10-QPeriod: Q3 FY2014

ISHARES GOLD TRUST Quarterly Report for Q3 Ended Sep 30, 2014

Filed November 7, 2014For Securities:IAU

Summary

The iShares Gold Trust (IAU) reported its financial results for the period ending September 30, 2014. The Trust's net asset value (NAV) experienced a decrease of 8.80% during the third quarter, primarily driven by a 7.49% decline in the London fix price of gold. Despite the overall decrease in NAV, the Trust saw a slight increase in its net asset value per share of 1.28% for the first nine months of the year, correlating with a 1.25% rise in the gold price over the same period. The Trust's financial reporting transitioned to an investment company accounting standard effective January 1, 2014, impacting how gold bullion is valued and how unrealized gains and losses are recognized. Key operational aspects include the Sponsor's fees, which are the Trust's primary expense, amounting to $4.3 million for the quarter and $12.7 million for the nine-month period. The Trust continues to operate as a passive investment vehicle, aiming to reflect the performance of gold prices, with shares issued and redeemed in physical gold rather than cash. A significant development noted is the ongoing changes in the administration of the London gold fix benchmark, which could potentially impact gold price discovery and, consequently, the value of IAU shares.

Financial Highlights

14 data points
Beta

Net Income

-$527.70M

EPS (Diluted)

$-1.92

Total Assets

$6.35B

Cash & Equivalents

$0.00

Free Cash Flow

$0.00

Financial Statements
Beta
Operating Expenses$4.29M
Operating Income-$4.29M
Net Income-$527.70M
EPS (Basic)$-1.92
Shares Outstanding (Basic)274.06M

Key Highlights

  • 1The Trust's net asset value (NAV) decreased by 8.80% in the third quarter of 2014, largely due to a 7.49% drop in the London fix price of gold.
  • 2For the first nine months of 2014, the Trust's NAV per share saw a modest increase of 1.03%, mirroring a 1.25% rise in the gold price.
  • 3The Trust adopted investment company accounting standards as of January 1, 2014, resulting in gold bullion being valued at fair value and changes in unrealized appreciation/depreciation being recognized on the income statement.
  • 4Sponsor's fees remain the primary expense, totaling $4.3 million for the third quarter and $12.7 million for the nine-month period.
  • 5Shares are continuously issued and redeemed in physical gold, not cash, exclusively through Authorized Participants.
  • 6The filing notes potential risks associated with changes in the administration of the London gold fix, a key benchmark for gold pricing.
  • 7The Trust holds 100.02% of its assets in gold bullion, indicating a high concentration risk tied to gold price fluctuations.

Frequently Asked Questions

In the third quarter of 2014, the iShares Gold Trust (IAU) experienced an 8.80% decrease in its net asset value, primarily due to a 7.49% decline in the price of gold as measured by the London fix. The net loss for the quarter was $527.7 million.

The primary expense for the iShares Gold Trust is the Sponsor's fee, which accrues daily at an annualized rate of 0.25% of the net asset value. For the three months ended September 30, 2014, these fees amounted to approximately $4.3 million, and for the nine months ended September 30, 2014, they totaled approximately $12.7 million.

Effective January 1, 2014, the Trust adopted investment company accounting standards. Under these standards, the gold bullion held by the Trust is valued at fair value, and changes in unrealized appreciation or depreciation are recognized on the income statement. Previously, gold bullion was valued at the lower of cost or market.

Authorized Participants are registered broker-dealers that have entered into agreements with the Trust and Sponsor. They are the only entities that can directly create and redeem Shares of the Trust, which they do by exchanging physical gold bullion for Shares, or vice versa, in aggregations of 50,000 Shares. Individual investors cannot transact directly with the Trust.

The report highlights concerns regarding the administration of the London gold fix, a key benchmark for gold pricing. Changes in its administration or any perceived disruption could affect gold price discovery, potentially leading to inaccurate valuations of the Trust's gold, incorrect fee calculations, and adverse effects on the value of IAU shares. The Trust plans to monitor this and may seek an alternative benchmark if necessary.