10-QPeriod: Q1 FY2007

ISHARES GOLD TRUST Quarterly Report for Q1 Ended Mar 31, 2007

Filed May 10, 2007For Securities:IAU

Summary

The iShares COMEX Gold Trust (IAU) reported its quarterly results for the period ending March 31, 2007. The Trust's primary objective is to provide investors with a cost-effective way to hold an interest in physical gold bullion, with its share value intended to reflect the market price of gold, less expenses. During this quarter, the Trust saw an increase in the value of its redeemable shares, driven by a rise in the price of gold and an increase in the number of outstanding shares due to creation activity outpacing redemptions. The Trust's financial performance for the quarter was positive, with a net income of approximately $2.1 million, a significant improvement from the net loss of $0.49 million in the same period of the prior year. This turnaround was largely due to substantial gains realized from the distribution of gold for share redemptions and the sale of gold to cover expenses. The Sponsor's fees, which cover most of the Trust's operational costs, remained a consistent expense. Investors should note that the Trust's performance is directly tied to the price of gold, and it holds no other significant assets, indicating a concentrated risk profile.

Key Highlights

  • 1The Trust reported a net income of $2.09 million for the three months ended March 31, 2007, a significant improvement from a net loss of $0.49 million in the prior year's comparable period.
  • 2The value of the Trust's redeemable shares increased by 5.00% during the quarter, from $907.67 million to $953.04 million.
  • 3The net asset value per share increased by 4.28%, from $63.03 to $65.73, reflecting the rise in the COMEX Spot Settlement Price of gold.
  • 4Gold bullion inventory, valued at fair value, increased from $907.97 million at December 31, 2006, to $953.36 million at March 31, 2007.
  • 5The Trust experienced a net gain of $3.00 million on sales and distributions of gold during the quarter, primarily from gold distributed for share redemptions.
  • 6Sponsor's fees amounted to $0.91 million for the quarter, representing the Trust's primary operating expense.
  • 7Shares are issued and redeemed in 'Baskets' of 50,000 shares, with 7 Baskets created and 5 Baskets redeemed during the quarter.

Frequently Asked Questions

The primary purpose of the iShares COMEX Gold Trust is to provide investors with a cost-effective and convenient way to gain exposure to the price movements of physical gold bullion. The value of the Trust's shares is designed to reflect the prevailing market price of the gold it holds, minus accrued expenses.

The Trust primarily incurs expenses related to Sponsor's fees, which cover most administrative and operational costs. It can generate gains or losses from the sale of gold to pay these expenses or from the distribution of gold when shares are redeemed. The Trust itself does not actively trade or seek to profit from gold price changes; its performance is directly tied to the market price of gold.

Shares of the Trust are created and redeemed by Authorized Participants, which are registered broker-dealers. These transactions are conducted in 'Baskets' of 50,000 shares and are typically exchanged for physical gold bullion rather than cash. Individual investors cannot directly create or redeem shares with the Trust.

The main risk is concentration risk, as substantially all of the Trust's assets consist of gold bullion. Therefore, the value of the Trust's shares is highly susceptible to fluctuations in the price of gold. Factors such as large sales by official sectors, increased hedging by producers, and changes in market sentiment can negatively impact gold prices and, consequently, the value of the Trust's shares.