World Gold Trust 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations This information should be read in conjunction with the financial statements and notes included in Item 1 of Part I of this Quarterly Report. This Quarterly Report, including the exhibits hereto and the information incorporated by reference herein, contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and such forward-looking statements involve risks and uncertainties. Except for historical information, statements about future gold prices, gold bullion sales, foreign currencies (including the Reference Currencies), foreign currency exchange rates, costs, plans, or objectives are forward-looking statements based on our estimates, beliefs, assumptions and projections. Words such as “could,” “would,” “may,” “expect,” “project,” “intend,” “plan,” “believe,” “seek,” “estimate,” and “predict,” and variations on such words, and similar expressions that reflect our current views with respect to future events and fund performance, are intended to identify such forward-looking statements. These forward-looking statements are only predictions, subject to risks and uncertainties that are difficult to predict and many of which are outside of our control, and actual results could differ materially from those discussed. Important factors that we believe could affect performance and cause results to differ materially from our expectations are described in the sections entitled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Annual Report on Form 10-K for the fiscal year ended September 30, 2021, as updated from time to time in World Gold Trust’s Securities and Exchange Commission filings. Trust Overview The World Gold Trust (the “Trust”) was formed as a Delaware statutory trust on August 27, 2014. The Trust consists of multiple series (each, a “Fund” and collectively, the “Funds”). Each Fund issues common units of beneficial interest that represent units of fractional undivided beneficial interest in and ownership of such Fund. The term of the Trust and each Fund is perpetual (unless terminated earlier in certain circumstances). The Trust was organized in separate series as a Delaware statutory trust rather than as separate statutory trusts to achieve certain administrative and other efficiencies. The Trust is sponsored by WGC USA Asset Management Company, LLC (the “Sponsor”). The Trust established six separate series, of which only SPDR ® Gold MiniShares SM Trust (“GLDM”) is operational as of June 30, 2022. GLDM commenced operations on June 26, 2018. GLDM’s investment objective is for its shares (the “Shares”) to reflect the performance of the price of gold, less its expenses. Gold is held by ICBC Standard Bank Plc (the “Custodian”) on behalf of GLDM. As of the date of this quarterly report, Goldman, Sachs & Co., J.P. Morgan Securities LLC, Merrill Lynch Professional Clearing Corp., Morgan Stanley & Co. LLC, UBS Securities LLC and Virtu Americas LLC are the only Authorized Participants. An updated list of Authorized Participants can be obtained from the Sponsor. 17 Table of Contents Investing in the Shares does not insulate the investor from risks, including price volatility. The following chart illustrates the movement in the market price of the Shares and NAV of the Shares against the corresponding gold price (per 1/100 of an oz. of gold) since the day the Shares first began trading on the NYSE Arca: Share price & NAV v. gold price - June 26, 2018 to June 30, 2022 Critical Accounting Policy Valuation of Gold, Definition of NAV GLDM values the investment in gold bullion at fair value. BNY Mellon Asset Servicing, a division of The Bank of New York Mellon (the “Administrator”), will value any gold bullion held by GLDM on the basis of the price of an ounce of gold as determined by the ICE Benchmark Administration Limited (the “IBA”). In determining the NAV, the Administrator will value the gold bullion held by GLDM on the basis of the price of an ounce of gold determined by the IBA 3:00 PM auction process (the “LBMA Gold Price PM”). The Administrator will calculate the NAV on each day the NYSE Arca is open for regular trading, at the earlier LBMA Gold Price PM for the day or 12:00 PM New York time. If no LBMA Gold Price (AM or PM) is made on a particular evaluation day or if the LBMA Gold Price PM has not been announced by 12:00 PM New York time on a particular evaluation day, the next most recent LBMA Gold Price AM or PM will be used in the determination of the NAV, unless the Sponsor determines that such price is