Gold ETF Investor: Hargreaves Lansdown

Showing posts with label Hargreaves Lansdown. Show all posts

Monday, 14 May 2012

Retail gold ETF attracts 10 fold more buying than selling

As the gold price continues to fall I rather urgently need to assess my position. However some UK retail gold investors seem to be pretty clear that today presented a buying opportunity.

The (allegedly) most popular physical gold exchange traded fund for retail investors - the ETF Securities sterling denominated fund with the London Stock Exchange ticker PHGP - has seen buyers spending nearly 10 times more than sellers have sold today. With £5.2 million worth of shares bought by investors compared to £650,000 worth of shares sold. (The most popular retail gold ETF? dealt with below)

(Click on images to expand them)

BlackRock Gold and General: -10% in a week -40% from 2011 peak

The performance of my BlackRock Gold and General fund holdings has been dire. It is down around 10% this week and nearly 40% since it's peaks in September 2011.

The 25% drop over the last year appears almost reasonable next to these two figures!

Over the year:

I bought gold yesterday

Despite a great deal of uncertainty about my investment rationale, I bought some gold yesterday afternoon. I did it without consulting previous agonies over action vs inaction or anything else other than the price had fallen below a level that had caused me to think about it earlier in the day.

I bought gold before it dropped below $1,690

On Monday morning I bought 10 gold shares - the ETF Securities Physical Gold exchange traded fund shares with the London Stock Exchange symbol of PHAU. (LSE shows there were two £8m PHAU sales today at around 9.44am)

Gold: tell me why I don't like manic mondays

As gold markets open for Monday I'm about to go to bed...

Another £1000 on PHAU gold ETF... bad move?

I just bought another 10 ETF Securities physical gold shares (London Stock Exchange ticker PHAU). I bought them on Monday 12 December 2011 around 3pm. That means my total holdings of PHAU now stands at 28 shares. All together these 28 shares cost me £3,057.62 to buy but are now worth £2,939.34 - down 3.87%.

The shares I bought on Monday cost £104.58 each before fees or £1,057.74 in total (after fees).

That is the cheapest I've managed to buy at so far but it is far from clear that this was a good move!

There seem to be lots of different arguments over whether the gold price will go up or down from here. At some points today PHAU and PHGP were down 3%.

On 4 November 2012 I bought 10 shares for £108.01 each at a total cost of £1,092.10.

The first time I bought was on September 22 when I bought 8 shares for £111.98 (before fees), at a total cost of £907.78 (after fees).

Two ideas.

I'm going to find out what happens if I step up my trading. At the moment I do one or two trades a month. This is a good thing in terms of keeping costs down but it means that I don't know yet what it's like to sell. I think that could be a big problem if I find out I'm afraid of selling when the gold price starts moving downwards. If each trade makes money - or the overall effect is money making then there's an option to carry out 10 trades before the end of December which will mean that the costs of trading will fall to £8.95 per trade through January. If I think I'm getting anywhere with it I can then shift up to 20 trades per month (unlikely as 20 times £8.95 is £179) which would push trading costs down to £5.95 each. It may become very obvious that this isn't a good idea very quickly - or that may be I need a more volatile asset to trade to make it worthwhile.

The second plan is to find a decent US fund that might help offset the euro/sterling problems that a UK gold ETF investor has. But it might take some work just to explore whether this option will actually help.

Friday, 9 December 2011

Spreads, sterling gold vs dollar gold

As the eurozone summit progressed today the performance of ETF Securities' sterling denominated (PHGP) and dollar denominated physical gold ETFs (PHAU) diverged, as did their spreads (although I'm still waiting to get a proper breakdown of these from ETF Securities.)

When I looked around 2pm today PHAU shares had a 0.04% spread (the difference between the price at which I can sell shares and the price at which I can buy them)

While PHGP had a 0.2% spread. Although they're both small figures, that is a five-fold difference.

Today PHAU was among the top ten shares bought by Hargreaves Lansdown clients making up 1.3% of the value of all shares bought.

Whatever the political outcome of the eurozone crisis and the summit, it was never likely to suit everyone involved. All parties want a solution of some kind but will employ brinkmanship to make their voices heard. It is ongoing.

Something happened but what it was is still unclear.From the point of view of an under resourced gold ETF investor all I could see was this divergence of paths between sterling gold and dollar gold earlier today.

