Item 1A. Risk Factors
Item 1A. Risk Factors
Before making an investment decision, you
should consider carefully the risks described below, as well as the other information included in this Report.
RISKS RELATED TO GOLD
The Value of Your Shares is Directly Related
to the Price of Gold
The value of your Shares fluctuates based
upon the price of the gold held by the Trust. Fluctuations in the price of gold could materially adversely affect your investment in
the Shares. This creates the potential for losses, regardless of the period of time that you hold the Shares.
The Shares are intended to track the performance
of the price of gold. The value of the Shares relates directly to the value of the gold owned by the Trust. Therefore, the value of the
Shares will fluctuate with the price of gold. The price of gold has fluctuated widely over the past several years. This exposes your
investment in Shares to potential losses. Several factors may affect the price of gold and, as a result, the value of the Shares, including
the following:
●
Global supply and demand,
which is influenced by factors including (1) forward selling by gold producers, (2) purchases made by gold producers to unwind gold
hedge positions, (3) central bank purchases and sales, (4) production and cost levels in major gold-producing countries and (5) new
production projects;
● Global
or regional political, economic or financial events and situations, especially those unexpected
in nature;
●
Investors’ expectations
regarding future inflation rates;
●
Currency exchange rate
volatility;
● Investment
and trading activities of hedge funds and commodity funds;
●
Interest rate volatility;
and
●
Other economic variables
such as income growth, economic output, and monetary policies.
The Shares have experienced significant price
fluctuations. If gold markets continue to be subject to sharp fluctuations, this may result in potential losses if you need to sell your
Shares at a time when the price of gold is lower than it was when you made your investment. Even if you are able to hold Shares for the
long-term, you may never experience a profit, since gold markets have historically experienced extended periods of flat or declining
prices, in addition to sharp fluctuations.
On March 7, 2022, in response to the Russian hostilities
in the Ukraine, LBMA suspended six Russian refiners; as a result, new production by such refiners will no longer be accepted as “Good
Delivery” by the London Bullion market until further notice. The bars these refiners previously produced will still be considered
Good Delivery, consistent with past suspensions of refiners by the LBMA. However, fewer suppliers to the LBMA may lead to a lower supply
of Good Delivery gold and further volatility in the price of gold.
Investors should be advised that there is no
assurance that gold will maintain its long-term value in terms of U.S. dollar value in the future. In the event that the price of gold
declines, the Sponsor expects the value of an investment in the Shares to decline proportionately.
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There is No Guarantee that the High Trading
Price of Gold Will be Sustained
The international gold market has experienced
historically high trading prices in recent years. Because there can be no assurance that this historically high trading price of gold
will be sustained, there could be significant decreases in the value of net assets and the NAV of the Trust.
Prices in the international gold market have reached
historically high levels in recent years. The price of physical gold going forward and, in turn, the future value of net assets of the
Trust, may be dependent upon factors that include global gold supply and demand, investors’ inflation expectations, exchange rate
volatility and interest rate volatility. An adverse development with regard to one or more of these, or other factors may lead to a decrease
in gold bullion currency trading prices. A decline in prices of gold would decrease the value of net assets and the NAV of the Trust.
Physical Gold Allocated to the Trust May
Not Meet the Standards of a London Bar
Physical gold allocated to the Trust in connection
with the creation of a Basket may not meet the standards of a London Bar and, if a Basket is issued against such gold, the Trust may suffer
a loss.
Neither the Trustee nor the Custodian independently
confirms the fineness of the gold allocated to the Trust in connection with the creation of a Basket. The physical gold allocated to the
Trust by the Custodian may be different from the reported fineness or weight required by the LBMA’s standards for gold bars delivered
in settlement of a gold trade (i.e., London Bars), the standards required by the Trust. If the Trustee nevertheless issues a Basket against
such gold, and if the Custodian fails to credit the Trust the amount of any deficiency, the Trust may suffer a loss.
Value of Gold in Trust Is Limited to the
Value of the Fine Ounce Content of Gold
Because gold in the Trust is valued at the
price of gold independent of location and type of gold, the value of gold in the Trust is limited to the price of gold multiplied by the
Fine Ounce content of the gold.
Gold in the Trust is valued at the price of gold
independent of location and type of gold. The price of gold commonly quoted refers to the price of a London Bar in London. Any gold that
is not a London Bar located in London may obtain a bid price when offered for sale that deviates from the price of gold. Nonetheless,
the Trust values all gold at the price of gold because the Sponsor assumes the cost of conversion of gold. Conversely, in the unlikely
event that such a conversion yields a profit, the Sponsor, not the Trust, will keep such profit. As a result, the value of gold in the
Trust is limited to the price of gold multiplied by the Fine Ounce content of the gold.
Similarly, when investors exchange their Shares
for physical gold other than London Bars, the Shares also are valued at the price of gold for purposes of calculating their Share in the
Trust. The Sponsor may recover this conversion cost as part of the Exchange Fee.
Discrepancies in the Calculation of the
LBMA PM Gold Price Could Impact the Value of the Trust’s Gold
The Trustee values the gold held by the Trust
based on the LBMA PM Gold Price. Potential discrepancies in the calculation of the LBMA PM Gold Price, as well as any future changes to
the LBMA PM Gold Price, could impact the value of the gold held by the Trust and could have an adverse effect on the value of an investment
in the Shares.
The Trustee values the gold held by the Trust
based on LBMA PM Gold Price, which is the afternoon session of the twice daily fix of the price of a Fine Ounce of gold which starts at
3:00 PM London, England time and is performed in London by the ICE Benchmark Administration as an independent third-party administrator.
The Trustee also determines the NAV per Share. If on a day when the Trust’s NAV is being calculated the LBMA PM Gold Price for that
day is not available, the Trustee will value the gold held by the Trust based on that day’s LBMA AM Gold Price, and if no fix is
available for the day, the Trustee will value the Trust’s gold based on the most recently announced LBMA AM Gold Price or LBMA PM
Gold Price. Prior to March 20, 2015, the Trustee utilized the daily fix of the price of a Fine Ounce of gold as performed by the five
members of the London gold fix, which has now been replaced by the ICE Benchmark Administration as an independent third-party administrator.
