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Gold started 2023 on a strong note, with prices rising to an eight-month peak. The yellow metal topped the key level of $1900 per ounce driven by recessionary fears, easing inflation, a pull-back in the U.S. dollar, hopes for slower Fed rate hikes and geopolitical risks.
Inflation in the United States unexpectedly fell for the first time in more than two-and-a half years in December. The consumer price index dipped 0.1% in December after gaining 0.1% in November. It rose 6.5% year over year in December, down from a 7.1% year-over-year increase in November and a recent peak of 9.1% in June.
The annual inflation growth was the smallest rise since October 2021. The data has put the Federal Reserve on track to again slow the pace of interest-rate hikes. The U.S. dollar lost ground after the inflation report, making gold less expensive for other currency holders (read: 5 ETFs to Benefit as Monthly Inflation Drops to 2-Year Low).
Gold is often used as a means of preserving wealth during times of financial and political uncertainty. It usually does well when other asset classes struggle. Bullion prices were also boosted by increased safe-haven demand as the International Monetary Fund warned of a potential recession in 2023. A third of the global economy will be in recession this year, per the agency. This has boosted the demand for the yellow metal as a great store of value and hedge against market turmoil.
Further, demand for gold has been on the rise fueled by increased buying from central banks and consumers purchasing more jewelry. Central banks from across the globe purchased a record amount of gold in the third quarter of 2022, according to data from the World Gold Council.
The solid trend in the bullion is likely to continue at least for the short term, with analysts expecting further gains this year.
Ways to Play
Given the optimism, investors have a long list of options to tap the metal’s rally. Below, we have highlighted some of them:
Simple Gold ETFs
While there are many products that are directly linked to the spot gold price or futures, we have highlighted the most-popular ETFs that carry a favorable Zacks ETF Rank #3 (Hold) with a Medium risk outlook.
SPDR Gold Trust ETF (GLD - Free Report) : This is the largest and most-popular ETF in the gold space, with AUM of $55.7 billion and an average daily volume of around 5 million shares. The fund tracks the price of gold bullion measured in U.S. dollars and has an expense ratio of 0.40% (read: 4 Reasons Why Gold ETFs May Stage a Comeback in 2023).
iShares Gold Trust (IAU - Free Report) : This ETF offers exposure to the day-to-day movement of the price of gold bullion. It has AUM of $27.6 billion and trades in solid volume of 4.2 million shares a day on average. The ETF charges 25 bps in annual fees.
SPDR Gold MiniShares Trust (GLDM - Free Report) : This product seeks to reflect the performance of the price of gold bullion. Being a low-cost product with an expense ratio of just 0.10%, GLDM has amassed $5.6 billion in AUM and trades in a solid average daily volume of 1.6 million shares.
Gold Mining ETFs
Acting as a leveraged play on the underlying metal prices, metal miners tend to experience more gains than their bullion cousins in a rising metal market. Hence, mining ETFs also appear as compelling choices:
Market Vectors Gold Mining ETF (GDX - Free Report) : This is the most-popular and actively traded gold miner ETF with AUM of $13.7 billion and an average daily volume of around 25 million shares. The fund follows the NYSE Arca Gold Miners Index, holding 49 stocks in its basket. Canadian firms account for about 42% of the portfolio, while the United States (17.7%) and Australia (13.3%) round off the top three. GDX charges 51 bps in annual fees.
VanEck Vectors Junior Gold Miners ETF (GDXJ - Free Report) : GDXJ is a small-cap centric ETF that tracks the MVIS Global Junior Gold Miners Index. Holding 98 stocks in its basket, Canadian firms dominate the fund’s portfolio at 51.5%, while Australia (17.3%) and Brazil (6%) round out the top three. VanEck Vectors Junior Gold Miners ETF has AUM of $4.2 billion and charges 52 bps in annual fees. It trades in heavy volume of around 6 million shares a day on average (read: all the Material ETFs here).
iShares MSCI Global Gold Miners ETF (RING - Free Report) : This ETF follows the MSCI ACWI Select Gold Miners Investable Market Index and holds 35 securities in its portfolio. Canadian firms take half of the portfolio, while the United States takes the next spot at 19.5% share. RING is one of the cheapest choices in the gold mining space, charging 39 bps in fees and expenses. iShares MSCI Global Gold Miners ETF has been able to manage assets worth $503.8 million and trades in a good volume of 212,000 shares per day.
