Gold has been on a tear. The precious metal has forged multiple new record highs so far this year. It’s now up some 30% year to date, and 3.5% in the past week alone.
Relative to equities year to date, the returns of the SPDR Gold Trust (GLD ) versus the SPDR S&P 500 Trust (SPY ) show strong leadership since mid-July when GLD (the blue line) crossed above SPY (green line). (See the chart below.)
It’s been a perfect storm for gold prices.
Sticky inflation concerns, even as the data stabilizes, has been one driving factor. Another is lower interest rates. The Federal Reserve cut rates by 50 bps in September. And the market seems increasingly convinced another big cut is coming before the year is over. The macro picture has also been supportive for gold, with economic growth uncertain, softening consumer sentiment, rising debt, a recent weakening of the dollar, and geopolitical risk among the drivers of gold’s momentum.
On the demand for physical gold, Peter Grant, in his latest market note, pointed out that the World Gold Council is forecasting increased demand for gold and jewelry in key markets such as India. And central bank demand for gold as a reserve asset across the globe to remain strong.
Underlying all of this, there’s the pursuit of portfolio diversification. That has been a call in just about everyone’s playbook for the rest of the year. And gold is a key asset in that tool kit.
Asset flows have been surprisingly tame, however.
As a category, gold ETFs are just now breaking even for 2024 regarding asset creations/redemptions. But that trend has recently changed. Gold ETFs have captured some $1.5 billion in net new money so far in September. That’s more than $2 billion in the past month.
Gold Plus Something: Unique ETF Ideas for Gold Investors
The bulk of assets invested in U.S.-listed gold ETFs sit in three physical trusts, including GLD, the iShares Gold Trust (IAU ), and the SPDR Gold MiniShares Trust (GLDM ), which command about $115 billion in combined assets. Physical trusts are a popular choice among investors looking to own gold.
But thanks to robust — and creative — product development in recent years, access to physical gold isn’t the only way to invest in the precious metal through ETFs. There are other unique ways to think about access to gold, including leveraged plays. Consider three ETFs:
1. Income-generating gold
Gold is not typically an income-producing asset. But the FT Vest Gold Strategy Target Income ETF (IGLD ) solves for that.
The fund relies on FLEX options on GLD to capture the price performance of gold. It also and sells calls on GLD to generate monthly income. The strategy, by design, gives up some upside for that income component. IGLD is up some 20% year to date and has a 30-day SEC yield of about 3%.
2. Buffer gold
Similar to IGLD, and offered by the same provider and subadvisor, the FT Vest Gold Strategy Quarterly Buffer ETF (BGLD ) wraps what’s already seen as a safety-type asset into another layer of bubble wrap. With the use of options contracts, BGLD captures some of the gold price upside. It also offers downside protection to losses between 5% and 15% during its target outcome period, which resets every three months.
Year to date, BGLD is up nearly 21%.
3. Metal plus miners
The WisdomTree Efficient Gold Plus Gold Miners Strategy Fund (GDMN ) blends gold exposure in the form of gold futures with gold miner stocks. The investment case for this strategy notes how gold investors tend to allocate to both categories, which can be capital intensive. The fund aims to simplify that, and capitalize on the upside of gold prices as well as on the increased profitability of the miners (thanks to higher gold prices) in a single ticker.
Year to date, GDMN is up an impressive 54%. The fund is part of WisdomTree’s Capital Efficient ETF lineup, which also include (GDE ) — gold plus equity.
Dive Right in While Gold Is Hot
If strong performance, or a search for diversification, or a safety hedge against macro conditions have you looking for exposure to gold, the ETF market has many solutions to offer.
You can find here a list of gold ETFs from multiple product providers including State Street, iShares, VanEck, GraniteShares, abrdn, Franklin, and ProShares, to name a few. Each issuer brings to the table a unique value proposition tied to access type, cost, strategy or a combination of factors. Dive right in, and find the choice that’s right for you.
For more news, information, and analysis, visit VettaFi | ETFDB.
