Since the economy is not expected to sail in calmer waters anytime soon, SPDR Gold Trust ETF (GLD), iShares Gold Trust ETF (IAU), and World Gold Trust - SPDR Gold MiniShares Trust (GLDM) could be ideal investments to help portfolios retain their luster even amid inflation, volatility, and occasional black swan events.
While the U.S. dollar was gaining strength due to interest-rate hikes by the Federal Reserve, the demand for gold from central banks worldwide totaled 1,136 tonnes in 2022, which is usually negatively correlated to the world reserve currency.
If this hoarding was fueled by misgivings that the Fed might overcook it with rate hikes and tip the U.S. and global economy into a downturn, they have been manifesting themselves with an evolving banking crisis on both sides of the Atlantic.
Despite the ongoing market turmoil, inflation is still high enough to warrant caution from the Fed as the central bank looks set to increase interest rates at least by another quarter point this week. This is expected to compound troubles for business and their financiers, already weighed down by significant increases in borrowing costs.
Moreover, with tribalism and geopolitical risks on the rise in an increasingly fragmented world facing common threats of climate change, the unrestricted rise of A.I., and nuclear wars, gold has become even more valuable as insurance against tail risks.
In view of the yellow metal’s eternal role as a hedge and haven against the corrosion of wealth due to inflation, and financial and macroeconomic misjudgments, let’s take a closer look at the featured ETFs.
SPDR Gold Trust ETF (GLD)
GLD is a world-renowned ETF launched and managed by World Gold Trust Services, LLC. It offers investors exposure to gold, which has of late become an important component of their asset allocation strategy by acting as a hedge against volatility in equity markets, inflation, and dollar depreciation.
With $56.93 billion in AUM, all of GLD’s holdings are in gold bullion stored in secure vaults. The physically-backed nature of this product insulates this product from the uncertainties introduced through futures-based strategies.
GLD has an expense ratio of 0.40%, lower than the category average of 0.47%. The fund’s net inflow came in at $50.17 million over the past month and $725.72 million over the past three months. It has a beta of 0.14.
Due to the increased contagion risk of the ongoing banking crisis, GLD has gained 7.7% over the past month and 18.6% over the past six months to close the last trading session at $183.84. The fund’s NAV was $183.07 as of March 20, 2023.
GLD has an overall rating of A, which translates to a Buy in our POWR Ratings system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
GLD has an A grade for Trade and Buy & Hold and a B for Peer. Unsurprisingly, the fund tops the list of 38 funds in the Precious Metals ETFs category.
iShares Gold Trust ETF (IAU)
IAU is an exchange-traded fund launched and managed by iShares Delaware Trust Sponsor LLC. It is designed to mirror the daily price performance of gold bullion.
With $27.24 billion in AUM, IAU’s holdings comprise gold bars held in a secure vault. This frees investors from finding a place to store the gold bought. The fund doesn’t manage its holding actively to obtain a profit from, or to offset losses caused by, changes in the price of gold. Hence, it is free of execution risks.
IAU has an expense ratio of 0.25%, lower than the category average of 0.47% and among the lowest in the category, which makes it a preferred choice for cost-sensitive investors. The fund’s net inflow came in at $3.93 billion over the past three years. It has a beta of 0.14.
IAU has gained 7.8% over the past month and 18.6% over the past six months to close the last trading session at $37.50. The fund’s NAV was $37.34 as of March 20, 2023.
IAU’s investment worthiness is reflected in its POWR Ratings. It has an overall rating of A, which translates to a Strong Buy in our proprietary rating system. It also has an A grade for Trade, Buy & Hold, and Peer.
IAU is ranked #2 of 38 funds in the B-rated Precious Metals ETFs category.
World Gold Trust - SPDR Gold MiniShares Trust (GLDM)
GLDM is an exchange-traded fund launched and managed by Wgc Usa Asset Management Company Llc. It offers investors a cost-effective and convenient exposure to gold by reflecting the price performance of gold bullion after subtracting operating expenses.
With $5.89 billion in AUM, all of GLDM’s holdings are stored in secure vaults in gold bullion. The fund has an expense ratio of 0.10%, significantly lower than the category average of 0.47%.
GLDM’s net inflow came in at $560.49 million over the past three months and $931.12 million over the past six months. It has a beta of 0.13.
GLDM has gained 7.8% over the past month and 18.7% over the past six months to close the last trading session at $39.25. The fund’s NAV was $39.09 as of March 20, 2023.
GLDM has an overall rating of A, which translates to a Strong Buy in our POWR Ratings system. It also has an A grade for Trade, Buy & Hold, and Peer.
GLDM is ranked #3 in the same category.
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GLD shares were trading at $181.01 per share on Tuesday morning, down $2.83 (-1.54%). Year-to-date, GLD has gained 6.70%, versus a 3.52% rise in the benchmark S&P 500 index during the same period.
About the Author: Santanu Roy
Having been fascinated by the traditional and evolving factors that affect investment decisions, Santanu decided to pursue a career as an investment analyst. Prior to his switch to investment research, he was a process associate at Cognizant. With a master's degree in business administration and a fundamental approach to analyzing businesses, he aims to help retail investors identify the best long-term investment opportunities.
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