Why is IAU significantly trailing the gold spot price

Discussion of the Gold portion of the Permanent Portfolio

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ppnewbie
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Why is IAU significantly trailing the gold spot price

Post by ppnewbie » Thu Mar 26, 2020 10:46 pm

IAU price is 15.61 and the gold spot is 1624. Are they having a hard time keep up with the volatility of gold at the moment? I hope this ETF stays solid because my 401k did not really have any for physical gold ownership.
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Tortoise
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Re: Why is IAU significantly trailing the gold spot price

Post by Tortoise » Thu Mar 26, 2020 10:56 pm

Gold ETF share price typically erodes slowly over time relative to gold spot price to pay fund expenses. It’s normal.
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ochotona
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Re: Why is IAU significantly trailing the gold spot price

Post by ochotona » Fri Mar 27, 2020 3:09 am

Tortoise wrote:
Thu Mar 26, 2020 10:56 pm
Gold ETF share price typically erodes slowly over time relative to gold spot price to pay fund expenses. It’s normal.
They might someday do a split to re-peg to gold, but probably not until it gets way worse, if ever
ppnewbie
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Re: Why is IAU significantly trailing the gold spot price

Post by ppnewbie » Fri Mar 27, 2020 12:15 pm

Thanks! So does it seem accurate to say that my expenses for holding IAU are actually the Expense Ratio plus the decay from spot price? The ER is 0.25% and the decay is about 5.5%.
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Tortoise
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Re: Why is IAU significantly trailing the gold spot price

Post by Tortoise » Fri Mar 27, 2020 12:19 pm

ppnewbie wrote:
Fri Mar 27, 2020 12:15 pm
Thanks! So does it seem accurate to say that my expenses for holding IAU are actually the Expense Ratio plus the decay from spot price? The ER is 0.25% and the decay is about 5.5%.
The decay is the ER. The current 5.5% difference between IAU and gold spot price is the cumulative effect of years of that ER-driven decay.
ppnewbie
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Re: Why is IAU significantly trailing the gold spot price

Post by ppnewbie » Fri Mar 27, 2020 2:27 pm

Thanks. makes sense
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