10-Q: Franklin Gold ETF Sees Strong Q2 Growth Amid Gold Rally

Franklin Responsibly Sourced Gold ETF (FGDL) reported significant growth in net assets and share value for the quarter ended June 30, 2025, driven by a 5.53% increase in gold prices.

Summary

• Net assets increased to $227,882,241 as of June 30, 2025, up from $186,935,761 at March 31, 2025.
• Net asset value (NAV) per Share rose to $43.82 at June 30, 2025, from $41.54 at March 31, 2025.
• The Fund's total return at NAV for the three months ended June 30, 2025, was 5.49%.
• The increase in NAV per Share is directly related to a 5.53% increase in the LBMA Gold Price PM, from $3,115.10 per ounce on March 31, 2025, to $3,287.45 per ounce on June 30, 2025.
• Net increase in net assets resulting from operations was $10,004,601 for the quarter, primarily due to $7,202,893 in net change in unrealized appreciation on gold investment and $2,885,981 in net realized gains.
• Shares outstanding increased to 5,200,000 at June 30, 2025, from 4,500,000 at March 31, 2025.
• The Fund received $45,549,915 from the creation of 1,050,000 shares and distributed $14,608,036 for the redemption of 350,000 shares during the quarter.
• The Sponsor's fee, the Fund's only ordinary recurring expense, was $84,273 for the quarter, representing an annualized rate of 0.15% of NAV.

Sentiment

Score: 8

Explanation: The filing indicates strong financial performance driven by favorable gold price movements and significant growth in net assets and shares outstanding. The Fund effectively tracks its underlying asset, and there are no material negative operational issues or legal proceedings. The 'responsibly sourced gold' aspect adds a positive qualitative dimension.

Positives

• Net assets grew by over $40 million, reflecting increased investor interest and gold price appreciation.
• NAV per Share increased by 5.49%, closely tracking the 5.53% rise in gold prices, indicating effective tracking of its underlying asset.
• Significant net increase in net assets from operations ($10,004,601) driven by gold's market performance.
• The Fund successfully issued 1,050,000 new shares, demonstrating continued demand for the ETF.
• An audit of the Fund's gold bullion by Bureau Veritas Commodities UK LTD concluded on April 1, 2025, with no non-conformities identified, affirming asset integrity.

Negatives

• The Fund experienced a net investment loss of $84,273 for the quarter, solely due to the Sponsor's fee.
• The NAV per Share increase was slightly less than the gold price increase on a percentage basis due to the Sponsor's fee.

Risks

• The Fund's sole business activity is investment in gold bullion, making it highly susceptible to gold price fluctuations.
• Factors affecting gold price include global supply and demand, forward selling by producers, central bank actions, production costs, inflation expectations, currency exchange rate volatility, interest rate volatility, and political/economic/regional incidents.
• There is no assurance that gold will maintain its long-term value in terms of purchasing power.
• An investment in shares is expected to decline proportionately if the price of gold declines.
• Forward-looking statements are predictions and actual events or results may differ materially due to various risks and uncertainties, including general economic, market, and business conditions, and changes in laws or regulations.
• Gold bullion held in an unallocated account is not segregated from the Custodian's assets, making the account holder an unsecured creditor at risk of the bullion dealer's insolvency.

Future Outlook

The Fund's performance is expected to directly reflect movements in the price of gold bullion, less expenses. Management acknowledges that forward-looking statements are predictions subject to various risks and uncertainties, including changes in commodity prices, market conditions, laws, regulations, and global economic/political developments. There is no intention to update forward-looking statements unless required by federal securities laws.

Management Comments

• "We express our estimates, expectations, beliefs, and projections in good faith and believe them to have a reasonable basis. However, we make no assurances that managements estimates, expectations, beliefs, or projections will be achieved or accomplished."
• "The audit findings did not identify non-conformities."

