01—Abstract
Summary
Summary of the 10-K filed February 23, 2023. Cited figures are marked; the original filing is the authoritative source.
iShares Gold Trust (IAU) reported a year-end 2022 net asset value of $26.15 billiona, down 8.94% from $28.72 billion at December 31, 2021.
The decline was driven mainly by a shrinking share count (829.75 million to 760.70 million shares) rather than a sharp fall in gold: the LBMA Gold Price slipped only 0.43%, from $1,820.10 to $1,812.35b, and NAV per share fell 0.69%, from $34.62 to $34.38. Redemptions of 152.55 million shares outpaced creations of 83.5 million, and net assets fell by about $2.57 billion over the year, including $2.03 billion in net capital outflows. The Trust is a passive, unleveraged vehicle that holds only physical gold, with no income distributions.
Its only ordinary expense is the Sponsor's fee of 0.25% of NAV, which totaled $71.45 millionc in 2022 and is funded by selling gold. Because gold must be sold to pay that fee, each share represents slightly less gold over time, so investors need gold prices to rise by roughly that fee amount just to hold their value. The 2022 results show the Trust's net investment loss of $71.45 million was more than offset by $583.8 million in realized gains, with a $1.05 billion unrealized loss on gold bullion, for a net decrease in net assets from operations of $538.96 million.
The filing also highlights risks that investors should weigh: concentration in a single asset, custodial and insurance gaps (the Trust does not insure its gold, and the Custodian's coverage is held for its own benefit), reliance on the LBMA Gold Price PM for valuation, and sanctions-related disruptions to Russian-origin gold after the invasion of Ukraine. PricewaterhouseCoopers issued an unqualified opinion on both the financial statements and internal control over financial reporting, and reported no critical audit matters.
02—Key points
Key Highlights
- NAV fell 8.94% to $26.15 billion at year-end 2022, while NAV per share fell only 0.69% to $34.38, showing that share redemptions drove most of the asset decline.
- Net share outflows were 69.05 million shares in 2022 (83.5 million created vs. 152.55 million redeemed), and Q4 2022 alone saw 56.5 million shares redeemed.
- The Sponsor's fee of 0.25% of NAV totaled $71.45 million in 2022, paid by selling gold, which steadily reduces the gold backing each share.
- Net decrease in net assets from operations was $538.96 million, comprising a $1.05 billion unrealized loss offset by $583.8 million in realized gains and the fee expense.
- The Trust holds only physical gold (14.43 million ounces at year-end 2022, valued at Level 1 fair value) and is not actively managed, hedged, or leveraged.
- The Trust does not insure its gold, and Shareholders have limited legal recourse against the Custodian (JPMorgan, London), which is governed by English law.
- Russia-related sanctions and LBMA delisting of six Russian refiners affect the supply of new gold bars, though the filing states no material impact on the Trust to date.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2022filed February 23, 2023Financial Statements
FY2022 against FY2021
| Line item | FY2022FY2021 | Change |
|---|---|---|
| Operating Expenses | $71.45M$72.77M | −1.8% |
| Operating Income | -$71.45M-$72.77M | +1.8% |
| Net Income | -$538.96M-$1.40B | +61.5% |
| EPS (Basic) | $-0.65$-1.65 | +60.6% |
05—Questions
Frequently Asked Questions
Why did the Trust's net asset value decline in 2022 if gold prices were nearly flat?
The NAV dropped 8.94% mainly because the number of outstanding shares fell from 829.75 million to 760.70 million as investors redeemed more shares than were created. Gold itself fell only 0.43% over the year, and NAV per share declined 0.69%, roughly matching the gold price decline plus the effect of the Sponsor's fee.
How does the Sponsor's fee affect my investment over time?
The Sponsor's fee accrues daily at 0.25% annualized of NAV and is paid by selling gold held by the Trust. Each share therefore represents slightly less gold over time, so the gold price must rise by about that fee amount each year just to keep the share's value unchanged. The Trust does not earn income to offset this cost, and it makes no cash distributions.
What are the main risks of holding IAU shares according to the filing?
The main risks include full exposure to gold price fluctuations since the Trust is not diversified, the absence of hedging or active management, and the decline in gold per share from fee-related sales. Other risks include custodial and insurance limitations, the possibility that Shares trade at a discount or premium to NAV (especially outside major gold market hours), and dependence on the LBMA Gold Price PM for valuation. Shareholders also lack the rights of corporate stockholders and of registered investment company holders.
Is IAU regulated like a mutual fund or commodity pool?
No. The Trust is not registered under the Investment Company Act of 1940 and is not a commodity pool under the Commodity Exchange Act, so shareholders do not receive the regulatory protections those structures provide, such as limits on affiliate transactions or restrictions on redemption suspensions. The Trust is taxed as a grantor trust, so shareholders are treated as directly owning a share of the gold, and gains on gold held over one year are generally taxed at up to 28% for individuals.
What happens to my shares if the Trust is terminated?
Holders of 75% of the Shares can vote to terminate the Trust. In that case, the Trustee sells enough gold to cover liquidation expenses and liabilities, then distributes the remaining gold to shareholders who surrender their shares. Sales made at low gold prices during liquidation could result in losses, and any gold unclaimed after 90 days may be sold with proceeds held for remaining holders.
06—Continue