Thursday, 31 May 2012

ETF Securities physical metal spreads widen massively in April

click on chart to enlarge

London Stock Exchange statistics show that spreads of a popular physical gold ETF  - the ETF Securities Physical Gold £  with the LSE ticker of PHGP  - widened to 1.36% in the week between 10 April 2012 and 13 April 2012.

In the same week two other ETF Securities products also saw massive spikes in spreads. The most dramatic commodity ETF spread was ETFS Tin (PHSN) which saw its spread widen to 14.77% when it was (already quite wide) at 2.3% the week before.

Also (on the chart above) ETFS Physical Swiss Gold (SGBS) saw its spreads widen to 2.3% for the same period when they were usually between 0.25 and 0.57 in the other figures I looked at.

The spread is the difference between the buying and selling price offered by market makers as a percentage of the share price. The LSE statistics give a 'time weighted' picture explained here: "The way they calculate them is as a time-weighted average of the spread between the best bid and best offer, tick-by-tick, on the exchange over the week, using the whole continuous trading period. PHGP typically has wider spreads than PHAU as it incorporates a currency conversion component, but both ETCs are pretty liquid."

However the chart above shows that these different spreads seem to specific to products, not currency.

There was a slight rise in the spreads of PHAU, the dollar denominated physical gold ETF to 0.1% when it was usually around 0.05%, still a 100% jump.

But that's nothing compared to what appears to be a near 900% increase on PHGP's usual spread around 0.14%.

I don't know if the LSE figures are right but I've asked ETF Securities to comment.

However I'm not holding my breath.

As the chart above shows iShares' physical gold ETF (SGLN sterling again) spreads spiked to 3% in January. When I asked for a comment I was told  "The team is looking into this now" on 3 April 2012 and then "We are still looking into this, will come back as soon as possible" on 14 May 2012. So it's obviously a very difficult question....

Past questions for ETF Securities resulted in "we're a bit snowed under" (that one was about the big one-off spikes in PHGP prices).

May be they'll get back to me this time.

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