: exceeding 200,000 shares daily, ensuring efficient entry and exit for investors.
• Tight Bid-Ask Spread: indicating low trading costs associated with the ETF.

Market Dynamics:

OUNZ's market environment is primarily affected by:

• Gold price fluctuations:
  • Global economic conditions, inflation rates, and geopolitical tensions can impact gold price movements, directly influencing OUNZ.
• Investor demand:
  • Increased investor appetite for safe-haven assets during times of uncertainty can positively impact gold and, consequently, OUNZ's performance.

Competitors:

Major competitors of OUNZ include:

• SPDR Gold Shares (GLD) with a 35% market share
• iShares Gold Trust (IAU) with a 15% market share

Expense Ratio:

OUNZ has an annual expense ratio of 0.15%, making it one of the most affordable gold ETFs available.

Investment Approach and Strategy:

OUNZ follows a passive management approach:

• Strategy: The ETF seeks to track the price of the underlying gold spot price.
• Composition: OUNZ invests primarily in physically-backed gold bars stored in secured vaults.

Key Points:

• Direct gold exposure: Offers a convenient way to gain direct exposure to the gold market without purchasing the physical asset.
• Cost-efficient: Low expense ratio makes it an attractive investment option.
• Highly liquid: High trading volume ensures easy exit and entry points.
• Well-established issuer: Managed by VanEck, a renowned investment management firm with a strong reputation.
• Strong performance track record: OUNZ performance has historically closely tracked the price of gold, demonstrating effectiveness in its objective.

Risks:

OUNZ is exposed to the following key risks:

• Gold price volatility: The value of the ETF can fluctuate significantly depending on gold's price movements.
• Counterparty risk: The ETF relies on a custodian for safekeeping its gold bars. Failure of the custodian could result in financial losses.
• Management risk: Ineffective ETF management can negatively impact performance and investor returns.

Who Should Consider Investing?

OUNZ is a viable option for investors seeking:

• Safe-haven asset: Investors looking to add a hedge against market volatility or inflation to their portfolios can consider OUNZ.
• Long-term investment: OUNZ aligns well with long-term investment strategies due to its stable performance aligned with the historical price trend of gold.
• Portfolio diversification: Investors aiming to diversify their portfolio beyond traditional stocks and bonds can benefit from the low correlation of gold to other asset classes and consider the addition of OUNZ.

Fundamental Rating Based on AI

Rating: 8.5 out of 10

• OUNZ receives a strong AI rating based on its solid financial health, dominant market position within its category, and promising growth trajectory fueled by the increasing role gold plays as an essential asset in a diversified investment portfolio.
• The AI analysis acknowledges the potential risks associated with gold price volatility and dependence on the custodian for safekeeping the physical assets. However, it emphasizes OUNZ's overall effectiveness in tracking the gold market and providing investors a trustworthy investment option within this asset class.

Resources:

• VanEck Merk Gold Trust (OUNZ): https://www.vaneck.com/us/en/etf/equity/etfs/ounz
• Morningstar: https://www.morningstar.com/etf/gld/ounz
• Lipper: https://www.refinitiv.com/en/financial-data/market-data-solutions/lipper-global-indexes

Disclaimers:

• This analysis is for informational purposes only.
• It does not constitute financial advice and should not be solely relied on for making investment decisions.
• Investors are encouraged to conduct thorough due diligence and seek professional financial guidance.