5 Popular ETFs to Tap Soaring Gold Prices
Gold has been enjoying a huge rally in recent months. It touched a new all-time high above $2,550 per ounce. The bullion is up more than 24%, outperforming the broader market index and the trend is likely to continue, given the looming Fed rate cuts next week.
Given the optimism, investors have a long list of options to tap into the metal’s rally. We have highlighted the five most popular options that are directly linked to the spot gold price or futures to gain exposure to the metal. These include SPDR Gold Trust ETF GLD, iShares Gold Trust (IAU), SPDR Gold MiniShares Trust GLDM, Aberdeen Standard Physical Swiss Gold Shares ETF SGOL and iShares Gold Trust Micro IAUM. All these ETFs have a Zacks ETF Rank #3 (Hold).
Recent economic data signals a slowdown, bolstering bets for Fed rate cuts. The United States created 142,000 jobs in August, lower than the 160,000 anticipated by economists. Prior month job growth was also revised lower, indicating signs of continued cooling in the labor market.
Inflation has also eased, raising confidence that the Fed will cut interest rates next week. The Consumer Price Index rose 2.5% year over year in August, down from the annual rise of 2.9% in July. This is the fifth straight annual drop and marks the slowest pace of annual growth since February 2021. The producer price index increased 0.2% in August, in line with expectations.
With inflation easing and the job market losing steam, market participants are pricing in an 85% chance of the Fed lowering rates by 25 bps and 15% odds of a 50-bps cut, per the latest CME FedWatch Tool. Lower rates raise the yellow metal’s attractiveness compared to fixed-income assets such as bonds. Notably, gold is highly sensitive to rising U.S. interest rates, as these increase the opportunity costs of holding non-yielding bullion and weaken the U.S. dollar (read: Sector ETFs Set to Explode as Fed Rate Cut Bets Gain Steam).
Geopolitical tensions and election uncertainty also raised the appeal for gold. Gold is considered a store of wealth for investors. It is often used as a means of preserving wealth during times of financial and political uncertainty and usually does well when other asset classes struggle. Further, strong physical buying from central banks and investors in Asia has also been a pillar of support.
ETFs to Tap
SPDR Gold Trust ETF (GLD)
SPDR Gold Trust ETF tracks the price of gold bullion measured in U.S. dollars and kept in London under the custody of HSBC Bank USA. It is an ultra-popular gold ETF with AUM of $69 billion and a heavy volume of about 6 million shares a day. SPDR Gold Trust ETF charges 40 bps in fees per year from investors.
iShares Gold Trust (IAU)
iShares Gold Trust offers exposure to the day-to-day movement of the price of gold bullion. It is backed by physical gold under the custody of JP Morgan Chase Bank in London. iShares Gold Trust charges 25 bps in annual fees. It trades in average daily volumes of 5 million shares and has AUM of $29.6 billion (read: Why Gold Prices Are Set to Soar).
SPDR Gold MiniShares Trust (GLDM)
SPDR Gold MiniShares Trust seeks to reflect the performance of the price of gold bullion. It is a slightly modified alternative to the State Street behemoth gold fund GLD. SPDR Gold MiniShares Trust is a low-cost choice in the U.S. listed physically gold-backed ETF space, charging investors 10 bps in annual fees. It has $8.6 billion in AUM and trades in a solid average daily volume of 3 million shares.
Aberdeen Standard Physical Swiss Gold Shares ETF (SGOL)
Aberdeen Standard Physical Swiss Gold Shares ETF tracks the price of gold bullion. The Trust holds allocated physical gold bullion bars stored in secure vaults in Zurich, Switzerland and London, the United Kingdom. Aberdeen Standard Physical Swiss Gold Shares ETF has amassed $3.5 billion in its asset base and trades in a solid volume of 4 million shares per day. It charges 17 bps in annual fees per year.
iShares Gold Trust Micro (IAUM)
iShares Gold Trust Micro offers exposure to the day-to-day movement of the price of gold bullion. It is the lowest-cost gold ETF on the market, having an expense ratio of 0.09%. iShares Gold Trust Micro has amassed $1.4 billion in its asset base while trading in an average daily volume of 2 million shares.
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SPDR Gold Shares (GLD): ETF Research Reports
iShares Gold Trust (IAU): ETF Research Reports
abrdn Physical Gold Shares ETF (SGOL): ETF Research Reports