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Gold ETFs to Shine Bright on Rising Prices Amid Inflation Woes
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Wall Street has been suffering as investors are increasingly worried about rising inflation and interest rates. Due to the same concerns, the Dow Jones and the S&P 500 dropped 1.1% and 1.4%, respectively, last week. The tech-heavy Nasdaq Composite Index also declined 2.3% in the same period.
Notably, the latest data highlighted inflation levels rising at the fastest speed since 2008 in April. Notably, the Consumer Price Index rose 4.2% year over year in comparison with the Dow Jones estimate of a 3.6% rise, per a CNBC article. The Producer Price Index in April expanded 6.2% from the year-ago month, representing its biggest expansion in a decade.
The five-year breakeven inflation rate — which measures expectations of inflation five years out — reached its highest since April 2011 on May 10 while the 10-year breakeven inflation rate — a measure of expectations of inflation in 10 years’ time — rose to its highest since March 2013 (read: Inflation Zooms to 13-Year High: 5 Solid TIPS ETF Picks).
Investors are worried that rising inflation may hurt corporate margins and profits. They are also fearing that the consistent rise in inflation may put pressure on the Federal Reserve to tighten monetary policy, according to a CNBC article.
Considering the current scenario, gold prices have been rising. The spot gold prices recently soared as much as 0.4% to $1,873.82 an ounce, hitting the highest since Jan 29, per a Bloomberg article. The inflationary backdrop in the United States is favorable for gold as the metal is historically viewed as a hedge against inflation. Moreover, rising inflation often lowers the value of the concerned currency. If the greenback remains subdued, gold will gain some glitter back.
John Feeney, business development manager at Sydney-based bullion dealer Guardian Gold Australia, has said that “It seems inflation fears are finally translating into higher precious metals prices. ETF investors are starting to swing into net-buyers again,” per a Bloomberg article.
Going on, the Fed has been acting super-dovish since March 2020. It has decided to maintain rates near zero until 2023, at least. Moreover, the central bank has raised its economic growth outlook considering the vaccine and stimulus optimism and it also expects higher inflation this year.
The Fed’s projections for core inflation as measured by personal consumption expenditures are 2.2% for 2021, 2% for 2022 and 2.1% for 2023 along with the longer-run measure at 2%.
Along with the Fed, several other central banks have implemented easy monetary policy. This should boost inflation in the near-term and favor gold investing.
Gold ETFs to Consider
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.
Also, analysts at the Morgan Stanley expect the yellow metal to maintain prices above $1,700 an ounce through the second half of the year, as mentioned in 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 $60.65 billion and three-months average trading volume of about 8.9 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: 5 Best Leveraged ETF Areas of Last Week).
IAU
This ETF offers exposure to the day-to-day movement of the price of gold bullion. It has AUM of $29.34 billion and trades in average three-months volume of 22.9 million shares. 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: ETF Strategies to Combat Aggravating Coronavirus Pandemic).
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 $4.42 billion in AUM and trades in average three-months volume of 2.5 million shares. At launch, each share of this ETF represented about 1/100th of an ounce of gold (read: Can Gold ETFs Gain in 2021 After Two Positive Years?).
BAR
With AUM of $1.11 billion and an expense ratio of 0.17%, the fund tracks the performance of gold price less trust expenses. It trades in three-months average trading volume of 368,000 shares. 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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Gold ETFs to Shine Bright on Rising Prices Amid Inflation Woes
Wall Street has been suffering as investors are increasingly worried about rising inflation and interest rates. Due to the same concerns, the Dow Jones and the S&P 500 dropped 1.1% and 1.4%, respectively, last week. The tech-heavy Nasdaq Composite Index also declined 2.3% in the same period.
Notably, the latest data highlighted inflation levels rising at the fastest speed since 2008 in April. Notably, the Consumer Price Index rose 4.2% year over year in comparison with the Dow Jones estimate of a 3.6% rise, per a CNBC article. The Producer Price Index in April expanded 6.2% from the year-ago month, representing its biggest expansion in a decade.
The five-year breakeven inflation rate — which measures expectations of inflation five years out — reached its highest since April 2011 on May 10 while the 10-year breakeven inflation rate — a measure of expectations of inflation in 10 years’ time — rose to its highest since March 2013 (read: Inflation Zooms to 13-Year High: 5 Solid TIPS ETF Picks).
Investors are worried that rising inflation may hurt corporate margins and profits. They are also fearing that the consistent rise in inflation may put pressure on the Federal Reserve to tighten monetary policy, according to a CNBC article.
Considering the current scenario, gold prices have been rising. The spot gold prices recently soared as much as 0.4% to $1,873.82 an ounce, hitting the highest since Jan 29, per a Bloomberg article. The inflationary backdrop in the United States is favorable for gold as the metal is historically viewed as a hedge against inflation. Moreover, rising inflation often lowers the value of the concerned currency. If the greenback remains subdued, gold will gain some glitter back.
John Feeney, business development manager at Sydney-based bullion dealer Guardian Gold Australia, has said that “It seems inflation fears are finally translating into higher precious metals prices. ETF investors are starting to swing into net-buyers again,” per a Bloomberg article.
Going on, the Fed has been acting super-dovish since March 2020. It has decided to maintain rates near zero until 2023, at least. Moreover, the central bank has raised its economic growth outlook considering the vaccine and stimulus optimism and it also expects higher inflation this year.
The Fed’s projections for core inflation as measured by personal consumption expenditures are 2.2% for 2021, 2% for 2022 and 2.1% for 2023 along with the longer-run measure at 2%.
Along with the Fed, several other central banks have implemented easy monetary policy. This should boost inflation in the near-term and favor gold investing.
Gold ETFs to Consider
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.
Also, analysts at the Morgan Stanley expect the yellow metal to maintain prices above $1,700 an ounce through the second half of the year, as mentioned in 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 $60.65 billion and three-months average trading volume of about 8.9 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: 5 Best Leveraged ETF Areas of Last Week).
IAU
This ETF offers exposure to the day-to-day movement of the price of gold bullion. It has AUM of $29.34 billion and trades in average three-months volume of 22.9 million shares. 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: ETF Strategies to Combat Aggravating Coronavirus Pandemic).
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 $4.42 billion in AUM and trades in average three-months volume of 2.5 million shares. At launch, each share of this ETF represented about 1/100th of an ounce of gold (read: Can Gold ETFs Gain in 2021 After Two Positive Years?).
BAR
With AUM of $1.11 billion and an expense ratio of 0.17%, the fund tracks the performance of gold price less trust expenses. It trades in three-months average trading volume of 368,000 shares. At launch, each share of this ETF represented about 1/100th of an ounce of gold (see: all the Precious Metal ETFs here).
Want key ETF info delivered straight to your inbox?
Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week. Get it free >>