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In the event that the LBMA PM Gold Price does
not prove to be an accurate benchmark, and the LBMA PM Gold Price varies materially from the price determined by other mechanisms, the
NAV of the Trust and the value of an investment in the Shares could be adversely impacted. Any future developments in the benchmark, to
the extent they have a material impact on the LBMA PM Gold Price, could adversely impact the NAV of the Trust and the value of an investment
in the Shares. Further, the calculation of the LBMA PM Gold Price is not precise, but rather is based upon a procedure of matching orders
from participants in the auction process and their customers to sell gold with orders from participants in the auction process and their
customers to buy gold at particular prices. As such, the LBMA PM Gold Price does not necessarily reflect each buyer or seller of gold
in the market, nor does it set a definitive price for gold at which all orders for sale or purchase will take place on that particular
day or time. All orders placed into the auction process by the participants will be executed on the basis of the price determined pursuant
to the LBMA PM Gold Price auction process (provided that orders may be cancelled, increased or decreased while the auction is in progress).
It is possible that electronic failures or other unanticipated events may occur that could result in delays in the announcement of, or
the inability of the system to produce, an LBMA PM Gold Price on any given date. Further, any actual or perceived disruptions that result
in the perception that the LBMA PM Gold Price or LBMA AM Gold Price are vulnerable to actual or attempted manipulation could adversely
affect the behavior of investors and traders, which may have an effect on the price of gold. Any such disruptions in the determination
of the LBMA PM Gold Price or LBMA AM Gold Price may also result in an incorrect valuation of the Trust’s gold and an inaccurate
computation of the Sponsor’s fee, among other potential effects.
The Sponsor may also instruct the Trustee to use
a different publicly available price that the Sponsor determines fairly represents the commercial value of the Trust’s gold.
Governmental Actions May Affect the Price
of Gold
Future governmental decisions may have significant
impact on the price of gold, which may result in a significant decrease or increase in the value of the net assets and the NAV of the
Trust.
Generally, gold prices reflect the supply and
demand of available gold. Governmental decisions, such as the executive order issued by the President of the United States in 1933 requiring
all persons in the United States to deliver gold to the Federal Reserve or the abandonment of the gold standard by the United States in
1971, have been viewed as having significant impact on the supply and demand of gold and the price of gold. Future governmental decisions
may have an impact on the price of gold, and may result in a significant decrease or increase in the value of the net assets and the NAV
of the Trust.
An Investment in the Trust may be More Volatile
than an Investment in a Diversified Portfolio
Because the Trust invests only in gold, an
investment in the Trust may be more volatile than an investment in a more broadly diversified portfolio.
The Trust invests only in gold. As a result, the
Trust’s holding are not diversified. Accordingly, the Trust’s NAV may be more volatile than another investment vehicle with
a more broadly diversified portfolio and may fluctuate substantially over time. The price of gold can be volatile. Fluctuations in the
price of gold are expected to have a direct impact on the value of the Shares.
Loss of or Damage to the Trust’s Gold
Gold owned by the Trust may be subject to loss,
damage, theft or restriction on access.
There is a risk that part or all of the Trust’s
gold could be lost, damaged or stolen. Access to the Trust’s gold could also be restricted by natural events (such as an earthquake)
or human actions (such as a terrorist attack). Any of these events may adversely affect the operations of the Trust and, consequently,
an investment in the Shares.
The Trust does not insure gold held by the Custodian
or delivered by the precious metals dealer. Consequently, if there is a loss of assets of the Trust through theft, destruction, fraud
or otherwise, the Trust will need to rely on insurance carried by applicable third parties, if any, or on such third party’s ability
to satisfy any claims against it. If the Trust’s gold is lost, damaged, stolen or destroyed under circumstances rendering a party
liable to the Trust, the responsible party may not have the financial resources sufficient to satisfy the Trust’s claim. For example,
as to a particular event of loss, the only source of recovery for the Trust might be limited to the Custodian, the precious metals dealer
or other responsible third parties ( e.g. , a thief or terrorist), any of which may not have the financial resources (including liability
insurance coverage) to satisfy a valid claim of the Trust. Moreover, losses due to nuclear accidents, terrorism, riots, acts of God, insurrections,
strikes and similar causes beyond the control of the Custodian and for which the Custodian would not be liable may be sustained by the
Trust. Any loss of gold owned by the Trust will result in a corresponding loss in the NAV, and it is reasonable to expect that such loss
will also result in a decrease in the value at which the Shares are traded on NYSE Arca.
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Recovery for Damage to the Trust’s
Gold May Be Limited
In the event the Trust’s gold is lost,
damaged, stolen or destroyed, recovery may be limited to the market value of the gold at the time the loss is discovered, which may negatively
affect the value of net assets of the Trust.
If there is a loss due to theft, loss, damage,
destruction or fraud or otherwise with respect to the Trust’s gold held by the Custodian or delivered by the precious metals dealer,
and such loss is found to be the fault of the Custodian or the precious metals dealer, the Trust may not be able to recover more than
the market value of the gold at the time the loss is discovered. If the market value of gold increases between the time the loss is discovered
and the time the Trust receives payment for its loss and purchases gold to replace the losses, less gold will be acquired by the Trust
and the value of the net assets of the Trust will be negatively affected.
RISKS RELATED TO SHARES
Sales of Gold in the Market Could Adversely
Affect the Shares
Substantial sales of gold by central banks,
governmental agencies and multi-lateral institutions could adversely affect an investment in the Shares.
Central banks, other governmental agencies and
multi-lateral institutions buy, sell and hold gold as part of their reserve assets. This market sector holds a significant amount of gold,
some of which is static, meaning that it is held in vaults and is not bought, sold, leased or swapped or otherwise available in the open
market. Several central banks and multi-lateral institutions have sold portions of their gold reserves in recent years, with the result
being that this sector, taken as a whole, has been a net supplier of gold to the open market. In the event that future economic, political
or social conditions or pressures require members of this sector to liquidate their gold assets all at once or in an uncoordinated manner,
the demand for gold may not be sufficient to accommodate the sudden increase in the supply of gold to the market. Consequently, the price
of gold may decline which may adversely affect an investment in the Shares.
The Shares May Trade at a Discount or a
Premium
Trust Shares may trade at NAV or at a price
that is above or below NAV. Any discount or premium in the trading price relative to the NAV per Share may widen as a result of the different
trading hours of NYSE Arca and other exchanges.
Trust Shares may trade at, above or below the
NAV per Share. The NAV per Share will fluctuate with changes in the market value of the gold owned by the Trust. The trading price of
the Shares will fluctuate with changes in the NAV per Share as well as market supply and demand. The amount of the discount or premium
in the trading price relative to the NAV per Share may be influenced by non-concurrent trading hours between the NYSE Arca and major gold
markets. While the Shares will trade on the NYSE Arca until 4:00 PM (New York time), liquidity in the market for gold may be reduced after
the close of the major world gold markets, including London. As a result, during this time, trading spreads and the resulting discount
or premium on the Shares may widen.
There May Not be an Active Trading Market
for the Shares
The lack of an active trading market for the
Shares may result in losses on your investment at the time of disposition of your Shares.