Dollar denominated gold gained while sterling denominated gold fell. That means that my dollar denominated physical gold ETF (PHAU) gained nearly 1% but if I had sold it, the dollars I would have got from the sale would have been automatically converted into pounds sterling.

And pounds sterling, as well as the euro, gained against the dollar as the build up to the summit results went on before settling back in the aftermath - as did the gap between PHGP and PHAU.

That's the way the ETF works. So my actual return would have been more akin to the sterling denominated ETF PHGP. In effect, the dollars I made from gold would have been swallowed up by the dollar falling in value against the pound.

Wednesday, 23 November 2011

I'm buying the fund not the ETF today but will gold plunge anyway?

MoneyWeek's John C Burford said in an email today : "my target is for gold to fall to much lower levels".

His last gold forecast proved pretty accurate but I didn't act on it because I didn't understand his methods.

I still don't. However I am at a buying moment - it's two months since my first investment on 22 September - and I've decided on a vague month-by-month investment strategy.

So I am looking to add more to my gold bet, either via investing in ETFS Physical Gold (PHAU) or BlackRock Gold and General and I had a look at this choice yesterday.

Back to Burford... just because he was right last time I thought I'd hang on and see if he's right again. I can't tell from the piece what sort of time scale he's putting on this - his 'tramlines' suggest the fall will be today (Thursday).

I've just put in a £250 order for more BlackRock Gold and General (it's been accepted although I didn't think I could invest such small amounts. If it goes through I might do the same over the next three days. But I want to check with my broker Hargreaves Lansdown what they mean by this: "We actively monitor levels of trading and may refuse applications from anyone who is considered to have a history of short-term or excessive trading or whose trading has been, or may be, disruptive" in their terms and conditions).

I also need to properly understand how the spreads on this unit trust work. Yesterday the buying price was nearly 6% higher than the selling price although most of this should be wiped-off because I'm dealing through Hargreaves Lansdown.

As far as I can tell, I am able to cancel my order by phone any time before the investment manager starts processing the order - and no one knows when that is.

In his piece Burford says that if gold falls with markets "This demonstrates the fact that gold may not be, contrary to common wisdom, a hedge against financial turmoil. If and when the Dow makes a huge leap down, gold is likely to follow."

That does seem to be the way things work at the moment due to investors selling gold and buying dollars. But gold falls less and recovers faster and that's enough for me - and it seems like a good idea to buy at those low points.

I also noticed that my pounds have weakened against the dollar - hence the sterling gold ETF PHGP, has not fallen as far as PHAU. To me this looks counter-intuitive but I think it makes sense: if I convert my dollar denominated ETF into pounds I get more pounds per dollar (because the pound has weakened) so, in sterling terms my gold price hasn't fallen so far. This means that a sterling based investor is at a disadvantage during a good buying opportunity.

I want the pound to be weak when I sell, not when I buy. But this stuff still doesn't come naturally to me!

As far as I can tell this currency problem is by-passed, or passed on to fund manager, by investing in the BlackRock Gold and General. Hopefully a fund manager knows how to deal with that catch 22.

At the same time I can also invest smaller amounts at no cost. So I'm going to give it a go.

Tuesday, 22 November 2011

Decision time: gold fund vs gold etf

A further £3,000 should be transferring into my Hargreaves Lansdown account from another ISA that has been sitting out of sight for a decade. The question is whether I want to build up my gold or diversify.

However I don't understand other investments to any useful degree and so I'll probably use the cash to motivate more understanding of my existing investments - narrow as they may be.

One area I could look at is increasing the cash in the BlackRock Gold and General Fund which has fallen 6% over the last week or so.

The chart only goes up to 19 November but the fund's second biggest holding, silver Miner Fresnillo, and its biggest holding Newcrest Mining (NCM), both fell again on Monday and today (Tuesday) as this google chart shows. The chart also shows that my physical gold ETF (PHAU) hasn't fallen as much - and even less in sterling.

The two charts suggest the fund is behaving more in line with Fresnillo than gold or even gold miners.

So, if markets regain confidence, there is potentially more to gain from the fund than the gold ETF. Another advantage is that it's a fund and the cost of buying is much lower than the £11.95 flat fee for an ETF share purchase. The problem is that I have to make a decision to buy before 8am and that purchase won't be processed until midday - and by then anything could have happened. (Interesting observation from Harvey Organ today about a large amount of physical silver being shifted around - the significance of which I do not know... more general news suggests gold is up a lot since UK markets closed, so may be the chance has gone...)

