How Gold ETF Adoption Can Accelerate

Led by the SPDR Gold Shares ETF (GLD), the group of bullion-backed exchange traded funds listed in the U.S. has close to $100 billion in combined assets under management, confirming advisors and investors frequently use the gold ETF wrapper to access gold.

Alone, GLD, the original gold-backed ETF, has north of $55 billion in assets under management. That’s an impressive tally in the commodities ETF space. Still, it's dwarfed by a slew of equity and fixed income ETFs. That says there’s room for broader adoption of gold ETFs. There's a lot more, but education is a hurdle for many retail investors.

While GLD kicked off the gold ETF revolution nearly 19 years ago, many retail investors remain unsure of how to properly proportion commodities within their portfolios or how to access this asset in ETF form. Said another way, as gold ETF education improves, adoption could increase.

Room for Gold ETF Growth

A recent survey by State Street Global Advisors (SSGA), the issuer behind the aforementioned GLD and its lower cost counterpart, the SPDR Gold MiniShares Trust (GLDM), suggests there’s ample room for gold ETFs to add more assets.

The survey says just 15% of those polled are familiar with gold ETFs while more than quadruple that amount are not acquainted with funds such as GLD, GLDM and comparable offerings.

“What this suggests is that without the right education, investors stick to familiar investments. To help investors expand their horizons and understand gold’s potential benefits, financial advisors (FAs) should engage investors in conversations about the asset class,” according to SSGA.

Of note to registered investment advisors is the point that the dynamic mentioned above markedly improves among investors that work with advisors. That is to say clients are much more familiar with gold ETFs than many do-it-yourself market participants. Roughly nine in 10 respondents to the SSGA survey noted that their advisors have discussed gold with them while highlighting how the commodity’s benefits and how it fits in portfolios.

That says advisors can play critical roles in broadening clients’ gold horizons while potentially driving more assets to the related ETFs.

“We believe that the conversations FAs facilitate and the education they provide on gold can potentially impact investors’ decisions on whether or not to invest in the asset class,” concluded SSGA. “At the same time, 37% of surveyed investors with gold ETFs do not have a financial advisor and, instead, access gold ETFs through trading platforms and self-directed brokerage accounts.”

For more news, information, and analysis, visit the Alternatives Channel.

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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.

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