It’ll be much easier to buy gold on the ASX on Wednesday. Here’s why

This gold-based ETF is about to get a whole lot more affordable.

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Key points

  • Gold has always been a tricky investment for retail investors
  • Owning physical bullion can be difficult and expensive
  • But ASX gold ETFs are becoming more popular. And one is about to become a lot easier on the hip-pocket to buy

ASX enthusiasts in gold investing got some good news last week. It was news that will make it easier to invest in the precious metal using the ASX.

Gold has always been a tricky asset to invest in. Investors have the option to buy physical gold bullion, of course. Always have. This involves buying bold coins or bars and storing them in one’s home. Or else paying someone else for the storage and security. But this is unattractive to many investors for obvious reasons.

So in recent years, another option has emerged for potential gold investors – buying gold through the ASX. Like many other commodities, there are now exchange-traded funds (ETFs) that one can use to get exposure to the yellow metal without the burden of actually owning the physical gold itself.

One popular such ETF is the ETFS Physical Gold ETF (ASX: GOLD). This fund, run by ETF Securities, allows investors to buy units that represent the physical ownership of gold. According to the provider, each unit is “backed by physically allocated gold bullion held by JPMorgan Chase Bank” in London.

In addition: “Each physical bar is segregated, individually identified and allocated which means there is no credit risk. Investors can choose to redeem units for the physical holdings.”

Buying gold on the ASX

So it’s perhaps no surprise that many investors now prefer this simpler method of investing in gold. This GOLD ETF now has close to $2.6 billion in assets under management.

But it might soon be even easier to invest in this ETF. At the present time, one unit of GOLD will set an investor back $239.59 at the time of writing.

Now that might not be as expensive as a CSL Limited (ASX: CSL) share. But it’s still a fair chunk of change, and could potentially price some investors out of this ETF. Well, that’s about to change.

What’s new?

ETFS released an ASX notice last week that informed investors that this ETF is about to undergo a stock split. Here’s what the provider said in its ASX notice explaining why this move is occurring:

The share split is being conducted to reduce the per share price of GOLD, from its current range of approximately $230$260 in 2022 yeartodate, by a factor of 10, to a level that is more inline with to other ASXquoted exchange traded products (“ETPs”). The company understands that retail and smaller investors are increasing using ETPs to construct portfolios. A lower per share price is anticipated to have wider appeal to smaller investors.

Further, GOLD is being increasingly used by investors in portfolio construction, either selfdirected, advised or modelbased. A lower per share price allows these users to more precisely manage their portfolio allocations.

GOLD ETF divides to conquer

So this move is clearly being designed to widen the appeal of the GOLD ETF for investors. If you’re an existing GOLD investor, don’t worry. A stock split like this doesn’t actually reduce the value of your investment. It just divides it into an increased number of smaller shares (or units in this case).

This change will be effective on 8 June. It means that any existing investor will receive nine additional units for every one owned. This is the date we will also see the unit price of GOLD decrease by a factor of 10 (today’s current pricing would change to approximately $23.60 per unit).

So if you’ve been looking for an ASX-listed path to investing in gold, this one just got wider.

Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended CSL Ltd. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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