Below is what has happened to my account since Sunday:

Tuesday 22 November

Monday 21 November

Sunday 20 November

Thursday, 17 November 2011

Gold ETF and BlackRock Gold and General snapshot

My Hargreaves Lansdown account at the end of Thursday November 17 2011 after gold prices fell (Wall Street Journal) and ETFS Physical Gold shares (PHAU) fell 1.8% (Google chart).

I haven't got time to work out what I'm doing at the moment. Hopefully things will become clearer before my next investment deadline around November 22. But that's unlikely.

Tuesday, 15 November 2011

Update: glad to be distracted

On Monday Goldman Sachs and Credit Suisse both were positive about gold and today it was reported that John Paulson cut his gold ETF holding by a third).

I haven't worked out what I'm going to do with some extra cash I'll be adding to my account over the next couple of weeks and, more importantly, I still haven'g got a selling strategy for my existing investment. Unfortunately I am too busy to work on either of these at the moment.

The main job is to ignore what other people are saying about the price and work out why I'm invested - and hopefully that'll provide me with an idea about whether I want to invest more, and under what conditions I'll think about selling.

Today my ETF Securities Physical ETF shares looked OK in term of sterling but were down in dollars.

But here's what my account looks like now:

Sunday, 13 November 2011

Should I trade my gold ETF?

On Wednesday I got my first emailed note from Moneyweek's John C Burford. It said that thegold price was about to drop. And so it did. Then on Friday he sent another one saying he thought it would drop further. And it did.

The system he uses doesn't look impossibly complicated but should a small-time physical gold ETF investor like me consider using these kinds of methods?

By the end of last week my gold holding was down 3%. It has certainly looked worse but that's no excuse to sidestep the thorny subjects of how, why and when to sell.

The numbers I'm dealing with mean that there has to be some pretty big moves to justify incurring the £11.95 transaction fees from Hargreaves Lansdown. The moves forecast by Burford may have justified it (assuming I timed it right): I'd have got £1977 for my ETFS Physical Gold ETF at 14:20 on 9 Nov 2011.

By 4pm November 10 Hargreaves Lansdown would have paid me £50 less, £1,927 for my 18 gold shares.

As someone who is investing for the long term I feel that any sale should be followed - hopefully fairly quickly - by more buying. And, more importantly, the buying and selling should happen whether a trade works or not.

I'm going to be tied-up more than usual this week but I think I need to set out a proper buying and selling system.

As an investor I expect to sit back and wait for the longterm picture to take shape: an expectation for gold to rise to $2,000 per ounce or more. Unfortunately the recent moves downward have not corresponded with a healing of the global economic picture. In other words my view that gold is an insurance policy or a hedge for my other assets is still not clear.

In The Streets "Gold Brief", Martin Murenbeeld, chief economist at DundeeWealth in Toronto said: "If anything, the fundamentals for gold have been strengthened by everything that has been happening... The game is coming down more and more to the European Central Bank stepping in to stop interest rates [rising] in Italy."

But he added: "Gold's fate is now dependent on how bad things get in Europe. If Europe plunges into a recession and disaster strikes, Murenbeeld thinks that gold prices will fall along with every other asset. "To what degree we are going to create more liquidity -- when that thought is in more ascendancy -- gold will start to rise.""

Why does he think that gold won't work in this scenario?

Tuesday, 8 November 2011

How much gold do I actually own?

I own 18 ETF Securities Physical Gold ETF shares with the (PHAU) ticker on the London Stock Exchange. Each of these shares entitles me to 0.0982449 of an ounce of gold (according to this page on ETF Securities web site:http://www.etfsecurities.com/msl/index.asp).

Why have I got this much gold per share? According to the PHAU prospectus it's because everyday that the share exists a small chunk of it is paid back to ETF Securities. Over a year these small chunks will equal the 0.39% annual management fee.

The amount of gold per share diminishes every day from the date of the launch which means the older the ETF the less gold each of its shares will be entitled to. When PHAU shares were launched in 2007 they were entitled to 0.1 of an ounce of gold and that has been diminishing ever since. Hence the 0.0982449 of an ounce of gold per share today.

The chart below shows the rate of decay for three physical gold ETFs from November 2009. I picked this date because it was the launch of the ETFS Physical Swiss Gold (SGBS). At launch SGBS shares were entitled to 0.1 fine troy ounce of gold each.

The US dollar version (PHAU) which I own was launched in April 2007 so is entitled to less gold than the Swiss ETF.

