Overview

The Trust holds Gold Bullion for the benefit of owners of Gold Deposit Receipts. One Gold Deposit Receipt represents the undivided beneficial ownership of one troy ounce of Gold Bullion. The Trustee performs only administrative and ministerial acts. The property of the Trust consists of the Gold Bullion and all monies or other property, if any, received by the Trustee. The Initial Depositor sells Gold Bullion to the Trust and arranges custodial services through its gold storage account. As of JanuaryJuly 31, 2021, there were 9791,295 Gold Deposit Receipts outstanding.

The Trust is not managed like a corporation or an active investment vehicle. It does not have any officers, directors, or employees and is administered by the Trustee pursuant to the Depositary Trust Agreement. The expenses of the Trust are borne by the Initial Depositor.

The fiscal year end for the Trust is October 31.

Gold Industry

The participants in the gold industry may be classified in the following sectors: (1) mining and producer; (2) banking; (3) official; (4) investment; and (5) manufacturing. The following is a brief description of each of the sectors.

Mining and Producer Sector. This group includes mining companies that specialize in gold and silver production; mining companies that produce gold as a byproduct of other production (such as a copper or silver producer); scrap merchants; and recyclers.

Banking Sector. Bullion banks provide a variety of services to the gold industry and its participants, thereby facilitating interactions between other parties. Services provided by the bullion banking community include traditional banking products as well as mine financing, physical gold purchases and sales, hedging and risk management, inventory management for industrial users and consumers, and gold deposit and loan instruments.

The Official Sector. The official sector encompasses the activities of the various central banking operations of gold-holding countries. In September 1999, a group of 15 central banks acting to clarify their intentions with respect to their gold holdings signed the Central Bank Gold Agreement commonly called the “Washington Agreement on Gold.” The signatories included the European Central Bank (the “ECB”) and the central banks of Austria, Belgium, Finland, France, Germany, Ireland, Italy, Luxembourg, the Netherlands, Portugal, Spain, Sweden, Switzerland, and England. The original agreement limited incremental sales by the 15 signatories to 400 tonnes per annum over the ensuing five-year period. The original Washington Agreement on Gold expired in September 2004, and was renewed by almost all of the original signatories for a second five-year period (England did not renew in 2004). The second Washington Accord Agreement expired in September 2009 and was renewed again by all signatories of the second agreement for a third agreement to last another five-year period. In addition, the central banks of Cyprus, Greece, Malta, Slovakia and Slovenia signed in 2009. The annum limit on gold sales under the third agreement was 400 tonnes, with total sales not to exceed 2,000 tonnes in the five-year period. In May 2014, before the third agreement was set to expire in September 2014, a fourth agreement was reached between the ECB and the central banks of Austria, Belgium, Cyprus, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Latvia, Luxembourg, Malta, the Netherlands, Portugal, Slovakia, Slovenia, Spain, Sweden and Switzerland, which will expire after a five-year period. The signatories agreed to, among other things, continue to coordinate their gold transactions to avoid disturbances to the gold market and have acknowledged that they each do not have plans to sell significant amounts of gold. On July 26, 2019, the ECB announced that it and the 21 other central bank signatories have decided not to renew the fourth agreement upon its expiry in September 2019, citing that they no longer see the need for a formal agreement as the market has developed and matured. The signatories confirmed that gold remains an important element of global monetary reserves and none of them currently has plans to sell significant amounts of gold.

The Investment Sector. This sector includes the investment and trading activities of both professional and private investors and speculators. These participants range from large hedge and mutual funds to day-traders on futures exchanges and retail-level coin collectors.

The Manufacturing Sector. The fabrication and manufacturing sector represents all the commercial and industrial users of gold for whom gold is a daily part of their business. The jewelry industry is a large user of gold. Other industrial users of gold include the electronics and dental industries.

World Gold Supply and Demand (from calendar year 2015-2019)

The following table sets forth a summary of the world gold supply and demand from calendar year 2015-2019:

Note: Totals may not add due to independent rounding. Net producer hedging is the change in the physical market impact of mining companies’ gold loans, forwards and options positions. Implied net investment is the residual from combining all other Thomson Reuters GFMS data on the gold supply/demand as shown in the Summary Table. As such, it captures the net physical impact of all transactions not covered by the other supply/demand variables.

(1) “Tonne” refers to one metric ton. This is equal to 1,000 kilograms or 32,150.7465 troy ounces.

† Source: Gold Survey 2019, GFMS, Refinitiv

* Source: Gold Survey H2 2019 Update and Outlook, GFMS, Refinitiv

Historic Movements in the Price of Gold

As movements in the price of gold are expected to directly affect the price of the Gold Deposit Receipts, investors should understand what the recent movements in the price of gold have been. Investors, however, should also be aware that past movements in the gold price are not indicators of future movements.

