Here's Why You Should Invest in Gold ETFs Now
The aggravating coronavirus outbreak in the United States is reinforcing risk-off sentiments among investors. The outbreak has crossed the grim mark of 4 million cases in the United States, with the country seeing a staggering 1 million new cases in just 15 days of touching the 3-million mark on Jul 8, per a CNN report. Accordingly, spot gold prices have increased more than 4% so far this week, on track for its longest winning streak since late-2011 (per a CNBC article). The yellow metal also touched the price of $1,897.16 (highest since September 2011) on Jul 23.
Simmering tensions between the United States and China have also supported the upside in yellow metal prices. Reciprocating to the shutting down of its consulate in Texas, China ordered the United States to close its Chengdu consulate, per a Reuters article. Going on, a weak dollar is also providing support to gold prices. The dollar index is currently near a two-year low level and on course for its steepest weekly decline since early June, according to the Reuters article.
In fact, gold-backed ETFs witnessed record inflows in the first half of 2020. Going by new data released by World Gold Council, global net inflows came in at $39.5 billion in bullion-backed ETFs, beating the previous annual inflow record of $23 billion in 2016.
Net inflows for June rose 2.7% to $5.6 billion. Contribution in around 80% of global net inflows in June came in from North American funds at $4.6 billion. Commenting on the record inflows, Juan Carlos Artigas, Head of Research, World Gold Council, said that, "gold ETF investment demand shattered numerous records this year as investors sought safety from the economic turmoil created by COVID-19. To put it in context, inflows in the first half of 2020 significantly exceeded multi-decade record levels of net gold purchased by central banks in 2018 and 2019," per the report.
Gold ETFs to Continue Shining
Yellow metal investments have been popular this year due to the coronavirus outbreak. Notably, the global stash of gold in ETFs touched the highest level in seven years in the middle of the first quarter of 2020. Net inflows in gold-backed ETFs are expected to continue as the second half of 2020 is likely to keep facing the brunt of the pandemic as the second wave of the outbreak is gathering steam.
Also, some analysts believe the Federal Reserve’s measures to provide support to the ailing economy seem to be supportive of investments in gold and treasuries. Moreover, interest-rate cuts are lowering the opportunity costs of investing in non-yielding bullion.
Gold ETFs mostly move in tandem with gold prices. The SPDR Gold Shares GLD, iShares Gold Trust IAU, SPDR Gold MiniShares Trust GLDM and GraniteShares Gold Trust BAR are some of the popular ETFs. These funds carry a Zacks ETF Rank #3 (Hold). Below we have discussed these in detail:
This is the largest and most popular ETF in the gold space, with AUM of $74.08 billion and average daily volume of 13.3 million shares. The fund reflects the performance of the price of gold bullion, less the Trust's expenses. At launch, each share of this ETF represented about 1/10th of an ounce of gold. The expense ratio is 0.40% (read: Here's Why Silver Outshining Gold ETFs).
This ETF offers exposure to the day-to-day movement of the price of gold bullion. It has AUM of $28.93 billion and trades in a solid volume of 26.6 million shares a day, on average. At launch, each share of this ETF represented about 1/100th of an ounce of gold. The ETF charges 25 basis points (bps) in annual fees (read: Try These ETF Strategies as the Coronavirus Crisis Worsens).
This product seeks to reflect the performance of the price of gold bullion, less GLDM’s expenses. Being one of the low-cost products with an expense ratio of 0.18%, GLDM has accumulated $2.98 billion in AUM and trades in average daily volume of 2.7 million shares. At launch, each share of this ETF represented about 1/100th of an ounce of gold (read: Why Gold ETFs are Soaring This Year).
With AUM of $1.15 billion and an expense ratio of 0.17%, the fund tracks the performance of gold price less trust expenses. It trades in a moderate volume of 462,000 shares per day, on average. At launch, each share of this ETF represented about 1/100th of an ounce of gold (see: all the Precious Metal ETFs here).
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SPDR Gold Shares (GLD): ETF Research Reports
iShares Gold Trust (IAU): ETF Research Reports
GraniteShares Gold Trust (BAR): ETF Research Reports
SPDR Gold MiniShares Trust (GLDM): ETF Research Reports
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.