Meanwhile Gold Bullion Securities (GBS) is even older having started in 2003. It also pays a higher management fee of 0.4%. However it allows investors to convert their shares into physical gold (which means different rules apply to it - it can't be held in an ISA and the annual management fee is slightly higher (question number 28)).

Even though I am never likely to touch the gold I own, it determines the value of the shares. So the value of PHAU shares diminish inline with the amount of physical gold backing it.

In a 2009 article by Index Universe Ronan O'Shea of market-making firm Nyenburgh, said: "Most of the time the different physical gold trackers have traded in line with the asset value implied by their gold content, with occasional premiums to NAV, which have occurred more often for those funds with a less-diversified creation and redemption mechanism (where ETFs have fewer official market makers - known as 'authorised participants' - who have to offer a price at which they will buy ETF shares from investors and price at which they will sell to them).

What is that gold worth today?

So, if I own 1.7684082 ounces of gold, what do I actually get when I sell it?

At 4.30pm today, when the London Stock Exchange shut up shop, my broker, Hargreaves Lansdown was offering to buy my shares for $176.40 each. If each share is entitled to 0.0982449 of an ounce of gold then they would be paying me $1,795.5 per ounce (176.4/0.0982449).

That's before working out what the pound dollar conversion rate would be or taking into account the £11.95 cost of selling.

But first I want to check that I am actually getting a reasonable deal on the gold spot price. According to BullionVault's spot price chart the selling price of gold was pretty close to $1,795 at 4.30pm.

It looks like I've done better than I should have done!

But what have I got in pounds? If I take my 1.7684082 ounces of gold and multiply it by the value of $1,795.5 per ounce it comes out at $3,175.20 for the whole lot. When I wrote this story the pound was buying $1.60 (Google Chart) and so my investment would be worth £1,984 in total.

Does this correspond with the pound denominated version of this ETF? The value of the PHGP exchange traded fund was £109.65 to sell. I have 18 shares, this would have come to £1,973, so I'm out by a bit - it could be the exchange rate (I don't know which one they're using, or just straight maths failure).

I can also check the value of my holding in the Hargreaves Lansdown account which is based on the bid price and on a $1.6072 exchange rate. That comes out a lot closer to the PHGP value (not surprisingly!) at £1,975.61

If I took my gold to a pawnshop in Hackney, what would I get?

All together, in ounces my shares hold 1.7684082 oz(troy) which converts into 55.0036 g.

If I wanted to sell my gold in a Hackney pawnshop I'd got to one called Cashier (last month they offered me the best deal) and today their selling price was £25 per gram which would have got me just £1,375 for all my gold. Bear in mind that they only offer it on 22 carat gold and the gold I own is 24 carat.

Friday, 4 November 2011

Gold ETF holding more than doubled

From 22 September to 4 November I owned 8 shares of ETF Securities Physical Gold (PHAU).

I now own 18 of them. The extra 10 shares have set me back another £1092.

This is not going to look like a fortune to some but I don't have a great deal to play around with.

According to my Hargreaves Lansdown account my total holding in PHAU is now down by 3.26%:

At the end of the today PHAU was down 0.5% and the pound was up 0.65% against the dollar, both more favourable than the price at which I bought at.

I didn't check to see how my original shares were doing before this purchase but when I bought the original 8 shares they were £111.97 each. At the end of today these shares were worth £107.5.

So the 8 shares I bought for £111.97 were down 4% while the 10 I bought for £108.015 were down just under 0.5%.

I'm worried I've bought at a bad time but I felt that if I was buying as a defence against disaster I can't keep waiting for the disaster to pass before investing. Unfortunately gold has generally fallen in the wake of upsets then staged a recovery. While this shows it should make sense to invest after the event, do I know if that pattern is going to persist?

I have until Monday morning to work out what I'll do if the gold price falls sharply on Monday on the back of whatever may develop in Greece. For now though, it appears as if Greece has taken the least tumultuous route.

Tuesday, 1 November 2011

So, how much was that gold ETF again?

I still don't really know why I own gold or whether I trust it. But that hasn't stopped me thinking about buying more ETF Securities Physical Gold (PHAU).

After the Greek prime minister surprised everyone by calling for a referendum everything fell, including gold. The price of PHAU dropped by more than 2% during the day but ended the day down less than 1%.