Although Shares are listed for trading on NYSE
Arca, there can be no assurance that an active trading market for the Shares will develop or be maintained. If an active public market
for the Shares does not develop or continue, the market prices and liquidity of the Shares may be adversely affected. If you need to sell
your Shares at a time when no active market for them exists, the absence of an active market will most likely adversely affect the price
you receive for your Shares (assuming you are able to sell them).
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The Trust is Not Actively Managed
The Trust does not actively trade gold to take
advantage of short-term market fluctuations in the price of gold. An investment in the Trust will yield long-term gains only if the value
of gold increases over time.
The Trust does not actively manage the gold it
holds. This means that the Trust does not sell gold at times when its price is high or acquire gold at low prices in the expectation of
future price increases. It also means that the Trust does not make use of any of the hedging techniques available to professional gold
investors to attempt to reduce the risks of losses resulting from price decreases. Any losses sustained by the Trust will adversely affect
the value of your Shares.
The Trust May Suspend Redemptions of Baskets
by Authorized Participants, which Could Affect the Market Price of the Shares
There may be situations where the Trust suspends
redemptions of Baskets by Authorized Participants. To the extent the value of gold declines, these delays may result in a decrease in
the value of the gold received upon redemption by an Authorized Participant, as well as a reduction in liquidity for all investors in
the secondary market.
Although Shares are redeemable by Authorized Participants
in exchange for the underlying amount of gold, redemptions by Authorized Participants may be suspended during any period while regular
trading on NYSE Arca is suspended or restricted, or in which an emergency exists that makes it reasonably impracticable to deliver, dispose
of, or evaluate gold. If any of these events occurs at the time of a redemption by an Authorized Participant, and the price of gold decreases
before the redemption occurs, an Authorized Participant will sustain a loss with respect to the amount that it would have been able to
obtain in exchange for the gold received from the Trust upon the redemption of its Shares, had the redemption taken place when it was
originally intended to occur. As a consequence, Authorized Participants may reduce their trading in Shares during periods of suspension,
decreasing the number of potential buyers of Shares in the secondary market and the price an investor may receive upon sale.
The Trust May Suspend or Reject the Surrender
of Shares for Physical Gold, which Could Affect the Market Price of the Shares
There may be situations where the Trust suspends
or rejects the surrender of Shares for physical gold. To the extent the value of gold declines, these delays may result in a decrease
in the value of the physical gold received by a Delivery Applicant, as well as a reduction in liquidity for all investors in the secondary
market.
The surrender of Shares for physical gold may
be suspended or rejected by the Trust during any period while regular trading on NYSE Arca is suspended or restricted, in which an emergency
exists that makes it reasonably impracticable to deliver, dispose of, or evaluate gold, or, with respect to the surrender of Shares by
a Delivery Applicant only, as deemed necessary or advisable by the Sponsor. In addition, the Trustee shall reject the delivery of Shares
by the Delivery Applicant: (1) if the number of Shares delivered does not correspond to the number of Shares specified in the pre-approved
Delivery Application; (2) if the delivered Shares are not accompanied by proper instructions or by a pre-approved Delivery Application;
or (3) the number of Fine Ounces represented by the delivered Shares is less than the Fine Ounces to be delivered specified in the Delivery
Application. Additionally, the Sponsor may decline to approve a Delivery Application for any reason. The delivery of physical gold shall
be suspended in the event the Sponsor resigns or is otherwise unable or unwilling to perform its obligations relating to the process of
Delivery Applicants taking delivery of physical gold. If any of these events occurs at the time that a Delivery Application has been received,
and the price of gold decreases before the Delivery Application is processed, a Delivery Applicant will sustain a loss with respect to
the amount of physical gold that it would have been able to obtain from the Trust in connection with the surrender of the Delivery Applicant’s
Shares had the surrender taken place when it was originally intended to occur. In addition, there may be a reduction in the trading of
Shares during periods of suspension, decreasing the number of potential buyers of Shares in the secondary market and the price an investor
may receive upon sale.
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The Withdrawal of an Authorized Participant
and Substantial Redemptions by Authorized Participants May Affect the Liquidity of the Shares
The liquidity of the Shares also may be affected
by substantial redemptions by Authorized Participants related to or independent of the withdrawal from participation of Authorized Participants.
In the event that there are substantial redemptions
of Shares or one or more Authorized Participants with a substantial interest in the Shares withdraws from participation, the liquidity
of the Shares will likely decrease, which could adversely affect the market price of the Shares and result in your incurring a loss on
your investment.
Competition From Other Methods of Investing
in Gold
An investment in the Shares may be adversely
affected by competition from other methods of investing in gold.
The Trust competes with other financial vehicles,
including traditional debt and equity securities issued by companies in the gold industry and other securities backed by or linked to
gold, direct investments in gold and investment vehicles similar to the Trust. Market and financial conditions, and other conditions beyond
the Sponsor’s control, may make it more attractive to invest in other financial vehicles or to invest in gold directly, which could
limit the market for and reduce the liquidity of the Shares.
Other Investment Vehicles May Cause a Decline
in the Price of Gold
The price of gold may be affected by the sale
of ETVs tracking gold markets, which could negatively affect gold prices and the price and NAV of the Shares.
To the extent existing exchange traded vehicles
(“ETVs”) tracking gold markets represent a significant proportion of demand for gold, large redemptions of the securities
of these ETVs could negatively affect gold prices and the price and NAV of the Shares.
Financial Crises May Result in a Decline
in the Price of Gold
Crises may motivate large-scale sales of gold,
which could decrease the price of gold and adversely affect an investment in the Shares.
The possibility of large-scale distress sales
of gold in times of crisis may have a short-term negative impact on the price of gold and adversely affect an investment in the Shares.
For example, the 2008 financial credit crisis resulted in significantly depressed prices of gold largely due to forced sales and deleveraging
from institutional investors such as hedge funds and pension funds. Crises in the future may impair gold’s price performance which
would, in turn, adversely affect an investment in the Shares.
Factors that May Cause a Decline in the
Price of Gold
Several factors may have the effect of causing
a decline in the prices of gold and a corresponding decline in the price of Shares, including:
●
A significant increase in gold hedging activity by gold producers. Should there be an increase in the level of hedge activity of gold producing companies, it could cause a decline in world gold prices, adversely affecting the price of the Shares.
●
A significant change in the attitude of speculators and investors toward gold. Should the speculative community take a negative view toward gold, it could cause a decline in world gold prices, negatively impacting the price of the Shares.
●
A widening of interest rate differentials between the cost of money and the cost of gold could negatively affect the price of gold which, in turn, could negatively affect the price of the Shares.
