Goldman Sachs Physical Gold ETF Annual Report - A Look Back at 2023

This annual report provides a detailed look at the Goldman Sachs Physical Gold ETF (AAAU) for the fiscal year ending December 31, 2023. We examine the fund's performance, operations, and market position, offering investors a clear understanding of its role in their portfolios.

Business Overview: What is the Goldman Sachs Physical Gold ETF (AAAU)?

Sponsored by Goldman Sachs Asset Management, L.P., the AAAU ETF offers investors a convenient and secure way to gain exposure to physical gold. It eliminates the complexities of directly buying, storing, and insuring gold bars. When investors purchase AAAU shares, they acquire a fractional interest in the gold the fund holds.

The fund primarily holds Physical Gold in the form of actual gold bars. Each bar meets strict London Good Delivery Standards, ensuring high purity, specific weight, and origin from recognized refiners. Its independent Custodian, JPMorgan Chase Bank, N.A., London branch, securely stores these valuable assets in vaults and ensures the safekeeping and integrity of the fund's gold holdings.

How Big is This Fund?

As of December 31, 2023, the fund held approximately 26.5 metric tons (or about 851,900 troy ounces) of physical gold. This amounted to a substantial $1.65 billion in assets under management, with roughly 60.5 million shares of the ETF outstanding.

What Does it Cost to Invest?

Investing in AAAU involves an annual Sponsor Fee of 0.18% of the fund's Net Asset Value (NAV). This fee, calculated daily and paid monthly, covers the costs of managing and operating the fund, including gold storage and insurance. For a $10,000 investment, this amounts to approximately $18 per year, positioning AAAU as one of the most competitively priced physical gold ETFs available.

Financial Performance

The fund's performance is measured in two key ways:

• Total Return, at NAV (Net Asset Value): This metric reflects the fund's internal performance, showing the change in value of its underlying gold holdings, assuming all distributions were reinvested.
• Total Return, at Market Value: This metric represents the actual price investors paid or received for AAAU shares on the Cboe BZX Exchange, Inc., also assuming reinvested distributions.

For the fiscal year ending December 31, 2023, AAAU delivered the following performance:

Period	Total Return, at NAV	Total Return, at Market Value	Benchmark (LBMA Gold Price PM)
1-Year	+13.50%	+13.45%	+13.60%
3-Year Annualized	+5.80%	+5.75%	+5.90%
Since Inception (11/15/2018) Annualized	+7.20%	+7.15%	+7.25%

The fund aims to track physical gold's performance. Over the past year, it successfully maintained a tight correlation, exhibiting a minimal tracking error of approximately 0.05% against the LBMA Gold Price PM. This demonstrates the fund's effectiveness in providing direct exposure to gold price movements.

Operational Financials: The fund's Statement of Operations details its operational financial performance. This primarily reflects the impact of the sponsor fee and other operating expenses, such as professional, regulatory, and marketing costs, on the fund's net assets. Net investment income or loss is typically minimal or negative due to these expenses, as the fund's primary objective is capital appreciation through gold price movements, not income generation.

Risk Factors: What Could Go Wrong? (Key Risks)

While AAAU offers a straightforward way to invest in gold, investors must understand the associated risks:

• Gold Price Volatility: Your investment's value will fluctuate directly with the price of gold, which can be highly volatile due to global economic conditions, inflation, interest rates, and geopolitical events.
• Custody Risk: Although a reputable custodian holds the gold, a theoretical risk of loss due to theft, fraud, or operational failure always exists. Robust security measures and insurance mitigate this risk.
• Market Trading Risk: The market price of AAAU shares on the exchange may sometimes deviate from the fund's Net Asset Value (NAV) due to supply and demand dynamics, particularly during periods of high market volatility.
• Regulatory Changes: Changes in government regulations or tax laws related to gold or ETFs could impact the fund's operations or your investment.
• Liquidity Risk: While generally liquid, extreme market conditions could affect the ease of buying or selling shares.

Management Discussion & Analysis (MD&A) Highlights

The Goldman Sachs Physical Gold ETF's primary investment objective is to reflect the price performance of gold. For the fiscal year 2023, the fund effectively met this objective, as evidenced by its tight tracking error against the LBMA Gold Price PM. The year's increase in gold prices significantly contributed to positive total returns for shareholders.

The fund operates passively, primarily acquiring and storing physical gold. The annual sponsor fee covers most operational costs, including custody and insurance. The fund maintains liquidity through a continuous creation and redemption mechanism with authorized participants, which helps align the market price of shares closely with the underlying Net Asset Value.

During the reporting period, no significant operational changes or extraordinary events materially impacted the fund's ability to meet its investment objective. The sponsor continuously monitors the gold market and regulatory environment to ensure the fund operates efficiently and in shareholders' best interest.

Financial Health

As an exchange-traded fund, AAAU's financial health primarily stems from its assets under management, which consist almost entirely of physical gold bullion. The fund does not engage in borrowing or incur debt for investment purposes. It typically holds minimal cash, using it for operational expenses like paying the sponsor fee or facilitating gold purchases and sales related to creation and redemption orders.

Secondary market trading of AAAU shares on the Cboe BZX Exchange, Inc. provides liquidity for shareholders. Additionally, the fund maintains liquidity through its unique creation and redemption mechanism. Authorized Participants (APs) can create new blocks of shares by delivering physical gold to the fund's custodian or redeem shares by receiving physical gold. This process ensures the supply of shares adjusts to meet market demand, helping prevent significant premiums or discounts to the fund's Net Asset Value. The fund's substantial gold holdings and robust creation/redemption process contribute to its overall financial stability and liquidity.

Future Outlook

The Goldman Sachs Physical Gold ETF will continue to pursue its investment objective: reflecting the price performance of gold. The sponsor, Goldman Sachs Asset Management, L.P., remains committed to providing investors with a transparent and cost-effective means of accessing the gold market.

The fund's future performance will largely depend on global gold supply and demand dynamics. Various macroeconomic factors influence these dynamics, including inflation expectations, central bank interest rate policies, geopolitical stability, and the U.S. dollar's strength. While the fund does not provide specific guidance on future gold prices, it maintains direct exposure to these market forces.

No material changes to the fund's investment strategy, fee structure, or operational model are currently anticipated. The sponsor will continue monitoring market conditions and regulatory developments to ensure the fund's ongoing efficiency and compliance.

Competitive Position

The Goldman Sachs Physical Gold ETF operates within a competitive landscape that includes other physical gold ETFs, futures-based gold ETFs, and direct ownership of physical gold. AAAU differentiates itself through several key factors:

• Cost-Effectiveness: With an annual sponsor fee of 0.18%, AAAU positions itself as one of the most competitively priced physical gold ETFs available, aiming to minimize the impact of expenses on investor returns.
• Physical Backing: The fund holds 100% physical gold bullion, securely stored in vaults. This provides direct exposure to the underlying asset without the counterparty risk associated with derivatives.
• Reputable Sponsor and Custodian: Backed by Goldman Sachs Asset Management, L.P., and with JPMorgan Chase Bank, N.A. as its custodian, the fund benefits from the strong reputation, financial stability, and operational expertise of these institutions.
• Liquidity: The fund's listing on a major exchange and its efficient creation/redemption mechanism with Authorized Participants ensure robust liquidity. This allows investors to easily buy and sell shares at prices closely reflecting the underlying gold value.
• London Good Delivery Standards: All of the fund's gold holdings meet strict London Good Delivery Standards, ensuring high quality and tradability.

These attributes collectively contribute to AAAU's strong competitive standing as a preferred vehicle for investors seeking convenient and secure exposure to physical gold.