inappropriate to use as the basis for such determination. Gold held by GLDM is reported at fair value on the Statement of Financial Condition. Once the value of the gold has been determined, the Administrator subtracts all estimated accrued fees, expenses and other liabilities of GLDM from the total value of the gold and all other assets of GLDM. The resulting figure is the NAV. The NAV is used to compute the Sponsor’s fee. The Administrator determines the NAV per Share by dividing the NAV of GLDM by the number of Shares outstanding as of the close of trading on NYSE Arca. Inspectorate International Limited (“Inspectorate”) conducts two counts each year of the gold bullion held on behalf of the Trust at the vaults of the Custodian. A complete bar count is conducted once per year and coincides with the Trust’s financial year end at September 30 th . On October 4, 2021, Inspectorate completed the annual full count of the Trust’s gold bullion held by the Custodian. The second count is a random sample count and is conducted at a date which falls within the same financial year and was completed most recently on May 25, 2022. The results can be found on www.spdrgoldshares.com . The Sponsor generally visits the vaults of the Custodian twice a year as part of its due diligence procedures. 18 Table of Contents Recent Developments GLDM as well as the Sponsor and its service providers are vulnerable to the effects of geopolitical events and the continuation of the war in Ukraine or other hostilities. Geopolitical events and the continuation of the hostilities in Ukraine or other hostilities could disrupt and potentially impact the business activities of the Sponsor and its service providers and have an adverse effect on GLDM. In late February 2022, Russia launched an invasion of Ukraine, significantly amplifying already existing geopolitical tensions among Russia and other countries in the region and in the west. On March 7, 2022, the LBMA suspended its accreditation of six Russian precious metals refiners. The LBMA stated that existing bars produced by the refiners before their suspension will still be accepted as good delivery. Following an announcement at the G7 Summit to collectively ban the import of Russian gold, the UK passed regulations which prohibit the direct or indirect (i) import of gold that originated in Russia, (ii) acquisition of gold that originated in Russia or is located in Russia and (iii) supply or delivery of gold that originated in Russia, all after July 21, 2022. Similarly, US regulations prohibit the import of gold of Russian origin into the United States on or after June 28, 2022 and EU regulations prohibit the direct or indirect import, purchase or transfer of gold if it originates in Russia and has been exported from Russia after July 22, 2022. The responses of countries and political bodies to Russia’s actions, the larger overarching tensions, and Ukraine’s military response and the potential for wider conflict may increase financial market volatility generally, have adverse effects on regional and global economic markets, and cause volatility in the price of gold and the price of the Shares. In addition, the conflict in Ukraine, along with global political fallout and implications including sanctions, shipping disruptions, collateral war damage, and a potential expansion of the conflict beyond Ukraine’s borders, could disturb the gold market. War and other geopolitical events in eastern Europe, including but not limited to Russia and Ukraine, may cause volatility in commodity prices including precious metals prices. These events are unpredictable and may lead to extended periods of price volatility. To date, the impact of the conflict in Ukraine, including the regulatory responses to such conflict, have not materially affected the operations of GLDM and have not materially impacted the price of gold or the share price of GLDM. Results of Operations In the three months ended June 30, 2022, 10,700,000 Shares (107 Creation Units) were created in exchange for 212,564.2 ounces of gold, 4,900,000 Shares (49 Creation Units) were redeemed in exchange for 97,333.9 ounces of gold and 689.7 ounces of gold were sold to pay Sponsor fees. For accounting purposes, GLDM reflects creations and redemptions on the date of receipt of a notification of a creation but does not issue Shares until the requisite amount of gold is received. Upon a redemption, GLDM delivers gold upon receipt of Shares. These creations were completed in the normal course of business. At June 30, 2022, the amount