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●
A combination of rising money interest rates and a continuation of the current low cost of borrowing gold could improve the economics of selling gold forward. This could result in an increase in hedging by gold mining companies and short selling by speculative interests, which would negatively affect the price of gold. Under such circumstances, the price of the Shares would be similarly affected.
There is uncertainty regarding the impact
of inflation.
The Sponsor’s analysis suggests that since the enacting of the
“American Rescue Plan” in March 2021, inflation has been trending higher than it had in previous years. While higher inflation
readings might translate to higher gold prices, gold prices might also fall as the Federal Reserve raises interest rates to offset the
impact of inflation. As many factors impact the price of gold, it is not possible to predict whether higher inflation will indeed translate
to higher gold prices. However, there is a significant risk that higher inflation increases the volatility in the price of gold, and with
that volatility in the price of the Shares, as a result of the interaction of inflation and the Federal Reserve's monetary policy.
Payment of the Sponsor’s Fee in Shares
and the Sale of Gold by the Trust May Cause a Decline in the Value of the Shares
The amount of gold represented by each Share
will decrease when the Sponsor’s Fee is paid in Shares and when the Trustee sells the Trust’s gold to pay Trust expenses.
Without increases in the price of gold sufficient to compensate for that decrease, the price of the Shares will also decline and you will
lose money on your investment in Shares.
Although the Sponsor has agreed to assume all
organizational and certain ordinary administrative and marketing expenses incurred by the Trust, not all Trust expenses will be assumed
by the Sponsor. For example, most taxes and other governmental charges that may be imposed on the Trust’s property will not be paid
by the Sponsor. As part of its agreement to assume some of the Trust’s ordinary administrative expenses, the Sponsor has agreed
to pay legal fees and expenses of the Trust not in excess of $100,000 per annum. Any legal fees and expenses in excess of that amount
will be the responsibility of the Trust.
The Sponsor intends to accept Shares of the Trust
for the Sponsor’s Fee and reimbursement of expenses not assumed by the Sponsor. However, the Trust may be subject to certain other
liabilities (for example, as a result of litigation) which have not been assumed by the Sponsor. The Trust will sell gold to pay those
expenses, unless the Sponsor agrees to pay such expenses out of its own pocket and receive reimbursement from the Trust in the form of
Shares.
To the extent the Trust issues additional Shares
to pay the Sponsor’s Fee or sells gold to cover expenses or liabilities, the amount of gold represented by each Share will decrease.
New deposits of gold, received in exchange for new Shares issued by the Trust, would not reverse this trend. A decrease in the amount
of gold represented by each Share results in a decrease in the price of a Share even if the price of gold has not changed. To retain the
Share’s original price, the price of gold would have to increase. Without that increase, the lesser amount of gold represented by
the Share will have a correspondingly lower price. If these increases do not occur, or are not sufficient to counter the lesser amount
of gold represented by each Share, you will sustain losses on your investment in Shares. For example, assuming the Trust has not incurred
fees or expenses in excess of the amount the Sponsor has agreed to bear and the Shares trade at the same price as the Trust’s NAV,
the price of the gold represented by your Shares would need to increase by the amount of the Sponsor’s Fee between the date of your
purchase and one year later so that your Shares would have the same value on both dates, not including any transaction costs you may incur
to purchase your Shares. The Sponsor’s Fee is currently 0.25% of the NAV of the Trust. The value of your investment also may decline
if the price of the Shares is negatively affected by the Sponsor’s sale in the open market of the Shares that the Sponsor has received
from the Trust as payment of the Sponsor’s Fee.
Operational Problems May Cause a Decline
in the Trading Price of the Shares
The value of the Shares could decline if unanticipated
operational or trading problems arise.
There may be unanticipated problems or issues
with respect to the mechanics of the Trust’s operations and the trading of the Shares that could have a material adverse effect
on an investment in the Shares. In addition, to the extent that unanticipated operational or trading problems or issues arise, the Sponsor’s
past experience and qualifications may not be suitable for solving these problems or issues.
Shareholders May Terminate the Trust
Shareholders with large holdings may choose
to terminate the Trust.
Under the Trust Agreement, registered holders
of at least 75% of the Shares have the right to require the Trustee to terminate the Trust Agreement. This power may be exercised by a
relatively small number of holders of Shares. Upon any such exercise, investors who would have elected to continue to invest in gold through
ownership of Shares will be compelled to find another vehicle for such investment and may not be able to identify another vehicle that
offers the same features as the Trust.
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A Share Submission is Irrevocable
An investor’s instruction to a broker-dealer
to transfer Shares to the Trust in a Share Submission cannot be changed.
A Delivery Applicant wishing to deliver Shares
of the Trust in exchange for physical gold must submit to the Sponsor a Delivery Application and the processing fees through its broker-dealer.
The Delivery Application is not binding until Shares are delivered to the Trust. Upon pre-approval of the Delivery Application by the
Sponsor, the Sponsor will send a copy of the pre-approved Delivery Application to the Trustee. A Delivery Applicant shall instruct its
broker-dealer to transfer Shares to the Trustee; the submission and transfer by the broker-dealer will be a binding and irrevocable Share
Submission in accordance with the details specified on the pre-approved Delivery Application. Once the Trustee has received a Delivery
Applicant’s Share Submission and, if the Delivery Applicant has requested physical gold other than London Bars, once the Trustee
has received a confirmation certified by the Sponsor that an over-the-counter transaction between the Sponsor and the precious metals
dealer has been entered into providing for the exchange of physical gold held by the Trust for physical gold specified by the Delivery
Applicant, physical gold will be selected or acquired by the Custodian or the precious metals dealer and then released from the Trust
for delivery to the Delivery Applicant according with the instructions in the Delivery Application. Once the Shares have been submitted,
a Share Submission may no longer be revoked by the Delivery Applicant under any circumstances, though the Share Submission may be rejected
by the Trustee or the Sponsor under certain circumstances.
Delivery of Physical Gold to Delivery Applicants
May Take Considerable Time
The Custodian or a precious metals dealer will
deliver physical gold to Delivery Applicants in exchange for their Shares. A delay in the delivery of physical gold to Delivery Applicants
could result in losses if the price of gold declines.
The Custodian or a precious metals dealer will
arrange for the delivery of physical gold to Delivery Applicants in exchange for their Shares. After a Delivery Applicant irrevocably
submits Shares to exchange for physical gold, either the Trustee will instruct the Custodian to deliver physical gold to the Delivery
Applicant or, if the Delivery Applicant requests physical gold other than London Bars, the Sponsor will enter into an over-the-counter
transaction on the business day following the Share Submission Day with a precious metals dealer to exchange physical gold the Trust holds
for physical gold specified by the Delivery Applicant. Because delivery time depends on many factors, including the types of physical
gold requested and the delivery method chosen, considerable time may elapse by the time Delivery Applicants receive their physical gold.
