Gold Funds: How They Work, What They Cost, and Why the Board Price Drifts From NAV

You bought a gold fund, but what exactly is registered in your name? Let us find out. This lesson covers the mechanism, the fees, and the gap from real value. Because the price you pay is not always the gold behind the unit. A gold fund pools money and buys paper assets backed by gold. The manager buys coin and bullion deposit certificates on the Iran Mercantile Exchange. The rules require at least seventy percent of assets in those gold certificates. Net asset value is the basket's current worth divided by units outstanding. The board price, though, is simply what the market will pay today. If NAV is twenty thousand and the board twenty thousand nine hundred, the premium is four and a half percent. Four forces open that gap: buy queues, reporting lag, market hours, and the underlying. The premium has two layers: the fund's own, and the coin premium inside it. A fund's return multiplies two variables: world gold and the dollar rate. Commission runs about one eighth of a percent per side, and trades are tax exempt. A common mistake is treating the board price as what your gold is worth. Before every purchase, compare the published net asset value against the board price. So now you know: you bought a share of a basket, not bullion. Save this lesson and review it on Sahmino.com.