BMO Launches New GOLDRs Program to Give Investors More Options

On Wednesday, the Bank of Montreal (TSX:BMO) announced the launch of a new gold deposit receipt program called GOLDRs. The first of its kind in the United States, the program is intended to give investors more options when investing in the gold space. 

Essentially, GOLDRs represent a different way of investing in physical gold. They’re the first gold deposit receipt program in the US that is Depository Trust Company (DTC) eligible, meaning that they’re more accessible for investors, according to Simon Carling, managing director at BMO Capital Markets.

Currently, all securities in the US must go through the DTC, but physical gold is not DTC eligible, which could be problematic for some investors.

As BMO states in Monday’s release, “GOLDRs are designed to be a book-entry solution for investors interested in having their gold bullion reflected in a brokerage account.” GOLDRs are also registered with the SEC, although they’re not listed or traded on a securities exchange. They represent direct gold bullion ownership, and are issued by the Vaulted Gold Bullion Trust.

Certainly, gold bugs already have a number of options at their disposal, between bullion, physically backed exchange-traded funds (ETFs), gold equity indices and a range of gold mining stocks. However, Carling told Gold Investing News that GOLDRs add something new to the mix in that they’re a DTC-eligible product that allows investors to track the gold spot price directly.

“A lot of the gold-linked products that are out there today do not necessarily track the gold price directly,” he pointed out, adding, “we’re giving the ability to track the spot price directly because other products don’t.”

To be sure, given the drop in the gold price at the end of last year, some investors might not be keen on such direct exposure to the gold price. However, given Thomson Reuters’ (TSX:TRI,NYSE:TRI) recent report that the worst will be over in 2015 and bullish sentiment from panelists at the 2015 Vancouver Resource Investment Conference, others might be happier to have the option.

GOLDRs offer other benefits too — there are no annual fees, for instance, unlike with mutual funds or ETFs, and the program “does not use unallocated gold, gold certificates, exchange traded products, derivatives, financial instruments, or any product that represents encumbered gold.” That said, Carling pointed out that GOLDRs are meant to be an alternative tool for investors that will complement ETFs and other tools in the marketplace rather than compete with them.

Certainly, the product seems like it could be interesting, especially for investors on the lookout for something new in terms of investing in the gold space.

Securities Disclosure: I, Teresa Matich, hold no direct investment interest in any company mentioned in this article.