The following chart provides historical background on the price of gold. The chart illustrates movements in the price of gold in U.S. dollars per ounce over the period from JanuaryJuly 2016 to JanuaryJuly 2021, and is based on the LBMA (PM) Gold Price, an offering of ICE Benchmark Administration.

Source: LBMA.org.ukLBMA.org.uk; World Gold Council (accessed MarchSeptember 2021)

Gold prices deteriorated throughout 2015, in part as a result of the Federal Reserve Board’s announcement that it would raise interest rates as well as a significant rally of the U.S. dollar index, falling to $1,060.00 per ounce on December 30, 2015. However, the price of gold rebounded during the first half of 2016. In July 2016, gold prices experienced a rapid increase following the United Kingdom’s referendum held on June 23, 2016 to leave the European Union (i.e., “Brexit”), reaching a 28-month high of $1,366.25 per ounce on July 6, 2016. The initial market volatility and negative sentiment in connection with Brexit has somewhat subsided and gold prices have receded from the high prices displayed during July 2016, leveling off at prices similarly exhibited during the beginning of 2016. Gold prices rallied robustly in the first seven months of 2016 before leveling off for much of the third calendar quarter. Gold hit a near eleven-month low price of $1,125.70 per ounce in late December and ended the year 8 percent higher than it started. This lower price followed a few days after the Federal Reserve raised interest rates on December 15, 2016.

In the first half of 2017, physical demand was up 17 percent compared to the same period a year earlier. In September 2017, gold prices rose to their highest level for thirteen months, but then slipped to a near five-month low by mid-December. Gold prices near $1,300.00 per ounce in the later half of 2017 indicated that physical demand had slipped compared to prior calendar quarters. The final weeks of 2017 saw gold prices recover the bulk of previous losses as the dollar weakened against other major currencies after the Federal Reserve reiterated that a gradual path of rate increases remained appropriate even in light of the new tax reform. Gold closed at $1,291.00 per ounce on December 28, 2017.

Gold started 2018 strongly, extending the rally that followed the Federal Reserve’s interest rate hike in December 2017. This rally hit a barrier just below $1,360.00 in late January. While gold started off to a positive year in 2018, a recovery in the U.S. dollar weakened prices and uncertainty on the U.S-China trade front weakened the yuan, further pulling gold down. In mid-August 2018, the price of gold was at $1,178.40, which was both the lowest price point for the year-to-date and the lowest since the start of 2017. By the end of August, gold prices had gone down approximately 7.7 percent in 2018. Investment sector demand grew in the fourth calendar quarter of 2018, as a short covering rally in net managed positions on COMEX pushed up net short positions into net long positions for the first time since July 2018. Official sector purchases rose to 196 tonnes in the last calendar quarter of 2018, their highest quarterly level in 50 years. A January 2019 study by the World Gold Council, an industry trade group, reported that the amount of gold purchased by central banks reached 651 tonnes in 2018, the highest level since 1967. Gold closed at $1,279.00 per ounce on December 28, 2018.

On January 30, 2019, the Federal Reserve announced it would keep its target range for its benchmark interest rate at 2.25% to 2.5% and declared it would be patient in deciding when to raise interest rates again. Gold closed at $1,323.25 per ounce on January 31, 2019. By the end of the first calendar quarter in 2019, gold demand grew to 1.053 tonnes, up approximately 7% from the first calendar quarter of 2018. While demand grew, supply remained relatively unchanged throughout the first calendar quarter of 2019, flatlining at approximately 1,150 tonnes. Gold reached a high of $1,343.75 in the first calendar quarter of 2019, but fell to around $1,295.40 by the end of March.

In the second calendar quarter of 2019, gold demand was 1,123 tonnes, up 8% from the prior year period, while gold supply grew 6% to 1,186.7 tonnes. For the first half of 2019, gold demand grew to a three-year high of 2,181.7 tonnes, largely due to central bank purchases and ETF inflows, while gold supply reached 2,323.9 tonnes, the highest since 2016. The price of gold broke through the $1,430 per ounce level in late June, trading at a then six-year high, as the Federal Reserve re-opened the door for interest rate cuts amid rising global economic and political uncertainties. Gold closed at $1,409 per ounce on June 28, 2019. On July 31, 2019, the Federal Reserve lowered the target range for its benchmark interest rate to 2% to 2.25% (from 2.25% to 2.5%) and declared it would continue to monitor the implications of incoming information for the economic outlook. During the third calendar quarter, gold demand grew modestly to 1,107.9 tonnes mainly due to the largest ETF inflows since 2016. The price of gold rose by 5% during the third calendar quarter of 2019. On September 4, 2019, the price of gold broke through the $1,546.10 per ounce level, its highest mark for 2019. The primary factors behind this price momentum continued to be ongoing geopolitical tensions, concerns of a slowdown in economic growth, lower interest rates and the level of negative yielding debt. Gold closed at $1,514.75 per ounce on December 30, 2019.

