Posted on 15 November 2011. Tags: gold exchange traded fund
While ETFs have been part of the investment landscape for nearly two decades, the concept of a gold exchange traded fund didn’t come along until late 2004. That’s when the SPDR Gold Shares (NYSE: GLD) burst onto the scene. Seven years later, GLD isn’t only the largest gold exchange traded fund in the world by a wide margin, it’s the second-largest ETF in the world trailing only the SPDR S&P 500 (NYSE: SPY). In fact, GLD spent a few days in 2011 as the largest ETF in the world by assets.
The idea of a gold exchange traded fund has become so popular that GLD now has over $70.3 billion in assets under management and is also one of the most heavily traded ETFs in the world. While GLD certainly has first-to-market advantage when it comes to gold exchange traded funds, it’s far from being the only option in this universe. Investors looking for choices among gold exchange traded funds would do well to consider GLD and other, similar funds.
The concept of GLD is quite simple. The ETF is backed by physical holdings of gold and its price reflects one-tenth the daily spot price of gold bullion, give or take a few cents. In other words, if spot gold closes at $1,800 an ounce on Monday, GLD should close around $180 a share. There are other gold exchange traded funds that do the same thing and they’re worth investigating as well.
Take the iShares Gold Trust (NYSE: IAU) for example. IAU became the second gold exchange traded fund listed in the U.S. when it debuted in January 2005. While IAU is smaller than GLD (it has almost $9.5 billion in AUM), the former also features a lower expense at 0.25%. That’s lower than the 0.4% expense ratio GLD offers.
And if you’re looking for something a little bit different, ETF Securities, an ETF sponsor that we’ve highlighted here before, has something unique for you in your search for a gold exchange traded fund. The firm sponsors the ETFS Physical Swiss Gold Shares (NYSE: SGOL) and the ETFS Physical Asian Gold Shares (NYSE: AGOL). SGOL and AGOl do exactly the same thing as GLD and IAU, but the gold they hold is stored in Switzerland and Singapore, respectively.
Keeping with the theme of looking for something unique when it comes to gold exchange traded funds, the ETFS Physical PM Basket Shares (NYSE: GLTR) is a fund to consider. GLTR doesn’t just offer exposure to gold, it also features smaller allocations to silver, platinum and palladium. And don’t make your search for a gold exchange traded fund all about physical gold. Consider ETFs like the Market Vectors Gold Miners ETF (NYSE: GDX) and the Market Vectors Junior Gold Miners ETF (NYSEL GDXJ) if you want some equity exposure in your gold exchange traded fund.
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