Further, because shipments of physical gold may be broken down into multiple smaller shipments, it may take additional time for the Delivery
Applicant to receive all of the requested physical gold. A delay in the delivery of physical gold to Delivery Applicants could result
in losses if the price of gold declines.
Suspension or Rejection of the Surrender
of Shares
If the Trust suspends or rejects a surrender
of Shares for gold, a Shareholder may have no alternative but to sell Shares on the open market and thus incur brokerage costs and be
subject to potential tax consequences.
If the Trust suspends the surrender of Shares
or rejects the delivery of Shares under a Delivery Application, a Shareholder who wishes to redeem Shares may have no alternative but
to sell Shares on the open market. Such a sale of Shares will involve brokerage costs and may result in tax consequences to the Shareholder.
The Creation and Redemption Process May
Result in a Decline in the Price of Shares
If the process of creation and redemption of
Baskets encounters any unanticipated difficulties, the possibility for arbitrage transactions intended to keep the price of the Shares
closely linked to the price of gold may not exist, and as a result, the price of the Shares may fall.
If the processes of the creation and redemption
of Shares by Authorized Participants (which depend on timely transfers of gold to and by the Custodian) encounter any unanticipated difficulties,
potential market participants who would otherwise be willing to purchase or redeem Baskets to take advantage of any arbitrage opportunity
arising from discrepancies between the price of the Shares and the price of the underlying gold may not take the risk that, as a result
of those difficulties, they may not be able to realize the profit they expect. If this is the case, the liquidity of the Shares may decline
and the price of the Shares may fluctuate independently of the price of gold and may fall.
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A Delivery Applicant Bears the Risk of Loss
in Connection with the Delivery of Physical Gold
A Delivery Applicant that suffers loss of,
or damage to, its physical gold during delivery will not be able to claim damages from the Trust, the Trustee, the Custodian, the precious
metals dealer from which physical gold was obtained or the Sponsor.
Upon the release of physical gold from the Trust
for forwarding to the Delivery Applicant, the Delivery Applicant’s physical gold will be transported by either a conventional shipping
carrier such as the U.S. Postal Service, Federal Express or United Parcel Service, or an armored transportation service engaged by or
on behalf of the investor (a “Delivery Service Provider”). Because ownership of physical gold will transfer to the Delivery
Applicant at the time the Custodian or the precious metals dealer from which they were obtained surrenders physical gold to the Delivery
Service Provider, the Delivery Applicant will bear the risk of loss from the time the Delivery Service Provider assumes possession of
physical gold on the Delivery Applicant’s behalf. In the event of any loss or damage in connection with the delivery of physical
gold after such time, the Delivery Applicant will have no claim against the Trust, the Trustee, the Custodian, such precious metals dealer
or the Sponsor but may have a claim against the Delivery Service Provider.
In addition, upon receipt of physical gold, the
Delivery Applicant will have five business days, or such shorter or longer period as may be specified in the Delivery Application from
time to time, following the receipt of the physical gold to notify the Sponsor in writing of any complaints or objections concerning the
shipment, delivery or receipt of the physical gold. In the absence of any such objection or complaint, the Delivery Applicant will be
deemed to have accepted receipt of the physical gold in full satisfaction of the physical gold due the Delivery Applicant and to have
waived any and all claims the Delivery Applicant may have concerning the physical gold received by the Delivery Applicant.
Risks of Transactions with Precious Metals
Dealers
Counterparty risks associated with the Trust’s
transactions with precious metals dealers to exchange the Trust’s gold for physical gold of different specifications may expose
the Trust to potential quantity and quality deficiencies and to situations where the Trust is not be able to exchange gold for physical
gold.
If a Delivery Applicant requests physical gold
in a form other than London Bars, the Trust will enter into an over-the-counter transaction with a precious metals dealer pursuant to
which the type of physical gold requested by a Delivery Applicant will be acquired by the Trust from the precious metals dealer and the
precious metals dealer will be instructed to deliver the requested physical gold to the Delivery Applicant. However, there is no assurance
that physical gold acquired by the Trust from the precious metals dealer will meet the quantity and quality requirements of the requested
over-the-counter transaction. The precious metals dealer is responsible to the Trust for any deficiency in the amount or quality of physical
gold under a Transaction and Shipping Agreement between the Sponsor and the precious metals dealer. In addition, the Trust may enter into
exchange transactions with only one or a limited number of precious metals dealers, which may increase the Trust’s exposure to counterparty
risk. Further, there is a risk that no suitable precious metals dealers will be willing to enter into, or continue to enter into, transactions
with the Trust, and as a result, the Trust may not be able to exchange London Bars for physical gold of different specifications.
Default of a Precious Metals Dealer
The Trust will bear the risk of loss of the
amount expected to be received in an exchange of gold in the event of the default or bankruptcy of a precious metals dealer.
Although the Sponsor is responsible for selecting
the precious metals dealer and ensuring the agreement by which the precious metals dealer is engaged includes appropriate representations,
warranties and covenants of the precious metals dealer regarding completion of the over-the-counter transactions by which the Trust’s
gold is exchanged for the physical gold requested by the Delivery Applicant, the Sponsor is not responsible for the default or misconduct
of the precious metals dealer, provided the Sponsor exercises reasonable care in selecting the precious metals dealer. Under the terms
of the Sponsor’s engagement of the precious metals dealer, the precious metals dealer is responsible to the Trust for any deficiency
in the amount or quality of physical gold it is to provide to the Trust. Accordingly, the Trust will bear the risk in connection with
any loss resulting from the insolvency or any misconduct of a precious metals dealer. Physical gold that is to be exchanged for different
specifications to meet delivery requests from Delivery Applicants will be converted into unallocated gold and deposited into the precious
metals dealer’s unallocated gold account with the Custodian and, until the time that the physical gold to be delivered to a Delivery
Applicant is surrendered to the Delivery Service Provider, the Trust may bear some risk of loss to such physical gold held on the Trust’s
behalf. During those times, the Trust will have no proprietary rights to any specific bars of gold held by the precious metals dealer,
may not have possession of the physical gold held on its behalf by the precious metals dealer and will be an unsecured creditor of a precious
metals dealer. In the event the precious metals dealer becomes insolvent or a claim of misconduct is made against the precious metals
dealer, the precious metals dealer’s assets might not be adequate to satisfy a claim by the Trust.