As PHAU is a dollar denominated share I needed to find out how much of it I could buy with the pounds sterling that I own. When I looked at the exchange rate between the pound and the dollar I saw that the pound had dropped 1.3% against the dollar - this meant my pounds wouldn't go so far as they had done 24 hours earlier. But at the same time it meant my existing investment in gold hadn't lost as much of its value in terms of pounds sterling as it had in dollars.

Even so, I was still thinking about buying more shares in my gold ETF because the last time I bought I paid $172.7 per share. On that day - September 22 - the pound fell dramatically against the dollar and was only worth around $1.53 at end of the day. I got a slightly better rate and the combined moving parts - the gold price and the exchange rate - meant that I paid £111.97 for each of my PHAU shares.

Today the same shares were trading around $165.7 each and, because the purchasing power of my pounds had increased since my last adventure - (they now buy $1.59 each: Google Chart ) - I could have bought them for around £104.21 per share.

That's a fall of nearly 7% since my last buying point.

Information gap

Unfortunately I only worked out a general view - that I wanted to buy - and I had done it using Google Finance data before opening up my Hargreaves Lansdown (HL) account. When I started the process to buy the first HL page showed me everything in dollars:

(The prices shown, if you can read them, are from later in the day.)

I placed a deal via the "place deal" tab where I said I wanted to spend £1100 including costs. The last stage of the buying process was a 15 second window in which I had to decide whether I wanted to accept a specific deal. But this page only gave me a total cost in pounds which meant I didn't know how much I was paying per unit.

Luckily I was offered 10 units so I could work that out easily enough - but was it a good deal? Was it even what I expected it to be?

At 13.48 I pondered over this screen for 15 seconds:

It took a moment but I realised that I didn't have enough information here to know what the exchange rate was or how much I was actually paying for the gold in dollars. If I had a dollar price and a pound price I could have worked out the exchange rate if I wanted to.

At 14.01 I saw this screen:

At 14.13 I saw this screen for 15 seconds:

At 14.42 I saw this screen for 15 seconds:

So what's the problem? I can't tell if I'm making an unnecessary fuss about this. It could be argued that if I'm buying in pounds sterling so why do I need to know anything more than the price I'm paying in sterling?

To me the problem is clear. Only having a sterling value obscures the two important factors at work in the investment: the dollar value of gold and the value of my pounds against the dollar.

When I buy I want to know if the price is attractive because of a change in the currency relationship or because the thing that I wanted to invest in - gold - has performed well. The situation in one of these moving parts may be dominant and it may be changing for better or worse.

I don't think it's unreasonable for me to know these simple facts when making the investment.

What happened to the sterling price of PHAU today is a case in point. The price of gold fell but my existing investment didn't suffer too much because the dollar strengthened against the pound.

However, looking at the exchange rate I could see that, despite the pound falling more than 1% against the dollar, my pound was still a lot stronger than it had been the last time I bought Google Chart .

For now though, I have to accept that this information isn't available at the moment I buy.

What's more, as I discovered the first time I bought PHAU, it's not easy to get hold of that data even after the event.

This means that an investor needs to know beforehand what sterling price they will accept. They also have to accept that they will not know why a price may be better or worse than they expected. And if they want to find out they will have to go back to data that is 15 minutes out of date. This knowledge gap makes it difficult to decide whether they should wait or go ahead and buy at that moment.

Even if I decide to delay my buying decision for a few minutes and the price changes I won't know if it's because the currency has strengthened or if the gold price has changed.

These factors can change in seconds, particularly in times of market stress like today.

There is also a disconnect between the presentation of the data that alerted me to a potential good deal and the presentation of the price I was then offered by HL.

In my case I was attracted by a dollar price of individual PHAU shares on Google Finance (with a 15 minute delay) - this was roughly confirmed by Hargreaves Lansdown with another delayed dollar price per share. Then, at the final stage, in the 15 second window I had to make up my mind, I was confronted by a sterling price that gave me a total for all the units I was buying - not a figure per share.

Not only was this switch a little bit disorientating, it took me moment to realise that it was impossible for me to connect the pound sterling price I was being offered to a dollar price that had looked attractive.

PS. Interesting observations about the world of credit default swaps (CDS: insurance policy against goverments defaulting on bonds) from Jim Sinclair. He points out that a referendum in Greece could change the status of Greek debt to "default" and trigger those insurance policies.

If that happened attention could swing away from european banks to US banks who are the main sellers of CDS.