Leveraged Gold ETF
Investors, who are bullish on gold, may consider a near-term long on the precious metal with the following ETFs.
ProShares Ultra Gold ETF (UGL - Free Report) : This fund seeks to deliver twice (2X or 200%) the return of the daily performance of the Bloomberg Gold Subindex. It charges 95 bps in fees a year and has amassed $195.2 million in its asset base. Volume is good at about 98,000 shares per day.
DB Gold Double Long ETN (DGP - Free Report) : This ETN seeks to take a leveraged view on the performance of gold. It is based on a total return version of the Deutsche Bank Liquid Commodity Index-Optimum Yield Gold, charging 75 bps in fees per year. It has accumulated $81.3 million in its asset base so far and trades in an average daily volume of 9,000 shares.
Direxion Daily Gold Miners Index Bull 2X Shares (NUGT - Free Report) : NUGT provides two times exposure to the daily performance of the NYSE Arca Gold Miners Index. It charges 86 bps in annual fees and has gathered $561 million in its asset base. Volume is heavy, with around 3 million shares exchanged per day, on average (read: 5 Best Leveraged ETF Areas of Last Week).
Direxion Daily Junior Gold Miners Index Bull 2x Shares (JNUG - Free Report) : This product provides 2X exposure to the daily performance of the MVIS Global Junior Gold Miners Index. It charges 87 bps in annual fees and has accumulated $328.9 million in its asset base. Volume is heavy, exchanging about 1.4 million in shares per day on average.
MicroSectors Gold Miners 3X Leveraged ETN (GDXU - Free Report) : This ETN seeks to deliver three times (3X or 300%) the performance of the S-Network MicroSectors Gold Miners Index. It has amassed $152.3 million in its asset base and charges 95 bps in annual fees. The product trades in an average daily volume of 278,000 shares.
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How to Bet on Gold Price Rally With ETFs
Gold started 2023 on a strong note, with prices rising to an eight-month peak. The yellow metal topped the key level of $1900 per ounce driven by recessionary fears, easing inflation, a pull-back in the U.S. dollar, hopes for slower Fed rate hikes and geopolitical risks.
Inflation in the United States unexpectedly fell for the first time in more than two-and-a half years in December. The consumer price index dipped 0.1% in December after gaining 0.1% in November. It rose 6.5% year over year in December, down from a 7.1% year-over-year increase in November and a recent peak of 9.1% in June.
The annual inflation growth was the smallest rise since October 2021. The data has put the Federal Reserve on track to again slow the pace of interest-rate hikes. The U.S. dollar lost ground after the inflation report, making gold less expensive for other currency holders (read: 5 ETFs to Benefit as Monthly Inflation Drops to 2-Year Low).
Gold is often used as a means of preserving wealth during times of financial and political uncertainty. It usually does well when other asset classes struggle. Bullion prices were also boosted by increased safe-haven demand as the International Monetary Fund warned of a potential recession in 2023. A third of the global economy will be in recession this year, per the agency. This has boosted the demand for the yellow metal as a great store of value and hedge against market turmoil.
Further, demand for gold has been on the rise fueled by increased buying from central banks and consumers purchasing more jewelry. Central banks from across the globe purchased a record amount of gold in the third quarter of 2022, according to data from the World Gold Council.
The solid trend in the bullion is likely to continue at least for the short term, with analysts expecting further gains this year.
Ways to Play
Given the optimism, investors have a long list of options to tap the metal’s rally. Below, we have highlighted some of them:
Simple Gold ETFs
While there are many products that are directly linked to the spot gold price or futures, we have highlighted the most-popular ETFs that carry a favorable Zacks ETF Rank #3 (Hold) with a Medium risk outlook.