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A Failure by a Precious Metals Dealer to
Exercise Due Care with Respect to the Trust’s Gold Could Result in a Loss to the Trust
For deliveries of gold other than London Bars
to Delivery Applicants, the Trust will rely on a precious metals dealer to exchange the Trust’s gold for American Gold Eagle Coins
or another form of physical gold and to deliver physical gold to the Delivery Applicant pursuant to the Delivery Application. As a result,
a failure by the precious metals dealer to exercise due care in the exchange and delivery of the Trust’s gold could result in a
loss to the Trust.
The Trust will be reliant on a precious metals
dealer to exchange the Trust’s gold to American Gold Eagle Coins or another form of physical gold in the amount and of the quality
specified by the Sponsor in each over-the-counter transaction, and certified by the Sponsor to the Trustee in a confirmation thereof,
and to deliver physical gold to the Delivery Applicant pursuant to the instructions in the Delivery Application. Under the Transaction
and Shipping Agreement, the precious metals dealer is responsible to the Trust for any deficiency in the amount or quality of physical
gold. Although the Transaction and Shipping Agreement requires the precious metals dealer to maintain insurance to protect the Trust in
the event of a loss associated with physical gold, the Trust has no input regarding the amount, validity or adequacy of such insurance.
Any failure by the precious metals dealer to exercise due care with respect to the exchange and delivery of physical gold may not be detectable
or controllable by the Sponsor or the Trustee and, assuming the Delivery Applicant seeks recourse against the Trust, could result in a
loss to the Trust.
The Trust’s Ability to Recover Losses
from a Precious Metals Dealer may be Limited
The limited liability of a precious metals
dealer under the Transaction and Shipping Agreement with the Sponsor and New York State law may impair the ability of the Trust to recover
losses concerning its gold and any recovery may be limited, even in the event of fraud, to the market value of the gold at the time the
fraud is discovered.
The liability of the precious metals dealer is
limited under the Transaction and Shipping Agreement. Under the Transaction and Shipping Agreement, the precious metals dealer shall exercise
the same degree of care and diligence in safeguarding the Trust’s gold as any reasonably prudent person acting as a custodian would
exercise in the same circumstances and is liable for losses associated with the failure of physical gold to be in the amount and of the
quality specified by the Sponsor in an over-the-counter transaction and for physical loss or destruction of gold that results from fraud,
theft, negligence or otherwise and regardless of culpability of the precious metals dealer. However, any such liability is limited to
the market value of physical gold held by the precious metals dealer at the time such negligence, fraud or willful default is discovered
and is subject to the precious metals dealer honoring its contractual obligations.
Physical Gold May not be Available in the
Requested Sizes
There is no guarantee that physical gold will
be available in specified sizes, which may result in a Delivery Applicant paying higher or lower Processing fees.
The Trust holds London Bars. To facilitate a Delivery
Applicant’s ability to exchange Shares for physical gold, the Sponsor will engage in an over-the-counter transaction with a precious
metals dealer to exchange the Trust’s London Bars for physical gold of different specifications. There is no guarantee that at the
time that the Sponsor seeks to exchange the Trust’s London Bars for physical gold of different specifications such physical gold
will be available. As a result, it may be necessary for a Delivery Applicant to wait for such physical gold to be available. If the precious
metals dealer advises the Sponsor that the desired physical gold is not available, the Sponsor will advise the Delivery Applicant. At
that time, the Sponsor may offer the Delivery Applicant physical gold that is different from the physical gold specified in the Delivery
Application that comprises the same Fine Ounce content. If the Delivery Applicant accepts different physical gold than that specified
in the Delivery Application, a new Delivery Application would need to be completed and it may result in higher or lower processing fees.
However, it is unlikely that the cash proceeds (i.e., the difference between the value of a Delivery Applicant’s Shares and the
value of physical gold to be delivered to the Delivery Applicant) will change because the total Fine Ounce component of the physical gold
will not change unless otherwise agreed to by the Delivery Applicant. During times of high demand for coins in the market, Processing
Fees may be updated frequently and may be updated after the time a Delivery Applicant submits an application before it is pre-approved;
in this case, the Delivery Applicant may have to pay a higher Processing Fee to have the Delivery Application pre-approved.
29
Physical Gold Delivered upon Taking Delivery
in Exchange for Shares May Need to be Re-Assayed
If a Delivery Applicant requests that physical
gold be delivered to a destination that is outside the “chain of integrity,” the physical gold may need to be re-assayed,
which could result in additional costs for the Delivery Applicant and potential delays in assaying the physical gold.
The Trust’s London Bars are generally accepted
by institutional gold dealers without assaying because such London Bars are produced according to strict LBMA specifications and regularly
audited to ensure that specifications meet those stated. When traded exclusively among certain institutional gold dealers, London Bars
are considered to remain within the “chain of integrity.” By remaining in the chain of integrity, London Bars have historically
been available at the lowest transaction costs of any gold bullion because assay costs are minimized. However, a London Bar that leaves
the chain of integrity may need to be re-assayed. In addition to the costs associated with assaying, there may be significant delays in
assaying gold, especially during times when gold may be in high demand, due to potential backlogs.
If, upon exchanging Shares for physical gold,
a Delivery Applicant requests that the physical gold be delivered from the Custodian to another bank or a vault in the business of holding
physical gold for institutional investors, the physical gold may continue to be accepted for trading without being re-assayed while in
the custody of that institution.
If a Delivery Applicant instructs that London
Bars be delivered to a destination other than an institutional gold dealer, the London Bars delivered to the Delivery Applicant may no
longer be deemed part of the chain of integrity. This may make a future sale of such gold more difficult and expensive. In addition, the
value of any London Bars that have left the chain of integrity are likely to be at a discount from the spot price of gold.
Physical gold other than London Bars also may
need to be re-assayed should they leave the Custodian. One and 10 Ounce Bars may be accepted by some dealers without re-assaying should
the bars appear in excellent condition and/or remain in the mint’s original packaging. However, Delivery Applicants should be aware
that dealers may charge a fee to re-assay any bar for any reason.
Limited Investor Rights
As an investor, you will not have the rights
normally associated with ownership of Shares of other types of investment vehicles. For example, you will have extremely limited voting
rights in comparison to those of shareholders in traditional operating companies.
The Trust is a passive investment vehicle with
no management and no board of directors. Thus, the Shares are not entitled to the same rights as Shares issued by a corporation operating
a business enterprise with management and a board of directors. By acquiring Shares, you are not acquiring the right to elect directors,
to vote on certain matters regarding the issuer of your Shares or to take other actions normally associated with the ownership of Shares,
such as the right to bring “oppression” or “derivative” actions. You will only have the extremely limited rights
described under “Description of the Shares.”
