Interactive Investor

Royal Mint launches physically-backed gold ETC

The coin-maker is the first Sovereign Mint in Europe to launch a physically-backed gold exchange traded …

18th February 2020 10:08

Emma Lunn from interactive investor

The coin-maker is the first Sovereign Mint in Europe to launch a physically-backed gold exchange traded commodity.

The Royal Mint Physical Gold Securities ETC, called RMAU, will list on the London Stock Exchange, and is the Royal Mint’s first listed financial product.

Each ETC is equal to 1/100th of a troy ounce of gold, which is approximately $15 per ETC based on the current price of gold.

The Royal Mint has partnered with specialist white label ETF issuer, HANetf to issue, manage and distribute the RMAU ETC. 

The launch of the ETC complements The Royal Mint’s existing range of precious metal products, including gold, silver and platinum in the form of physical bars and coins, as well as its digital ‘Signature’ range available online.

Anne Jessopp, chief executive officer of the Royal Mint, says: “This launch is a significant milestone for The Royal Mint as we look to the future and diversify our business for the 21st century. Today, we are building on our 1,100 years of heritage and reputation for trust and security to expand into new ventures with the launch of our first-ever listed financial product, becoming the first Sovereign Mint in Europe to do so.

“Our precious metals business has gone from strength to strength since its launch five years ago, and the launch of this gold-backed ETC further builds on our existing range of Mint precious metal products.”

Dzmitry Lipski, head of funds research at Money Observer's parent company interactive investor, says: “The fact that the Royal Mint, the 1,100-year-old government owned coin maker, is launching its maiden gold ETC is a big deal and underlines the growing popularity of the asset.

“Investors might feel more secure with the knowledge that they would be putting their money in what is a fairly niche financial product backed by one of the UK’s most trusted and long-standing organisations. But nevertheless, bear in mind that gold can have big short-term swings in value and is sensitive to anything from currency fluctuations, through to the Indian wedding season – and not even Royal Mint can insulate investors from that.

ETCs explained

ETCs are a type of exchange traded fund (ETF) that track the price of a given commodity – gold, in this case.

The physical gold associated with RMAU will be held in The Royal Mint’s purpose-built vault in Llantrisant, Wales, and is 100% backed by the London Bullion Market Association (LBMA).

Most other gold ETCs custody their gold at commercial banks, so the RMAU ETC offers an alternative to investors looking to diversify their custody arrangements.

ETCs are listed and traded on a stock exchange that tracks the price of gold. They are available to UK investors with Sipp and Isa accounts and can be traded on investment platforms.

Gold-backed ETCs are held in a vault, while synthetic gold ETCs are designed to track the price of gold by buying gold-related derivatives.

If you opt for a synthetic gold ETC, you must bear in mind that you are taking on the additional risk associated with the third-party selling the derivatives.

Other ways to invest in gold

Gold is often regarded as a safe haven investment in times of market stress. Investors view it as a hedge against market volatility and economic slowdown in times of geopolitical uncertainty.

As gold is scarce and more can’t be produced at will, it tends to maintain its value over time.

The price of gold has risen recently because investors are seeking shelter for their cash following rising tensions in the Middle East and the coronavirus in China.

- Explore our articles on gold and other commodities 

However, experts say that gold should make up only a small fraction of a well-diversified portfolio, as it does not produce an income. 

Your main options to invest in gold are buying coins and bullion bars, either to hold yourself or to be held by a dealer. For example, in December the Mint was selling a Christmas gold bar containing 1g of 999.9 fine gold for £65.

Alternatively, you can invest in shares of gold-mining companies or specialist funds and investment trusts.

This article was first written by our sister magazine Moneywise.

This article was originally published in our sister magazine Money Observer, which ceased publication in August 2020.

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