of gold owned by GLDM and held by the Custodian in its vault was 2,803,815.31 ounces, 100% of which is allocated gold in the form of London Good Delivery gold bars with a market value of $5,094,532,409 based on the LBMA Gold Price PM on June 30, 2022 (cost — $4,858,939,808). As at September 30, 2021, the amount of gold owned by GLDM and held by the custodian in its vault was 2,517,632.7 ounces, 100% of which is allocated gold in the form of London Good Delivery gold bars with a market value of $4,387,730,778 based on the LBMA Gold Price PM on September 30, 2021 (cost — $4,237,695,934). Cash Resources and Liquidity At June 30, 2022, GLDM did not have any cash balances. When selling gold to pay expenses, GLDM endeavors to sell the exact amount of gold needed to pay expenses in order to minimize GLDM’s holdings of assets other than gold or any gold receivable. As a consequence, we expect that GLDM will not record any net cash flow from its operations and that its cash balance will be zero at the end of each reporting period. 19 Table of Contents Movements in the Price of Gold As movements in the price of gold are expected to directly affect the price of the Shares, it is important to understand the recent movements in the price of gold. However, past movements in the price of gold are not indicators of future movements. The following chart shows movements in the price of gold based on the LBMA Gold Price PM in U.S. dollars per ounce over the period from June 26, 2018 (the first date the Shares began trading on the NYSE Arca) to June 30, 2022. Daily Gold Price - June 26, 2018 to June 30, 2022 LBMA Gold Price PM USD The average, high, low and end-of-period gold prices for the three and twelve-month periods over the prior three years and for the period from June 26, 2018 (the first date the Shares began trading on the NYSE Arca) through June 30, 2022, based on the LBMA Gold Price PM, were: Period Average High Date Low Date End of period Last business day (1) Three months to September 30, 2019 $ 1,472.47 $ 1,546.10 Sep 4, 2019 $ 1,388.65 Jul 5, 2019 $ 1,485.30 Sep 30, 2019 Three months to December 31, 2019 $ 1,480.96 $ 1,517.10 Oct 3, 2019 $ 1,452.05 Nov 12, 2019 $ 1,523.00 Dec 31, 2019 (2) Three months to March 31, 2020 $ 1,582.80 $ 1,683.65 Mar 6, 2020 $ 1,474.25 Mar 19, 2020 $ 1,608.95 Mar 31, 2020 Three months to June 30, 2020 $ 1,711.13 $ 1,771.60 Jun 29, 2020 $ 1,576.55 Apr 1, 2020 $ 1,768.10 Jun 30, 2020 Three months to September 30, 2020 $ 1,908.56 $ 2,067.15 Aug 6, 2020 $ 1,771.05 July 1, 2020 $ 1,886.90 Sep 30, 2020 Three months to December 31, 2020 $ 1,874.23 $ 1,940.80 Nov 6, 2020 $ 1,762.55 Nov 30, 2020 $ 1,891.10 Dec 31, 2020 (2) Three months to March 31, 2021 $ 1,794.01 $ 1,943.20 Jan 4, 2021 $ 1,683.95 Mar 30, 2021 $ 1,691.05 Mar 31, 2021 Three months to June 30, 2021 $ 1,816.48 $ 1,902.75 Jun 2, 2021 $ 1,726.05 Apr 1, 2021 $ 1,763.15 Jun 30, 2021 Three months to September 30, 2021 $ 1,789.52 $ 1,829.30 Jul 29, 2021 $ 1,723.35 Aug 10, 2021 $ 1,742.80 Sep 30, 2021 Three months to December 31, 2021 $ 1,795.25 $ 1,864.90 Nov 17, 2021 $ 1,753.20 Oct 5, 2021 $ 1,820.10 Dec 31, 2021 (2) Three months to March 31, 2022 $ 1,877.16 $ 2,039.05 Mar 8, 2022 $ 1,788.15 Jan 28, 2022 $ 1,942.15 Mar 31, 2022 Three months to June 30, 2022 $ 1,870.58 $ 1,976.75 Apr 13, 2022 $ 1,809.50 May 16, 2022 $ 1,817.00 Jun 30, 2022 Twelve months ended June 30, 2020 $ 1,560.35 $ 1,771.60 Jun 29, 2020 $ 1,388.65 Jul 5, 2019 $ 1,768.10 Jun 30, 2020 Twelve months ended June 30, 2021 $ 1,848.95 $ 2,067.15 Aug 6, 2020 $ 1,683.95 Mar 30, 2021 $ 1,763.15 Jun 30, 2021 Twelve months ended June 30, 2022 $ 1,832.48 $ 2,039.05 Mar 8, 2022 $ 1,723.35 Aug 10, 2021 $ 1,817.00 Jun 30, 2022 June 26, 2018 to June 30, 2022 $ 1,624.74 $ 2,067.15 Aug 6, 2020 $ 1,178.40 Aug 17, 2018 $ 1,817.00 Jun 30, 2022 20 Table of Contents (1) The end of period gold price is the LBMA Gold Price PM on the last business day of the period. (2) There was no LBMA Gold Price PM on the last business day of December 2021, 2020 or 2019. The LBMA Gold Price AM on the last business day of December 2021, 2020 and 2019 was $1,820.10, $1,891.10 and $1,523.00, respectively. The Net Asset Value of GLDM on December 31, 2021, 2020 and 2019 was calculated using the LBMA Gold Price AM. Item 3. Quantitative and Qualitative Disclosures About Market Risk GLDM is a passive investment vehicle. Fluctuations in the value of gold bullion will affect the value of Shares which are designed to reflect the performance of the price of gold bullion, less GLDM’s expenses.