Also an interesting article from Galmarley.com: "The market doesn't wait conveniently showing the point at which we should get out. It hangs between greed and fear. When it falls it tempts us to hold on with the prospect of recoveries which don't happen, yet it punishes us repeatedly if we start selling, with bounces which would have saved us from our loss. Bit by bit it turns the shrewdest market operator into a rabbit."

Thursday, 20 October 2011

20 October 2011 gold ETF report: test of faith

Today my ETF Securities Physical Gold (PHAU) shares dropped 2.4%.

I'm not going to interpret the causes - some of them are discussed here (IB Times) and some more here (MarketWatch). The argument is that if gold isn't a fear barometer it's a useless investment for a while.

Where do I stand in this situation?

First the boring bit - deciphering what's happened to my PHAU shares. Then I'll assess whether I'm in enough pain to act and, lastly, whether I have enough knowledge to act sensibly.

When I bought the shares on 22 September I paid $172.734 per share (that's before adding the £11.95 I was charged to carry out the transaction.)

At the close of business today Hargreaves Lansdown would have paid me $158.03 for each of them. (The offer price was $158.22 per share.)

So my shares have dropped 8.5% in their dollar value - again that's before adding the cost of dealing.

Unfortunately that's the happiest spin my gold ETF story gets today.

When I bought the shares they cost £111.9787 each. There were 8 of them which adds up to £895.8296.

By the end of today - 20 October 2011 - my eight shares had a sterling value of £803.81 according to HL which used an exchange rate of $1.5728 to £1 to get this figure.

So in sterling, before dealing costs, my loss is £895.8296 - £803.81 and on that count I'm down £92 which equates to a 10.27% loss. That's a lot worse than the 8.5% dollar loss calculated above.

That appears to be because the pound has strengthened against the dollar (check this Google chart). It now costs me more to buy pounds with my gold ETF dollars than it did back on September 22.

At the end of 22 September £1 would have bought me $1.5358. Now, nearly a month later, my pound buys me $1.5728. That works out at a 2.4% increase in the purchasing power of my pound against the dollar. That has worked against me because my investment is in a dollar denominated asset.

If I wanted to sell now I'd have to include a £11.95 transaction cost which would come off what HL would pay me: so £803.81 - £11.95= £791.86.

When I first bought the shares I also paid £11.95, a total of £907.8 for my shares and so the difference between the entrance and exit price widens again. Now I would be exit with £791.86 when I spent £907.78 entering. A £115.92 loss or -12.7%.

So what do I do?

It feels like I picked a testing time to try out a 'leap-before-you-look" investment style in gold. But where does my faith lie? Should I sell and wait til things get better? Or should I hang on?

I'm a financial journalist of sorts (out of work at the moment!) and I've written about gold related investments for a while. This generally involved passing on various people's views about the price of gold and silver.

It's embarrassing but while writing about it, it didn't cross my mind to ask such a basic question as: "Where does the price of gold come from?"

But when I bought physical gold ETF shares it was an obvious hole in my knowledge because my investment tracks the "spot price" of gold.

Adrian Ash, head of research at the BullionVault helped me work towards an answer in this piece: Is the gold "spot price" real?

Then today I read some of this blog "Gold Chat" and was relieved to find out that it's quite common for people to take the construction of the gold price for granted. They don't realise that it's an issue until they buy the stuff.

Bron, who works at Perth Mint in Australia and writes Gold Chat said: "It was always amusing to me when clients would ring up to buy and we would quote a price and then, naturally, they would say “Well, where can I get what the spot price is?” so they could work out if our price was “fair”. The answer was, “It doesn’t exist.""

I expect there will be lots more surprisingly basic (or stupid) questions I need to answer before I get comfortable with the product I own, let alone the gyrations of the gold market.

On that front Bron is a reassuring read for people left confused and worried by the daily shifts in the gold price - look at the day trading section of the Investment Time Frames section. I feel like this has provided me a bit of space to work out what my motivations were for buying gold in the first place. I'll be looking at Gold Chat's investment time frames: part one and part two to start off with.

I don't know what I'm doing but, at the moment, owning gold has forced me to pay attention. I don't think I'd be interested if I wasn't invested enough for this to be a painful experience.

I'm not interested in diversifying until I have a better grasp of what I've already got - although I do own BlackRock Gold and General Fund too.

Saturday, 15 October 2011

Gold ETF bestseller for retail investors?

