Gold Tops 2700: ETFs to Tap the Metal's Rally

Gold has been on a solid run this year, hitting a series of new all-time highs. The bullion topped $2,700 per ounce for the first time and is outperforming the broader market index, gaining more than 30% so far this year compared with a 22% gain for the S&P 500. The U.S. election jitters and rising geopolitical tensions in the Middle East boosted demand for gold as a safe-haven asset. A loose monetary policy environment and central bank purchases of gold are also adding shine to the bullion.

Given the optimism, investors have a long list of options to tap into the metal’s rally. We have highlighted the five most popular options that are directly linked to the spot gold price or futures to gain exposure to the metal. These are SPDR Gold Trust ETF GLD, iShares Gold Trust (IAU), SPDR Gold MiniShares Trust GLDM, Aberdeen Standard Physical Swiss Gold Shares ETF SGOL and iShares Gold Trust Micro IAUM. All these ETFs are up more than 29% this year and have a Zacks ETF Rank #3 (Hold).

Here, we described several factors driving the gold price higher:

U.S. Election Uncertainty

The upcoming U.S. elections, a tight race between Kamala Harris and Donald Trump, have contributed to market volatility, pushing gold prices higher. Gold is considered a store of wealth for investors.

Geopolitical Tension

The ongoing conflict between Israel and Hezbollah has bolstered demand for gold as a safe-haven asset. Recent airstrikes and rising casualties have added to market uncertainty, driving investors toward gold to hedge against geopolitical risks. Gold is often used as a means of preserving wealth during times of financial and political uncertainty and usually does well when other asset classes struggle (read: ETFs to Profit From Rising Middle East Tension, Port Strike).

Loose Monetary Policy Era

Central banks around the world, including the Federal Reserve and European Central Bank (ECB), have been cutting interest rates to combat slow economic growth.

After holding the rates at a 23-year high for 14 consecutive months since July 2023, the Fed kicked off the new rate cycle era by initiating a 50-basis point cut in interest rates last month. This marked the first rate cut since 2020. The central bank projects two more rate cuts of 50 bps in its final two meetings this year, due in November and December. It also indicates another 100-bps rate cut next year and a 50-bps cut in 2026, which means four rate cuts in 2025 and two in 2026 (read: Fed Initiates Rate Cuts: Top-Ranked Growth ETFs to Buy).

Meanwhile, the ECB delivered its third interest rate cut of the year as inflation risks in the European Union eased faster than expected. The central bank lowered the deposit rate by a further 25 bps at its October meeting.

Lower rates raise the yellow metal’s attractiveness compared to fixed-income assets such as bonds. Notably, gold is highly sensitive to rising U.S. interest rates, as these increase the opportunity costs of holding non-yielding bullion.

Central Bank Purchases

Further, strong physical buying from central banks has also been a pillar of support for the bullion. According to the World Gold Council, global central banks increased purchases for their reserves by 6% to 183 tons in the second quarter and are now on track to scale back buying in 2024. China's central bank held back on buying gold for the fifth straight month in September.

Gold ETFs in Focus

SPDR Gold Trust ETF (GLD)

SPDR Gold Trust ETF tracks the price of gold bullion measured in U.S. dollars and kept in London under the custody of HSBC Bank USA. It is an ultra-popular gold ETF with AUM of $75.5 billion and a heavy volume of about 6 million shares a day. SPDR Gold Trust ETF charges 40 bps in fees per year from investors.

iShares Gold Trust (IAU)

iShares Gold Trust offers exposure to the day-to-day movement of the price of gold bullion. It is backed by physical gold under the custody of JP Morgan Chase Bank in London. iShares Gold Trust charges 25 bps in annual fees. It trades in average daily volumes of 4 million shares and has AUM of $32 billion (read: Top ETF Stories of the First Nine Months of 2024).

SPDR Gold MiniShares Trust (GLDM)

SPDR Gold MiniShares Trust seeks to reflect the performance of the price of gold bullion. It is a slightly modified alternative to the State Street behemoth gold fund GLD. SPDR Gold MiniShares Trust is a low-cost choice in the U.S. listed physically gold-backed ETF space, charging investors 10 bps in annual fees. It has $9.2 billion in AUM and trades in a solid average daily volume of 3.8 million shares.

Aberdeen Standard Physical Swiss Gold Shares ETF (SGOL)

Aberdeen Standard Physical Swiss Gold Shares ETF tracks the price of gold bullion. The Trust holds allocated physical gold bullion bars stored in secure vaults in Zurich, Switzerland and London, the United Kingdom. Aberdeen Standard Physical Swiss Gold Shares ETF has amassed $3.8 billion in its asset base and trades in a solid volume of 4 million shares per day. It charges 17 bps in annual fees per year.

iShares Gold Trust Micro (IAUM)

iShares Gold Trust Micro offers exposure to the day-to-day movement of the price of gold bullion. It is the lowest-cost gold ETF on the market, having an expense ratio of 0.09%. iShares Gold Trust Micro has amassed $1.4 billion in its asset base while trading in an average daily volume of 2 million shares.

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SPDR Gold Shares (GLD): ETF Research Reports
 
iShares Gold Trust (IAU): ETF Research Reports
 
abrdn Physical Gold Shares ETF (SGOL): ETF Research Reports

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