In the first calendar quarter of 2020, gold demand grew marginally to 1,083.8 tonnes. The global COVID-19 pandemic, which impacted the world in first calendar quarter of 2020, fueled safe-haven investment demand for gold, offsetting market weakness in consumer-focused sectors of the economy. These investment inflows helped push the US dollar gold price to an eight-year high. Consequently, global gold demand in value terms reached US$55 billion – the highest since the second quarter of 2013. Total supply in the first calendar quarter of 2020 fell 4% as COVID-19 lockdowns impacted mine production and gold recycling. Central banks continued to buy significant quantities of gold in the same period. Amid heightened volatility and uncertainty, global gold reserves grew by 145 tonnes in the first calendar quarter of 2020. Gold closed at $1,702.75$1,702.75 per ounce on April 30, 2020.

In the second calendar quarter of 2020, the COVID-19 pandemic was again the main influence on the gold market, severely curtailing consumer demand while providing support for investment. The global response to the pandemic by central banks and governments, in the form of rate cuts and massive liquidity injections, fueled record flows of 734 tonnes into gold-backed ETFs. This inflow of gold helped lift the gold price, which gained 17% in US dollar terms over the first half, hitting record highs in many other currencies. Gold closed at $1,964.90$1,964.90 per ounce on July 31, 2020. In early August 2020, gold rallied to a new all-time high of $2,067.15 per ounce. The demand for gold dropped to 892.3 tonnes in the third quarter of 2020, its lowest quarterly total since the third quarter of 2009, as consumers and investors continued to battle against the effects of the global pandemic. At the end of October 2020, demand for gold was 2,972.1 tonnes, which was 10% down compared to the same period in 2019 on a year-to-date basis. Total supply of gold fell 3% in the third quarter of 2020 compared to the same period in 2019, with mine production affected by COVID-19 restrictions imposed on the sector in the first half of 2020.

In the fourth calendar quarter of 2020, the demand for gold continued to decline to an 11-year low of 783.4 tonnes, marking a 28% decrease compared to the same period in 2019 and the lowest quarterly figure since the second quarter of 2008. The COVID-19 pandemic continued to weaken customer demand, resulting in a 14% decline in yearly gold demand to 3,759.6 tonnes. Gold-backed ETFs saw record annual inflows, as global holdings grew by 877.1 tonnes or $47.9 billion in 2020. At the end of 2020, total annual gold supply was 4,633 tonnes, which was 4% lower compared to the same period in 2019. 2019. Gold closed at $1,887.60 per ounce on December 30, 2020.

In the first calendar quarter of 2021, the demand for gold remained relatively similar to the previous quarter, at 815.7 tonnes, but down 23% compared to the first quarter of 2020. This 23% year-over-year decline was due to strong outflows from global gold ETFs in the first quarter of 2021 and reduced levels of net buying in central banks. The average gold price in the first quarter of 2021 was 13% higher than year-over-year, but fell 4% quarter-over-quarter. The opportunity to buy at lower prices, relative to last year’s prices, boosted consumer demand, as many nations began easing COVID-19 restrictions, such as lockdowns. Gold closed at $1,767.65 per ounce on April 30, 2021.

In the second calendar quarter of 2021, gold demand was relatively similar to the second calendar quarter of 2020, at 955.1 tonnes. Gold supply for the second quarter of 2021 was 13% higher year-over-year from the second quarter of 2020. Further, inflows of 40.7 tonnes into gold ETFs partially offset the heavy outflows observed in the previous quarter. ETFs saw net outflows for the first time since 2014 in the amount of 129.3 tonnes for the first half of 2021. Central banking buying continued from the previous quarter, with global bank reserves growing by 199.9 tonnes. 

As of March 15,September 13, 2021, the price of gold was $1,723.65$1,793.90 per ounce.

Results of Operations for the Three Months and Nine Months Ended JanuaryJuly 31, 2021

The Trust’s Net Asset Value decreasedincreased from $1,842,331 at October 31, 2020 to $1,824,660$2,364,346 at JanuaryJuly 31, 2021, a 0.96% decrease28.33% increase for the period.  

Net Asset Value per Receipt decreased 0.96%2.98% from $1,881.85 at October 31, 2020 to $1,863.80$1,825.75 at JanuaryJuly 31, 2021.

