10-Q: VanEck Merk Gold ETF Reports Strong Q1 Growth Driven by Gold Price Appreciation

The VanEck Merk Gold ETF (OUNZ) reported a significant increase in net assets and net asset value per share for the quarter ended April 30, 2025, primarily due to a substantial rise in gold bullion prices.

Summary

• The VanEck Merk Gold ETF's net assets increased by 26.44% to $1,662,219,685 as of April 30, 2025, up from $1,314,597,389 on January 31, 2025.
• Net asset value (NAV) per share rose by 17.59% to $31.76 at April 30, 2025, compared to $27.01 at January 31, 2025.
• The Trust experienced a net increase in net assets from operations of $237,960,710 for the three months ended April 30, 2025, significantly higher than $97,496,969 for the same period in 2024.
• This increase was largely driven by a net change in unrealized appreciation on gold bullion of $235,630,882 in the current quarter, compared to $97,950,683 in the prior year's comparable quarter.
• The number of outstanding shares increased to 52,339,392 at April 30, 2025, from 48,664,686 at January 31, 2025, reflecting significant creations by Authorized Participants.
• The Trust's total return at net asset value for the three months ended April 30, 2025, was 17.59%, an improvement from 12.44% in the same period last year.
• The Sponsor's fee remains at an annualized rate of 0.25% of the Trust's NAV, resulting in a net investment loss of $893,967 for the quarter.
• The Trust's sole business activity is investment in gold bullion, with its value directly tied to gold prices.
• The pricing index for the Trust's gold valuation changed to the Solactive Gold Spot Index on August 7, 2023, replacing the LBMA Gold Price.
• The settlement cycle for creations and redemptions of Baskets typically moved to a T+1 basis effective May 28, 2024.

Sentiment

Score: 8

Explanation: The sentiment is highly positive due to significant growth in net assets and NAV per share, driven by strong gold price appreciation. The ETF is performing its objective effectively, reflecting the underlying commodity's positive market trend. Operational expenses are low and stable. The risks are inherent to gold investment, not specific operational issues of the ETF.

Positives

• Significant 26.44% increase in Net Assets to over $1.66 billion, indicating strong investor interest and asset growth.
• Robust 17.59% increase in Net Asset Value per share, reflecting the appreciation of gold prices.
• Substantial net increase in net assets from operations of $237.96 million, primarily due to unrealized gains on gold investments.
• Higher total return at NAV of 17.59% compared to 12.44% in the prior year, demonstrating improved performance.
• Increased shares outstanding and gold bullion holdings, indicating net inflows into the ETF.
• The Trust maintains a low expense ratio, with net expenses at 0.25% of average net assets.

Negatives

• The Trust incurred a net investment loss of $893,967 for the quarter due to Sponsor's fees, as it is an passively managed ETF with no other income streams.
• The Trust's performance is entirely dependent on the price of gold, exposing it to commodity price volatility.

Risks

• The Trust's sole business activity is the investment in gold bullion, making it highly susceptible to fluctuations in gold prices.
• Factors that could affect gold prices include global gold supply and demand, investor expectations regarding inflation, currency exchange rates, interest rates, investment and trading activities of hedge funds and commodity funds, and global or regional political, economic, or financial events.
• There is no assurance that gold will maintain its long-term value in terms of purchasing power in the future.
• A decline in the price of gold is expected to result in a proportionate decline in the value of an investment in the shares.
• While the Trust and Sponsor are indemnified against certain liabilities, the maximum exposure is unknown, though management believes the risk of loss is remote.
• Acquisition of physical gold through redemption by an IRA or Tax-Qualified Account is treated as the acquisition of a collectible, potentially triggering a taxable distribution under Code section 408(m).

Future Outlook

The report includes forward-looking statements regarding future events or performance, such as changes in commodity prices and market conditions for gold, and the Trust's future success. These statements are based on assumptions and analyses by the Sponsor, Merk Investments LLC, and are subject to risks and uncertainties, including general economic, market, and business conditions, changes in laws or regulations, and other world economic and political developments. Neither the Trust nor the Sponsor undertakes an obligation to publicly update or conform these statements to actual results, except as required by law.

Management Comments

• Axel Merk, President and Chief Investment Officer of Merk Investments LLC (Sponsor), certified that the report does not contain any untrue statement of a material fact or omit to state a material fact, and that the financial statements fairly present the financial condition and results of operations.
• Mr. Merk also certified that disclosure controls and procedures and internal control over financial reporting are designed and maintained to ensure material information is known and financial reporting is reliable.

Industry Context

The VanEck Merk Gold ETF's strong performance for the quarter ended April 30, 2025, directly reflects the significant appreciation in global gold prices during this period. As a passively managed exchange-traded fund whose primary objective is to provide investors with an opportunity to invest in gold, its results are a direct indicator of the underlying commodity's market strength. The increase in net assets and NAV per share aligns with a generally bullish trend observed in the gold market, often driven by factors such as inflation concerns, geopolitical uncertainties, and central bank activities. The shift to the Solactive Gold Spot Index for valuation aims to provide a more robust and transparent pricing mechanism based on real-time market data, aligning with evolving industry standards for commodity ETFs.

Comparison to Industry Standards

• The Trust's primary objective is to reflect the performance of the price of gold less expenses. Its 17.59% total return at NAV for the quarter ended April 30, 2025, indicates strong performance in line with the appreciation of gold prices during the period.
• The Sponsor's fee of 0.25% annualized is competitive within the gold ETF market, aiming to minimize the drag on performance relative to the underlying gold price.
• The adoption of the Solactive Gold Spot Index for valuation, which uses Time Weighted Average Prices (TWAP) from ICE Data Services, aligns with industry efforts to enhance transparency and accuracy in commodity pricing for ETFs, moving away from traditional 'fix' mechanisms.

Corporate Governance

Related Party Transactions

• Sponsor's fees are paid to Merk Investments LLC, the Sponsor of the Trust, at an annualized rate of 0.25% of the Trust's NAV.
• Van Eck Securities Corporation (VanEck or Marketing Agent), an affiliate of the Sponsor, provides marketing assistance for the shares, with fees payable from the Sponsor's fee.
• Affiliates of the Trustee (The Bank of New York Mellon) and the Custodian (JPMorgan Chase Bank, N.A.) may act as Authorized Participants to purchase or sell gold or shares for their own account or as agents.

Stakeholder Impact

• Shareholders: Directly benefit from the appreciation of gold prices, as the ETF's value is tied to its gold holdings. They also have the unique option to take physical delivery of gold in exchange for shares.
• Authorized Participants: Engage in creation and redemption of Baskets, facilitating liquidity and ensuring the market price of shares aligns with NAV. The shift to T+1 settlement may improve their operational efficiency.
• Sponsor (Merk Investments LLC): Earns fees based on the Trust's net asset value, benefiting from asset growth.
• Marketing Agent (Van Eck Securities Corporation): Earns fees from the Sponsor for marketing efforts, benefiting from increased share distribution.
• Trustee and Custodian: Receive fees for their administrative and safekeeping services, respectively.

Next Steps

• The Trust will continue to operate as a passively managed ETF, with its performance directly tied to the price of gold.
• The Sponsor will continue to oversee the Trust's operations and financial reporting.
• Shareholders considering exchanging shares for physical gold should consult tax advisors regarding collectible implications.

Key Dates

Recommendation

Keywords

Gold ETF, VanEck Merk Gold ETF, OUNZ, Gold Bullion, Exchange Traded Fund, Commodity ETF, Physical Gold, Investment, SEC Filing, 10-Q, Financial Report, Net Asset Value, Gold Price, Solactive Gold Spot Index