The three most heavily bought shares (by value) were the same as the three most heavily sold shares by investors using Hargreaves Lansdown on Friday. These were Barclays, Lloyds and the iShares FTSE 100 exchange traded fund.

The ETFS Physical Gold ETF (PHAU) was one of the few shares on the top twenty list that didn't also make a showing on the list of shares being dumped at high speed by investors.

On Thursday Hargreaves Lansdown published an interim management statement which said that the number of clients opening accounts had increased but added that it wasn't expecting much action from them: "Whilst uncertainty remains about sovereign debt and default and a possible second recession, it is increasingly likely the retail investor will feel they need more pounds in their pocket and may continue to defer new investment decisions."

It's hard to tell if their buying and selling lists illustrate this prediction, or whether retail investors see gold as a kind of cash.

Also on Thursday the Sterling denominated PHGP was the gold ETF of choice (At close on Friday the spreads for PHGP were bid 10,382 offer 10,385 or 0.028% which were narrower than the spreads for the dollar denominated PHAG $164.09 and $162.3 or 0.12% - I was under the impression it was usually the other way around.)

Friday, 7 October 2011

Check LSE not broker for $ price of PHAU gold ETF shares

In the last post Hargreaves Lansdown (HL) told me what I'd paid in dollars for my ETF Securities Physical Gold shares (PHAU) because it wasn't on my contract note. I then asked them whether I needed to get in touch with them every time I traded to find out what I'd paid in dollars.

One of their traders emailed me saying that for now the details of how much I'd paid in dollars would not be available via my HL account but they were looking into adding them.

In the meantime I was told that I could find the particulars of my trade, priced in dollars, on the London Stock Exchange website.

So I took a look and yes, the details of all trades for one day are available for every share that is dealt on the exchange. An investor will need to be able to identify their own trade. I'm hoping I can do so just by knowing the number of shares I bought and the time I did the trade (and hope that no one else had done anything too similar recently).

How do you find these dollar prices? You can simply type PHAU into the search at the top of the LSE site and its page will come up - half way down you'll find a box showing the five most recent trades.

If you want to see all the trades for that day then adjust the controls above the displayed trades.

It should look like this:

Wednesday, 5 October 2011

What happened when I bought PHAU gold ETF?

I paid £907.78 for 8 PHAU shares (ETF Securities Physical Gold ) at 11.20am on 22 September 2011. This physical gold exchange traded fund is valued in dollars. When I bought it my pounds were converted into dollars by my broker Hargreaves Lansdown and used to pay for the shares. But the price I paid in dollars was not mentioned anywhere on the contract note from Hargreaves Lansdown and neither was the exchange rate my pounds were converted at.

This meant that I could not see how much I had actually paid for the gold and how many dollars my pounds had bought in order to make that payment.

I'm a novice as a gold ETF investor but I would have thought an investor should have this information, so I asked for it. Hargreaves Lansdown staff were helpful but, at first, weren't sure I'd be able to get an answer. However I did get a reply by email saying that all the figures had been supplied in sterling because all the trades were settled in sterling.

But Hargreaves also added that the "dollar price for your purchase of eight shares in ETFS Physical Gold (PHAU) was $172.734 per share, which converts to £111.9787."

That's an exchange rate of 172.734/111.9787 which equates to $1.54 per £1 which is pretty much what I worked out the day before yesterday.

I'm not yet sure how useful it is for me to know the dollar value of the gold or the dollar value of my pounds. But it feels like I should know this and be able to evaluate its usefulness for myself.

ETF Securities seems to agree. It doesn't say much about currency in PHAU's prospectus other than this pretty obvious point:

"Currency: Bullion prices are generally quoted in US dollars and the price of Metal Securities will be quoted on the London Stock Exchange in US dollars. To the extent that a Security Holder values Metal Securities in another currency, that value will be affected by changes in the exchange rate between the US dollar and that other currency."

The impression I got from Hargreaves Lansdown was that the conversion into pounds and dollars was automatic - I wasn't sure if ETFS was responsible but I think it is Hargreaves that does this bit

I must have got the wrong end of stick and maybe it's done by Hargreaves at the moment of buying or selling - but I don't know.

The other mystery is the spread which didn't look at when I bought the shares - there was quite a short space in which I had say accept the price I was offered and I didn't think to look. So I don't know, if I had decided to sell my PHAU shares straight away, how much would I have lost just on the difference between the price I bought at, and the price at which I could sell back to market makers.