SPDR Gold Trust ETF (GLD - Free Report) : This is the largest and most-popular ETF in the gold space, with AUM of $55.7 billion and an average daily volume of around 5 million shares. The fund tracks the price of gold bullion measured in U.S. dollars and has an expense ratio of 0.40% (read: 4 Reasons Why Gold ETFs May Stage a Comeback in 2023).
iShares Gold Trust (IAU - Free Report) : This ETF offers exposure to the day-to-day movement of the price of gold bullion. It has AUM of $27.6 billion and trades in solid volume of 4.2 million shares a day on average. The ETF charges 25 bps in annual fees.
SPDR Gold MiniShares Trust (GLDM - Free Report) : This product seeks to reflect the performance of the price of gold bullion. Being a low-cost product with an expense ratio of just 0.10%, GLDM has amassed $5.6 billion in AUM and trades in a solid average daily volume of 1.6 million shares.
Gold Mining ETFs
Acting as a leveraged play on the underlying metal prices, metal miners tend to experience more gains than their bullion cousins in a rising metal market. Hence, mining ETFs also appear as compelling choices:
Market Vectors Gold Mining ETF (GDX - Free Report) : This is the most-popular and actively traded gold miner ETF with AUM of $13.7 billion and an average daily volume of around 25 million shares. The fund follows the NYSE Arca Gold Miners Index, holding 49 stocks in its basket. Canadian firms account for about 42% of the portfolio, while the United States (17.7%) and Australia (13.3%) round off the top three. GDX charges 51 bps in annual fees.
VanEck Vectors Junior Gold Miners ETF (GDXJ - Free Report) : GDXJ is a small-cap centric ETF that tracks the MVIS Global Junior Gold Miners Index. Holding 98 stocks in its basket, Canadian firms dominate the fund’s portfolio at 51.5%, while Australia (17.3%) and Brazil (6%) round out the top three. VanEck Vectors Junior Gold Miners ETF has AUM of $4.2 billion and charges 52 bps in annual fees. It trades in heavy volume of around 6 million shares a day on average (read: all the Material ETFs here).
iShares MSCI Global Gold Miners ETF (RING - Free Report) : This ETF follows the MSCI ACWI Select Gold Miners Investable Market Index and holds 35 securities in its portfolio. Canadian firms take half of the portfolio, while the United States takes the next spot at 19.5% share. RING is one of the cheapest choices in the gold mining space, charging 39 bps in fees and expenses. iShares MSCI Global Gold Miners ETF has been able to manage assets worth $503.8 million and trades in a good volume of 212,000 shares per day.
Leveraged Gold ETF
Investors, who are bullish on gold, may consider a near-term long on the precious metal with the following ETFs.
ProShares Ultra Gold ETF (UGL - Free Report) : This fund seeks to deliver twice (2X or 200%) the return of the daily performance of the Bloomberg Gold Subindex. It charges 95 bps in fees a year and has amassed $195.2 million in its asset base. Volume is good at about 98,000 shares per day.
DB Gold Double Long ETN (DGP - Free Report) : This ETN seeks to take a leveraged view on the performance of gold. It is based on a total return version of the Deutsche Bank Liquid Commodity Index-Optimum Yield Gold, charging 75 bps in fees per year. It has accumulated $81.3 million in its asset base so far and trades in an average daily volume of 9,000 shares.
Direxion Daily Gold Miners Index Bull 2X Shares (NUGT - Free Report) : NUGT provides two times exposure to the daily performance of the NYSE Arca Gold Miners Index. It charges 86 bps in annual fees and has gathered $561 million in its asset base. Volume is heavy, with around 3 million shares exchanged per day, on average (read: 5 Best Leveraged ETF Areas of Last Week).
Direxion Daily Junior Gold Miners Index Bull 2x Shares (JNUG - Free Report) : This product provides 2X exposure to the daily performance of the MVIS Global Junior Gold Miners Index. It charges 87 bps in annual fees and has accumulated $328.9 million in its asset base. Volume is heavy, exchanging about 1.4 million in shares per day on average.
MicroSectors Gold Miners 3X Leveraged ETN (GDXU - Free Report) : This ETN seeks to deliver three times (3X or 300%) the performance of the S-Network MicroSectors Gold Miners Index. It has amassed $152.3 million in its asset base and charges 95 bps in annual fees. The product trades in an average daily volume of 278,000 shares.