I'm getting ready to commit 100% of my portfolio to the Permanent Portfolio. I already have holdings in both stocks and cash, and I recently exchanged my shares in Vanguard's Total Bond Market for TLT. The last piece left for me to purchase is gold. I'm not exactly comfortable holding physical gold, so I'm trying to understand the differences between GTU and IAU. This will be in a taxable account. This is what I've come up with so far:
1. Both have geographic diversification. GTU stores its gold bullion in Canada, and IAU in Toronto, New York, and London.
2. IAU has a slightly lower expense ratio of 0.25% vs GTU's 0.33% (although I need to verify this).
3. GTU seems to have better tax treatment, with long-term gains taxed at 15% rather than 28% for IAU. However, correct me if I'm wrong, but is IAU taxed at 15% if you are in the 15% tax bracket (as I am)? Either way, I think it's dangerous to count on these differences, as I will probably move up in tax brackets and the tax rates will probably change over time.
4. GTU trades at a premium or discount to NAV. Does this even out over time? I saw a growth chart for IAU and GTU starting around 2009 and there was a difference of almost 20%. Also, how do you check what the premium or discount is for GTU? Can you just go to this link: http://www.gold-trust.com/asset_value.htm
5. Both IAU and GTU seem to cause a headache around tax time in terms of the forms you have to fill out, so I'm not sure which is worse.
6. GTU claims in the latest annual report that at least 90% of its assets are backed by physical bullion at all times. The gold can't be loaned, and it is inspected annually and spot inspected periodically. IAU is also backed by physical gold, though I'm not sure how much it is required to have on hand. An FAQ document on the iShares website states that the gold can't be lent out. Also, vault inspections are conducted twice a year and inspection certificates are available online.
7. IAU potentially has counter-party risk. I'm not sure I understand the full implications of this exactly, but does it have to do with JPMorgan Chase being the custodian of the trust?
8. I'm not sure about this point either, but I read in an earlier post that investors in IAU are protected if iShares goes out of business, but investors in GTU would lose all of their money if the parent company were to go bankrupt.
Please add or correct me on any of the points above. It seems that after weighing all of these option IAU is the better choice for me, but I still am considering GTU.