5 Popular ETFs To Play The Rally In Gold Price

Gold Bars

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The allure of gold has returned in recent weeks on expectations of U.S. interest rate cuts in June. The bullion soared to a new high of above $2,100 an ounce on Mar 4, having risen 5.6% over the past month.

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 include SPDR Gold Trust ETF (GLD - Free Report), iShares Gold Trust (IAU - Free Report), SPDR Gold MiniShares Trust (GLDM - Free Report), Aberdeen Standard Physical Swiss Gold Shares ETF (SGOL - Free Report), and iShares Gold Trust Micro (IAUM - Free Report). All these ETFs have a Zacks ETF Rank #3 (Hold).

Traditionally viewed as a safe haven during periods of economic uncertainty and low interest rates, gold's appeal has surged following a series of weak U.S. economic reports. The U.S. manufacturing sector recorded its 16th consecutive month of decline in February, while Michigan University’s consumer confidence index dropped slightly last month. U.S. personal spending data also showed the weakest reading in three years.

The latest bouts of weak data have raised the bets that the Fed might lower interest rates as soon as June, propelling gold prices. According to the latest data from CME Group’s FedWatch Tool, about 70% of U.S. investors expect the Fed to begin cutting interest rates in June, up from 58% just a week ago. Notably, gold is highly sensitive to rising U.S. interest rates, as these increase the opportunity costs of holding non-yielding bullion and weaken the U.S. dollar.

Further, gold has been considered a store of wealth for investors. It 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. As such, factors such as the forthcoming U.S. presidential election and conflicts in Ukraine and Gaza enhance gold's attractiveness to investors. Strong physical buying from central banks and investors in Asia has also been a pillar of support.

Moreover, hedge funds and money managers are actively seeking to place bullish bets on gold. Recent data from the Commodity Futures Trading Commission indicates a spike in net bullish positions on gold by hedge funds and money managers, marking a three-week high as of Feb 27. This shift in sentiment underscores the growing optimism among investors regarding gold's potential in the current economic climate.


Ways to Play

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 $54.1 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 5 million shares and has AUM of $25.6 billion.

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 the low-cost choice in the U.S. listed physically gold-backed ETF space, charging investors 10 bps in annual fees. It has $6.4 billion in AUM and trades in a solid average daily volume of 3 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 $2.7 billion in its asset base and trades in a solid volume of 3 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 $995.3 million in its asset base while trading in an average daily volume of 510,000 shares.


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