This year has been a record breaker for gold, as the safe-haven metal has surged to all-time highs on the back of heavy central bank buying, sticky inflation, and persistently elevated geopolitical tensions. Spot gold prices are up 24.5% on a year to date basis, with the popular currency hedge outperforming both the S&P 500 Index ($SPX) (+18.1% YTD) and the Nasdaq Composite ($NASX) (+17.4% YTD). Most recently, December gold futures (GCZ24), the most active contract, set a new high as recently as Monday's session, peaking north of $2,617 per ounce.
While Vice President Kamala Harris and former POTUS Donald Trump have stayed close in presidential polls, analysts at Saxo Bank recently noted that gold should come out as a winner no matter who takes this November's election. “Either administration would inevitably expand the deficit in an economic slowdown,” wrote the firm's Head of Commodity Strategy Ole Hansen. "It doesn’t appear either party is set to deliver on fiscal austerity, which raises inflation risks, a gold positive."
ETF issuer Global X agrees that higher gold prices are likely to continue, "potentially supported by likely Federal Reserve interest rate cuts, the possibility of a ‘higher for longer’ inflationary environment, and recently robust physical market demand,” and adds that it sees likelihood of particular upside for gold miners, given the group's attractive valuations.
For investors who might be looking to add broad exposure to gold miners or participate in rising gold prices more directly, here are three popular gold ETFs that could rise alongside the precious metal.
1. SPDR Gold Shares (GLD)
Established in 2004 as a trust that holds physical bullion, SPDR Gold Shares (GLD) is the world's largest physically backed gold ETF, with assets under management (AUM) of about $72.3 billion. The ETF holds physical gold bars and issues shares representing those holdings. The price of GLD shares is designed to track the price of gold bullion, minus the ETF's expenses. State Street Global Advisors acts as the trustee of the SPDR Gold Shares.
Up 24.2% on a YTD basis, GLD has an expense ratio of 0.40%. Its average daily share volume is close to 6 million, making it extremely liquid.
Notably, for investors who want to play gold via options, GLD is a strong choice; the fund's calls and puts are actively traded, with weekly expiration dates available.
2. ProShares Ultra Gold 2X ETF (UGL)
Founded in 2009, the ProShares Ultra Gold 2X ETF (UGL) is a leveraged ETF designed to provide investors with twice the daily return (or loss) of the gold price, as measured by the Bloomberg Gold Subindex. This means that UGL aims to deliver a 2x daily return on gold's price movement. The fund's AUM currently stands at $315.15 million.
Shares of the ETF are up 43.6% on a YTD basis, with an expense ratio of 0.95%. UGL's average daily share volume is around 170,000, though options volume on the fund is very light.
As is typical with most leveraged ETFs, ProShares warns that the targeted leverage goals of the fund may deviate significantly beyond holding periods longer than one day. However, for investors seeking amplified gains who don't mind the heightened risk (and fees), UGL could be worth considering.
3. VanEck Gold Miners ETF (GDX)
We conclude our list of gold ETFs with the VanEck Gold Miners ETF (GDX), the third-largest gold ETF in the country with an AUM of $15.2 billion. GDX seeks to track the performance of the NYSE Arca Gold Miners Index, which is composed of companies involved in gold mining and exploration. By investing in this ETF, investors can gain exposure to the gold mining industry without having to invest directly in individual mining companies.
GDX is up 27.4% on a YTD basis. It also has healthy liquidity, with an average daily volume of about 17 million shares. The fund also has a fairly active options market, including weekly expiration dates.
GDX offers a dividend yield of 1.25%, and carries an expense ratio of 0.51%.
The fund's top three holdings consist of Newmont Mining (NEM) (15.27%), Agnico-Eagle Mines (AEM) (10.21%), and Barrick Gold (GOLD) (9.05%).
On the date of publication, Pathikrit Bose did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
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