Why Pros Love This Gold ETF

The Fed is stuck between a rock and a hard place.

On the one hand, inflation hasn’t dropped below 2%, with home prices remaining stubbornly high.

On the other hand, the economy is slowing quickly.

While a rate cut is already priced in for next week, many investors aren’t sure inflation has been tamed.

That’s led to a remarkable rally for gold this year, with the yellow metal up nearly 20% year-to-date.

The most popular gold ETF amongs financial pros, according to our TrackStar data, is State Street’s GLD.

It’s far and away the most searched gold ETF.

But before you add it to your portfolio, there are a few things you should know.

Key Facts About GLD

• Net assets: $68.8 billion
• 12-month trailing yield: N/A
• Inception: November 18, 2004
• Expense ratio: 0.40%
• Number of holdings: 1

State Street’s GLD ETF is rather unique.

Rather than owning stocks, the ETF holds (a lot of) gold in a warehouse.

The shares you buy are a fractional ownership against those gold stores.

By owning physical gold, the GLD is better at tracking the spot price of gold than other ETFs that use futures or derivatives.

However, there can sometimes be disconnects.

For example, the YTD gain for spot gold is 19.05%. The GLD is up 23.18% YTD.

But don’t worry. The premium or discount for the ETF stays within 0.01% of its net asset value.

Source: State Street

The ETF is actively traded with plenty of volume on the shares and the options, which contain weekly expiration cycles.

Performance

GLD’s performance is the combination of the spot rate for gold minus the expenses, which at 0.4% aren’t cheap but aren’t expensive either.

Source: State Street

Competition

The GLD has a few direct competitors, such as the IAU. Otherwise, most ETFs focus on gold and precious metal miners, as shown below.

• VanEck Vectors Gold Miners ETF (GDX): The most popular gold miner ETF, the GDX offers exposure to 55 major gold miners.
• US Global GO GOLD and Precious Metal Miners ETF (GOAU): The GOAU targets companies that mine gold and other precious metals including silver and palladium.
• iShares Gold Trust (IAU): As noted above, the IAU is structurally the same as the GLD, but run by iShares.
• VanEck Vectors Junior Gold Miners ETF (GDXJ): This ETF targets smaller gold miners that often carry more risk.

With a lower expense ratio, the IAU has outperformed the GLD slightly over the past five years.

Notably, gold miners underperformed gold itself, with junior miners faring the worst.

Our Opinion 9/10 

While the GLD is an excellent choice for gold investors, the IAU has a lower expense ratio with just as much liquidity.

The differences between the two aren’t that significant, even over five years. 

Nonetheless, it just edges out the GLD, in our opinion.

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