Industry Context

The Franklin Responsibly Sourced Gold ETF operates within the commodity ETF sector, specifically focusing on gold. Its performance is inherently tied to global gold market dynamics, which are influenced by macroeconomic factors such as inflation expectations, interest rate policies, currency strength, and geopolitical stability. The emphasis on 'responsibly sourced gold' aligns with growing investor demand for ESG (Environmental, Social, and Governance) compliant investment products, potentially attracting a broader investor base compared to traditional gold ETFs. The gold market experienced appreciation during the quarter, reflecting broader investor sentiment towards safe-haven assets or inflation hedges.

Comparison to Industry Standards

• The Fund's expense ratio of 0.15% (Sponsor's fee) is competitive within the gold ETF market. For instance, the iShares Gold Trust (IAU) has an expense ratio of 0.25%, and the SPDR Gold Shares (GLD) has an expense ratio of 0.40%. This lower fee structure could be a competitive advantage.
• The Fund's objective to hold 'responsibly sourced gold' (post-2012 LBMA Good Delivery bars) sets a higher standard for ethical sourcing compared to some older gold ETFs that may not have such explicit criteria, aligning with evolving global benchmarks for sustainable investing.
• The 5.49% total return at NAV for the quarter closely mirrored the 5.53% increase in the LBMA Gold Price PM, indicating efficient tracking of the underlying commodity, which is a key performance metric for passive ETFs.

Corporate Governance

Related Party Transactions

• Franklin Holdings, LLC, the Sponsor, is a related party to the Trust and the Fund.
• Franklin Distributors, LLC, the Marketing Agent, is an affiliate of the Sponsor and a related party.
• Franklin Resources, Inc. (FRI), the ultimate parent company of the Sponsor and Marketing Agent, is considered a related party.
• Expenses payable to the Marketing Agent are paid through the Sponsor's fee.
• No shares of the Fund were held by any related party as of June 30, 2025, and March 31, 2025.

Stakeholder Impact

• Shareholders: Benefited from the appreciation in gold prices, leading to a 5.49% total return at NAV for the quarter. The 'responsibly sourced gold' aspect may appeal to ESG-conscious investors.
• Authorized Participants: Engaged in significant creation and redemption activity, facilitating liquidity and market efficiency for the ETF.
• Sponsor (Franklin Holdings, LLC): Received its fee of $84,273 for the quarter, covering ordinary operating expenses and benefiting from the growth in net assets.
• Custodians (JPMorgan Chase Bank, N.A. and BNY Mellon Asset Servicing): Continued to provide essential services for gold and cash custody, respectively, as part of their ongoing contractual agreements.

Next Steps

• The Sponsor will continue to oversee the Fund's principal service providers and prepare periodic reports.
• The Fund will continue to sell gold as needed to pay the Sponsor's fee and any extraordinary expenses.
• The Fund will continue to issue and redeem Creation Units on an ongoing basis with Authorized Participants.

Key Dates

Recommendation

The Franklin Responsibly Sourced Gold ETF (FGDL) effectively tracks the price of gold, as evidenced by its strong performance mirroring gold's appreciation during the quarter. Its competitive expense ratio and commitment to responsibly sourced gold are attractive features. However, as a passive gold ETF, its performance is entirely dependent on gold price movements, which are subject to significant market volatility and macroeconomic factors. The filing itself does not present any new fundamental catalysts beyond the ongoing gold market trends. Therefore, for investors seeking exposure to gold, holding FGDL is appropriate, but the recommendation is not 'buy' or 'strong buy' as the filing primarily reflects past performance tied to the commodity, rather than new intrinsic value drivers for the fund itself. The 'hold' recommendation acknowledges its efficient operation and market alignment without suggesting an immediate entry point based solely on this quarterly report.

Keywords

Gold ETF, FGDL, Franklin Templeton, Gold Bullion, SEC Filing, Quarterly Report, Investment Fund, Commodity ETF, Responsible Gold, LBMA Gold Price