Absence of 1940 Act and Commodity Exchange
Act Protections
Investors will not have the protections normally
associated with ownership of Shares in an investment company registered under the 1940 Act or the protections afforded by the Commodity
Exchange Act.
The Trust is not registered as an investment company
under the 1940 Act and is not required to register thereunder. Consequently, investors do not have the regulatory protections provided
to investors in investment companies. The Trust will not hold or trade in commodity futures contracts regulated by the Commodity Exchange
Act, as administered by the CFTC. Furthermore, the Trust is not a commodity pool for purposes of the Commodity Exchange Act, and the Sponsor
is not subject to regulation by the CFTC as a commodity pool operator, or a commodity trading advisor, in connection with the Shares.
Therefore, investors will not have the regulatory protections provided to investors in instruments or commodity pools regulated by the
Commodity Exchange Act.
30
Termination and Liquidation May Be Required
The Trust may be required to terminate and
liquidate at a time that is disadvantageous to investors.
If the Trust is required to terminate and liquidate,
such termination and liquidation could occur at a time that is disadvantageous to investors, such as when gold prices are lower than the
gold prices at the time when investors purchased their Shares. In such a case, the Trust’s gold may be sold as part of the Trust’s
liquidation and the resulting proceeds distributed to investors will be less than if gold prices were higher at the time of the sale.
RISKS RELATED TO THE CUSTODY OF GOLD
The Trust’s Ability to Recover Losses
from the Custodian is Limited
The limited liability of the Custodian under
the agreement with the Trust and U.K. law may impair the ability of the Trust to recover losses concerning its gold and any recovery may
be limited, even in the event of fraud, to the market value of the gold at the time the fraud is discovered.
The liability of the Custodian is limited under
the Custody Agreement. Under the agreements between the Trustee and the Custodian that establishes the Trust Unallocated Account and the
Trust Allocated Account, the Custodian is liable only for losses that are the direct result of its own negligence, fraud or willful default
in the performance of its duties. Any such liability is further limited to the market value of the gold held in the Trust Allocated Account
and the Trust Unallocated Account at the time such negligence, fraud or willful default is discovered by the Custodian or notified to
the Custodian by the Trustee. In addition, under an unallocated account agreement between the Authorized Participant and the Custodian
or, if the Authorized Participant uses another custodian, that custodian, the Custodian or the Authorized Participant’s custodian
may not be contractually or otherwise liable for any losses suffered by any Authorized Participant or investor. Moreover, the terms of
the Authorized Participant’s unallocated account agreement may have other terms that may limit the recovery of the Authorized Participant’s
losses from the Custodian or the Authorized Participant’s custodian.
It May Be Difficult for the Trust to Seek
Legal Redress Against the Custodian
Although the relationship between the Custodian
and the Trustee concerning the Trust’s allocated gold is expressly governed by U.K. law, a court hearing any legal dispute concerning
that arrangement may disregard that choice of law and apply U.S. law, in which case the ability of the Trust to seek legal redress against
the Custodian may be frustrated.
The obligations of the Custodian under the Custody
Agreement are governed by U.K. law. The Trust is a New York common law trust. Any United States, New York or other court situated in the
United States may have difficulty interpreting U.K. law (which, insofar as it relates to custody arrangements, is largely derived from
court rulings rather than statute), LBMA rules or the customs and practices in the London custody market. It may be difficult or impossible
for the Trust to sue the Custodian in a United States, New York or other court situated in the United States. In addition, it may be difficult,
time consuming and/or expensive for the Trust to enforce in a foreign court a judgment rendered by a United States, New York or other
court situated in the United States.
Investors Do Not have the Right to Assert
a Claim Against the Custodian
Investors and Authorized Participants lack
the right under the Custody Agreement to assert claims directly against the Custodian, which significantly limits their options for recourse.
Neither the investors nor any Authorized Participant
will have a right under the Custody Agreement to assert a claim of the Trustee against the Custodian. Claims under the Custody Agreement
may only be asserted by the Trustee on behalf of the Trust.
31
A Failure by the Custodian to Exercise Due
Care with Respect to Gold Could Result in a Loss to the Trust
The Trust will rely on the Custodian for the
safekeeping of essentially all of the Trust’s gold. As a result, failure by the Custodian to exercise due care in the safekeeping
of the Trust’s gold could result in a loss to the Trust.
The Trust will be reliant on the Custodian for
the safekeeping of essentially all of the Trust’s gold. The Trustee is not liable for the acts or omissions of the Custodian. The
Trustee has no obligation to monitor the activities of the Custodian other than to receive and review reports prepared by the Custodian
pursuant to the Custody Agreement. In addition, the ability to monitor the performance of the Custodian may be limited because under the
Custody Agreement the Trustee and the Sponsor and any accountants or other inspectors selected by the Sponsor have only limited rights
to visit the premises of the Custodian for the purpose of examining the Trust’s gold and certain related records maintained by the
Custodian. As a result of the above, any failure by the Custodian to exercise due care in the safekeeping of the Trust’s gold may
not be detectable or controllable by the Trustee and could result in a loss to the Trust.
The Trust Would Be An Unsecured Creditor
of the Custodian in the Event of Insolvency
Gold held in the Trust Unallocated Account
and any Authorized Participant’s unallocated account will not be segregated from the Custodian’s assets. If the Custodian
becomes insolvent, its assets may not be adequate to satisfy a claim by the Trust or any Authorized Participant.
Gold which is part of a deposit for a purchase
order or part of a redemption distribution will be held for a time in the Trust Unallocated Account and, previously or after, in the unallocated
gold account of the purchasing Authorized Participant. During those times, the Trust and the Authorized Participant, as the case may be,
will have no proprietary rights to any specific bars of gold held by the Custodian and will each be an unsecured creditor of the Custodian
with respect to the amount of gold held in such unallocated accounts. In addition, if the Custodian fails to segregate gold held by it
on behalf of the Trust, unallocated gold will not be segregated from the Custodian’s assets, and the Trust will be an unsecured
creditor of the Custodian with respect to the amount so held in the event of the insolvency of the Custodian. In the event the Custodian
becomes insolvent, the Custodian’s assets might not be adequate to satisfy a claim by the Trust or the Authorized Participant for
the amount of gold held in their respective unallocated gold accounts.
Baskets May Be Issued for More or Less Gold
than Required
In issuing Baskets, the Trustee will rely on
certain information received from the Custodian which is subject to confirmation after the Trustee has relied on the information. If such
information turns out to be incorrect, Baskets may be issued in exchange for an amount of gold that is more or less than the amount of
gold required to be deposited with the Trust.