Net Asset Value per Receipt increased 3.29% from $1,767.65 at April 30, 2021 to $1,825.75 at July 31, 2021.

For the nine months ended July 31, 2021, the Trust issued 316 Receipts (cost: $563,568) and redeemed no Receipts, resulting in an increase in the number of Receipts issued and outstanding from 979 Receipts at October 31, 2020 to 1,295 Receipts at July 31, 2021.

For the three months ended JanuaryJuly 31, 2021, the Trust issued 109 Receipts (cost: $194,480) and redeemed no Receipts, and did not redeem any Receipts, resulting in an increase in the number of Receipts issued and outstanding of 979from 1,186 Receipts at October 31, 2020April 30, 2021 to remain the same1,295 Receipts at JanuaryJuly 31, 2021.

The decrease in net assets from operations for the threenine months ended JanuaryJuly 31, 2021 was $17,671,$41,553, resulting from a net change in unrealized loss on investment in gold of $17,671.the same amount.

The increase in net assets from operations for the three months ended July 31, 2021 was $73,433, resulting from a net change in unrealized gain on investment in gold of the same amount.

Liquidity and Capital Resources

The Trust is not aware of any trends, demands, commitments, conditions, events or uncertainties that are reasonably likely to result in material changes to its liquidity needs. In exchange for the Initial Depositor’s fee, the Initial Depositor has agreed to assume the expenses incurred by the Trust.

Off-Balance Sheet Arrangements

The Trust has no off-balance sheet arrangements.

Critical Accounting Policies

The Trust prepares its financial statements in accordance with GAAP.

The Trust has adopted the provisions of Financial Accounting Standards Board Accounting Standards Codification Topic 946, Financial Services—Investment Companies, and follows specialized accounting. As a result of the adoption of this provision, the Trust records its investment in gold at fair value and expects that there will be fluctuations in the value of investments based on changes in the price of gold.

The Trust does not engage in transactions in foreign currencies which could expose the Trust or holders of Gold Deposit Receipts to any foreign currency related market risk. The Trust does not invest in any derivative financial instruments or long-term debt instruments. The Trust’s sole business activity is the investment in gold, and substantially all the Trust’s assets are holdings of gold which creates a concentration of risk associated with fluctuations in the price of gold.

The Trust maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in its reports under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC, and that such information is accumulated and communicated to an executive or senior officer of the Initial Depositor familiar with and responsible for supervising the Trust and its operations, as appropriate, to allow timely decisions regarding required disclosure.

Under the supervision and with the participation of an executive or senior officer of the Initial Depositor, the Initial Depositor conducted an evaluation of the Trust’s disclosure controls and procedures, as defined under Exchange Act Rules 13a-15(e) and 15d-15(e). Based on this evaluation, the designated officer of the Initial Depositor concluded that, as of JanuaryJuly 31, 2021, the Trust’s disclosure controls and procedures were effective.

There have been no changes in the Trust’s or Initial Depositor’s internal control over financial reporting that occurred during the Trust’s most recent fiscal quarter ended JanuaryJuly 31, 2021 that have materially affected, or are reasonably likely to materially affect, the Trust’s or Initial Depositor’s internal control over financial reporting.

PART II. OTHER INFORMATION

None.

Item 1A. Risk Factors

There have been no material changes to the risk factors previously disclosed in the Trust’s Form 10-K filed with the SEC on January 29, 2021.

Not applicable.

None.

Not applicable.

There have been no changes in auditors and no disagreements with auditors during the Trust’s fiscal quarter ended JanuaryJuly 31, 2021.

Not applicable.

Not applicable.

Not applicable.

On May 11, 2017, the Trust entered into the Second Amended and Restated Depositary Trust Agreement with The Bank of New York Mellon, BNY Trust of Delaware, Bank of Montreal and BMO Capital Markets Corp. On July 11, 2018, the Trust entered into the Second Amended and Restated Distribution Agreement with Bank of Montreal and BMO Capital Markets Corp.

Audit Fees. Bank of Montreal, as the Initial Depositor, was billed $10,000 for professional services rendered by KPMG LLP.

All Other Fees. There were no other fees billed for products or services provided by KPMG LLP, other than those reported in this Item 10.

Not applicable.

* Previously filed.

** Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for the purposes of Section 18 of the Securities and Exchange Act of 1934, as amended, and otherwise are not subject to liability under those sections.

SIGNATURES

Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this annual report to be signed on its behalf by the undersigned in the capacities thereunto duly authorized.

__________

* The Registrant is a trust and the persons are signing in their capacities as officers of Bank of Montreal, the Initial Depositor of the Registrant.

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