By Christian Magoon
CEO, Magoon Capital
A battle continues to grow in the land of physical gold ETFs and investors are benefiting. There are four U.S. listed ETFs in this category but two funds stand out in terms of assets, the SPDR Gold Trust (GLD) and the iShares Gold Trust (IAU). Here is the list of products currently available via GoldETFs.biz.
Asset size is the largest and most obvious differential between the four gold funds. The original U.S. listed gold ETF, GLD, has been the default choice for many investors since its inception in 2004. This has propelled the SPDR Gold Trust to more physical gold ownership than most countries and to easily become the largest gold ETF in the world. However IAU, the iShares Gold Trust, is increasingly waging a successful battle for investor attention against GLD. The momentum of this battle can be measured in fund flows and trading volume.
ABOVE ITS PLAYING WEIGHT
The SPDR Gold Trust is about seven times larger in terms of assets than the iShares Gold Trust as evidenced in the chart above. However fund flows continue to indicate that IAU is taking new market share versus GLD. Here's the year to date ETF flow comparison between the two gold ETFs from IndexUniverse.
As the chart illustrates, IAU achieved about a third of GLD's 2012 inflows despite being less than a seventh of its size - an impressive feat.
Keep in mind these inflows been achieved in a year where gold ETFs have swung from gains, to losses and back to slight gains. These market conditions tend to emphasize ETF liquidity, or perceived liquidity, which has been a strong point for GLD since its inception. Yet that advantage is clearly diminishing for GLD as well. A simple review of average volume numbers shows IAU is over achieving by trading close to half the average volume levels of GLD but with significantly less fund assets. Here's the volume comparison of the two funds.
Sparking this growing battle on GLD's inflows and liquidity advantage was a bold decision by iShares several years ago to revise its expense ratio to a category low of 25bps. At more than 30% less expensive than GLD, iShares savvy move is paying off while creating trends that the SPDR Gold Trust may need to address. For ETF investors this golden battle deserves a watchful eye as nothing but positive outcomes have resulted from this face off.