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ETFs to Ride the Gold Rally Amid Coronavirus Crisis

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The year 2020, majorly dominated by the coronavirus pandemic and geopolitical tensions, has been quite promising for safe-haven assets like gold. On track for the best year since 1979, spot gold prices have witnessed an increase of more than 32% so far this year, going by a CNBC article.

Yellow metal prices have once again hit a new high, steering past $2,000 an ounce. The upside is being largely supported by a weaker dollar and declining bond yields. The yellow metal shares an inverse relationship with the greenback. A weak dollar against different currencies makes precious metal cheaper in other currencies and thereby, increases its demand and prices.

Also, some analysts believe the Federal Reserve’s measures to provide support to the ailing economy seem to be supportive of investments in gold and treasuries. Moreover, interest-rate cuts are lowering the opportunity costs of investing in non-yielding bullion. Uncertainty surrounding the coronavirus pandemic over the longer term is making the yellow metal’s reputation as a store of wealth more attractive and is supporting the rally in gold prices, per a Bloomberg article.

Meanwhile, rising geopolitical tensions are supporting the yellow metal. The simmering tensions between United States and China are making investors worrisome. Going on, the devastating blasts in Beirut have added to the safe-haven appeal of gold.

Glittering Gold ETFs in Focus

Yellow metal investments have been popular this year due to the coronavirus outbreak. Notably, the global stash of gold in ETFs touched the highest level in seven years in the middle of the first quarter of 2020. Net inflows in gold-backed ETFs are expected to continue as the second half of 2020 is likely to keep facing the brunt of the pandemic as the second wave of the outbreak is gathering steam.

Also, analysts at Bank of America expect the precious metal to hit $3,000 an ounce over the next 18 months (per an article published on foxbusiness.com). Going by the same article, commenting on the rising gold prices, they have said that “the global pandemic is providing a sustained boost to gold due to increased savings, growing inequality, vast capital destruction, declining productivity, rising public debt levels, and, most importantly, falling equilibrium real interest rates.”

Going on, Paul Wong, market strategist at Sprott Inc., has said that “the stage has been set for gold to continue to climb higher,” per a Bloomberg article.

Gold ETFs mostly move in tandem with gold prices. The SPDR Gold Shares (GLD - Free Report) , iShares Gold Trust (IAU - Free Report) , SPDR Gold MiniShares Trust (GLDM - Free Report) and GraniteShares Gold Trust (BAR - Free Report) are some of the popular ETFs. These funds carry a Zacks ETF Rank #3 (Hold). Below we have discussed these in detail:

GLD

This is the largest and most popular ETF in the gold space, with AUM of $79.95 billion and average daily volume of 13.9 million shares. The fund reflects the performance of the price of gold bullion, less the Trust's expenses. At launch, each share of this ETF represented about 1/10th of an ounce of gold. The expense ratio is 0.40% (read: Will Blockbuster Rally of Bitcoin Last? ETFs in Focus).

IAU

This ETF offers exposure to the day-to-day movement of the price of gold bullion. It has AUM of $31.37 billion and trades in a solid volume of 27.3 million shares a day, on average. At launch, each share of this ETF represented about 1/100th of an ounce of gold. The ETF charges 25 basis points (bps) in annual fees (read: July ETF Asset Report: Gold, Bond, Nasdaq Emerge as Winners).

GLDM

This product seeks to reflect the performance of the price of gold bullion, less GLDM’s expenses. Being one of the low-cost products with an expense ratio of 0.18%, GLDM has accumulated $3.35 billion in AUM and trades in average daily volume of 2.8 million shares. At launch, each share of this ETF represented about 1/100th of an ounce of gold (read: How to Bet on the Gold Frenzy With ETFs & Stocks).

BAR

With AUM of $1.28 billion and an expense ratio of 0.17%, the fund tracks the performance of gold price less trust expenses. It trades in a moderate volume of 521,000 shares per day, on average. At launch, each share of this ETF represented about 1/100th of an ounce of gold (see: all the Precious Metal ETFs here).

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