The Custodian’s definitive records are prepared
after the close of its business day. However, when issuing Baskets, the Trustee will rely on information reporting the amount of gold
credited to the Trust’s accounts that it receives from the Custodian during the business day and which is subject to correction
during the preparation of the Custodian’s definitive records after the close of business. If the information relied upon by the
Trustee is incorrect, the amount of gold actually received by the Trust may be more or less than the amount required to be deposited for
the issuance of Baskets.
Any Indemnification that the Trust is Required
to Pay May Adversely Affect the Value of the Shares
The value of the Shares will be adversely affected
if the Trust is required to indemnify the Sponsor, the Trustee or the Custodian as contemplated in the Trust Agreement and the Custody
Agreement.
Under the Trust Agreement, each of the Sponsor
and the Trustee has a right to be indemnified from the Trust for any liability or expense it incurs without gross negligence, bad faith
or willful misconduct on its part. Similarly, the Custody Agreement provides for indemnification of the Custodian by the Trust under certain
circumstances. That means that it may be necessary to sell assets of the Trust to cover losses or liability suffered by the Sponsor, the
Trustee or the Custodian. Any sale of that kind would reduce the NAV of the Trust and the value of the Shares.
Custodian Is Not Subject to Specific Governmental
Regulatory Supervision
The gold bullion custody operations of the
Custodian are not subject to specific governmental regulatory supervision.
The Custodian is responsible for the safekeeping
of the Trust’s gold bullion that the Custodian allocates to the Trust in connection with the creation of Baskets by Authorized Participants.
The Custodian also facilitates the transfer of gold in and out of the Trust. Although the Custodian is a market maker, clearer and approved
weigher under the rules of the LBMA (which sets out good practices for participants in the bullion market), the LBMA is not an official
or governmental regulatory body. Furthermore, although the Custodian is subject to general banking regulations by U.S. regulators and
is generally regulated in the U.K. by the Prudential Regulation Authority and the FCA, such regulations do not directly cover the Custodian’s
gold bullion custody operations in the U.K. Accordingly, the Trust is dependent on the Custodian to comply with the best practices of
the LBMA and to implement satisfactory internal controls for its gold bullion custody operations in order to keep the Trust’s gold
secure.
32
GENERAL RISK
The Trust’s Service Providers May
Not Carry Adequate Insurance
The service providers engaged by the Trust
may not carry adequate insurance to cover claims against them by the Trust, which could adversely affect the value of net assets of the
Trust.
The Trustee, the Custodian, precious metals dealers
and other service providers engaged by the Trust maintain such insurance as they deem adequate with respect to their respective businesses.
Investors cannot be assured that any of the aforementioned parties will maintain any insurance with respect to the Trust’s assets
held or the services that such parties provide to the Trust and, if they maintain insurance, that such insurance is sufficient to satisfy
any losses incurred by them in respect of their relationship with the Trust.
Accordingly, the Trust will have to rely on the
efforts of the service provider to recover from their insurer compensation for any losses incurred by the Trust in connection with such
arrangements.
Uncertainty regarding the effects of Brexit
The price of the Shares could be adversely
affected by the effects of Brexit.
The United Kingdom (“UK”) stopped
being a member of the European Union (“EU”) (“Brexit”) on January 31, 2020 (“Exit Day”). Following
Exit Day, the EU entered an 11-month transitional period to December 31, 2020 (the “Transitional Period”) during which existing
EU-derived laws and regulations and trading relationships continued to apply in the UK. On December 24, 2020, the EU and UK negotiators
reached an agreement on what their future relationship will look like. This agreement sets out the rules on the new partnership between
the EU and UK that apply from January 1, 2021. The unavoidable uncertainties and events related to Brexit could negatively affect taxes
and costs of business; cause volatility in currency exchange rates, interest rates, and European, UK or worldwide political, regulatory,
economic or market conditions; and contribute to instability in political institutions, regulatory agencies, and financial markets. Any
of these effects of Brexit, and others that cannot be anticipated, could adversely affect the price of the Shares.
Uncertainty regarding the effects of COVID-19
The price of the Shares could be adversely
affected by the effects of COVID-19.
In December 2019, a novel strain of coronavirus, COVID-19, was reported
to have surfaced in Wuhan, Hubei Province, China. In January 2020, this coronavirus spread to other countries, including the United States
and Europe. The World Health Organization classified the outbreak as a pandemic as it spread globally, and additional variants of COVID-19
continue to circulate and may cause further market disruption and shutdowns (including as a result of government regulation and prevention
measures). The COVID-19 pandemic has had and will likely continue to have serious and potentially adverse impacts on social, economic,
and financial systems, including significant uncertainty and volatility in the financial markets. Governmental authorities and regulators
throughout the world have, in the past, responded to major economic disruptions with a variety of fiscal and monetary policy changes,
such as quantitative easing, new monetary programs and lower interest rates. An unexpected or quick reversal of these policies, or the
ineffectiveness of these policies, is likely to increase volatility in the market generally, and could specifically increase volatility
in the market for gold, which could adversely affect the price of the Shares. Efforts to contain the spread of this coronavirus has intensified.
To date, this coronavirus has not had a significant impact on our business. Although we currently expect that any disruptive impact of
coronavirus on our business will be temporary, this situation continues to evolve and therefore we cannot predict the extent to which
the continued COVID-19 outbreak will directly or indirectly affect the price of the Shares. As a result in variations in supply and demand
of coins, the precious metals dealer has adjusted coin and bar premiums more frequently than before the pandemic; the Sponsor has updated
available coins and Processing Fees on merkgold.com/fees as information has become available.
33
Information system disruptions could adversely
affect the Trust’s record keeping and operations
The Trust relies on the information and technology
systems of the Trustee, the Custodian, the Marketing Agent and, to a lesser degree, the Sponsor, which could be adversely affected by
information systems interruptions, cybersecurity attacks or other disruptions which could have a material adverse effect on our record
keeping and operations.
The Custodian, the Trustee and the Trust’s
marketing agent, Van Eck Securities Corporation (“VanEck” or “Marketing Agent”), depend upon information technology
infrastructure, including network, hardware and software systems to conduct their business as it relates to the Trust. A cybersecurity
incident, or a failure to protect their computer systems, networks and information against cybersecurity threats, could result in a loss
of information and adversely impact their ability to conduct their business, including their business on behalf of the Trust. Despite
implementation of network and other cybersecurity measures, their security measures may not be adequate to protect against all cybersecurity
threats.
Item 1B. Unresolved Staff Comments
None.
Item 2. Properties
Not applicable.
Item 3. Legal Proceedings
None.
Item 4. Mine Safety Disclosures
Not applicable.
34
PART II
Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.