I took a look a the PHAU page on the London Stock Exchange but this said the spread at market close on Wednesday was a massive 3.2% (a bid of $156.5 and an offer of $161.5) and I think it must have been talking about something else.

I had a look at the spread this morning at 8.28am on the Hargreaves Lansdown page for PHAU and it showed a much lower spread: the bid $161.42 and $161.66 offer on Hargreaves Lansdown's site. (Maybe the LSE figures were daily highs and lows)

Apparently the spreads for the £ pound denominated gold ETF - which goes under a PHGP ticker - are wider. I'll have a look later, but I'm not yet clear on how to make knowledge of spreads useful to me.

I'm thinking that there will be times when spreads widen and when they narrow and I want to trade when they are narrow - but I don't know if these changes are significant enough for me to bother worrying about them. And, because I didn't look when I bought the shares, I'm not sure if the bid and offer price were shown - and if that was in £ or $ - but I'll have a look.

At the moment I am still in the process of understanding what I've bought but at least it's distracting me from the near 10% loss since I bought it.

Monday, 3 October 2011

The start: PHAU

This is a very dull attempt to work out what I've gone and done. I bought 8 shares of ETF Securities' physical gold exchange traded fund (PHAU) for £895.8296 at 11.20am on 22 September 2011. The cost of the transaction was £11.95 and I did it through Hargreaves Lansdown.

According to Google Finance, at 11.20am on 22 September, PHAU shares were trading at about $172.7 each. From my HL receipt I don't know what I actually paid in terms of dollars, only in pounds and that was £111.9787 for each share. Assuming what I paid was somewhere near the $172.7 per share I think I got an exchange rate at about $1.54 to £1.

According to Google Finance, the pound ended the 22 Sept trading at around $1.535 so this looks about right (Basically I bought on a day when the pound was particularly weak against the dollar so my pounds didn't buy so much. But then the strong dollar was the reason that the gold price fell... I'm hoping the fact that the price of gold fell further than the value of the pound made it vaguely worthwhile buying point. But these are all concepts I still have to get my head around).

This evening (a balmy but apocalyptic feeling October 3) my HL account said that my PHAU investment was down 7.61% and valued the 8 shares at £838.71. Considering the buying price had been £895.8296, the fall works out at around 6.3%. The other 1.3% is the £11.95 fee.

If I wanted to sell now, it would cost me another £11.95 in fees so, in effect, I am really down 8.91% on my original investment. I do not have to take the conversion fee from pounds into dollars into account as that, I hope, can only be what the £838.71 figure is based on - the value of my dollar investment in pounds.

Although I own a dollar denominated ETF I cannot keep dollars in my pound denominated Hargreaves Lansdown account so, as far as I can tell, I have no choice in the timing of the conversion from dollar into pounds.

So my PHAU shares - denominated in dollars but valued in pounds - have fallen by 6.3% (from £895.8296 to £838.71). Over the same period the dollar denominated ETF shares has fallen from $172.7 to $162.07 - a fall of 6.15%.

The difference between the fall of 6.3% in pounds and the 6.15% in dollars should be accountable somewhere. I'd imagine it would be a combination of the exchange rate and the spread between the price I bought at (bid) and price I could sell at (offer).

If the discrepancy is due to the value of the dollar I would expect the value of the dollar to have fallen by 0.15% against the pound over this period. On 22 September I was given an exchange rate of $1.54 to £1.

According to HL the exchange rate on my ETF is $1.5459 but Google Finance has the current rate around $1.5575. Even if the later rate is the one being used to calculate the value of my PHAU shares, it does not account for the 1.15% discrepancy over the last 7 trading days.

So the difference will also have something to do with the spread between the buying and selling price of the shares. At close today, according to the London Stock Exchange, the bid price was $161 while the offer price was $164.15 - that's a 1.95% spread, more than I was expecting. (It turns out that the LSE's spread data is talking about something else - Hargreaves has more realistic looking spreads on its factsheet for PHAU) It may not have been that wide when I bought my shares, and I don't know what price I paid for my ETF shares in dollars when I originally bought them.

The fact that the price at the time on the exchange gave a mid price of $172.7 doesn't tell me what I paid for it and unfortunately this price doesn't seem to be shown on my receipt.

Another point of possible interest is that my deal was done on Plus Markets, not the LSE. I don't know if that's significant. On 23 September I bought £1000 of the BlackRock Gold and General fund too. I am still working on my investment strategy - basically I'm blowing in the wind pretty much at the moment.