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Gold has been on a surge in recent months and hits a record high of above $2,100 per ounce. Bets on the Fed rate hike end, a dip in bond yields, a weaker U.S. dollar and elevated geopolitical risk have led to a global rush for the bullion.
Federal Reserve Chair, Jerome Powell, in his latest comments, increased traders’ confidence that the central bank had completed its monetary policy tightening and could cut rates starting March. According to CME’s FedWatch tool, traders are now pricing in a 70% chance for a rate cut by the U.S. central bank by next March. 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.
The dollar index, which measures the value against six major currencies, wrapped up the worst month in a year, losing 3.7% last month. A weak dollar makes bullion cheaper for overseas buyers, thereby driving the gold price higher. Additionally, 10-year Treasury yields hit a two-and-a-half-month low, boosting bullion’s appeal (read: Gold ETFs Rebound: Can the Momentum Continue?).
Further, investors have flocked into safe-haven buying when the Israel-Hamas war started. 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.
Notably, bullion has risen around 15% from a low in early October. The solid trend is likely to continue, at least for the short term, with analysts expecting further gains in the months ahead.
Ways to Play
Given the optimism, investors have a long list of options to tap into 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 an AUM of $57.7 billion and an average daily volume of around 8 million shares. The fund tracks the price of gold bullion measured in U.S. dollars and has an expense ratio of 0.40% (read: 5 ETFs That Gained Most Investors' Love Last Week).
iShares Gold Trust (IAU - Free Report) ): This ETF offers exposure to the day-to-day movement of the price of gold bullion. It has an AUM of $26 billion and trades in a solid volume of 6 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 $6 billion in AUM and trades in a solid average daily volume of 1.7 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 an AUM of $13.2 billion and an average daily volume of around 23 million shares. The fund follows the NYSE Arca Gold Miners Index, holding 51 stocks in its basket. Canadian firms account for about 42% of the portfolio, while the United States (19.1%) and Australia (10.8%) 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 94 stocks in its basket, Canadian firms dominate the fund’s portfolio at 55.1%, while Australia (18.6%) round out the top two. VanEck Vectors Junior Gold Miners ETF has an AUM of $4.4 billion and charges 52 bps in annual fees. It trades in a heavy volume of 7.4 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 39 securities in its portfolio. Canadian firms take half of the portfolio, whereas the United States takes the next spot at 21.2% 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 $427.6 million and trades in a good volume of 83,000 shares per day.
Leveraged Gold ETFs
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 $184.2 million in its asset base. Volume is good at about 119,000 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 $83.4 million in its asset base so far and trades in an average daily volume of 4,000 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 87 bps in annual fees and has gathered $569.5 million in its asset base. Volume is heavy, with around 3 million shares exchanged per day, on average.
Direxion Daily Junior Gold Miners Index Bull 2x Shares (JNUG): 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 $308 million in its asset base. Volume is heavy, exchanging about 2 million shares per day on average.
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Gold Tops $2,100: Here's How to Bet With ETFs
Gold has been on a surge in recent months and hits a record high of above $2,100 per ounce. Bets on the Fed rate hike end, a dip in bond yields, a weaker U.S. dollar and elevated geopolitical risk have led to a global rush for the bullion.
Federal Reserve Chair, Jerome Powell, in his latest comments, increased traders’ confidence that the central bank had completed its monetary policy tightening and could cut rates starting March. According to CME’s FedWatch tool, traders are now pricing in a 70% chance for a rate cut by the U.S. central bank by next March. 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.
The dollar index, which measures the value against six major currencies, wrapped up the worst month in a year, losing 3.7% last month. A weak dollar makes bullion cheaper for overseas buyers, thereby driving the gold price higher. Additionally, 10-year Treasury yields hit a two-and-a-half-month low, boosting bullion’s appeal (read: Gold ETFs Rebound: Can the Momentum Continue?).
Further, investors have flocked into safe-haven buying when the Israel-Hamas war started. 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.
Notably, bullion has risen around 15% from a low in early October. The solid trend is likely to continue, at least for the short term, with analysts expecting further gains in the months ahead.
Ways to Play
Given the optimism, investors have a long list of options to tap into 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 an AUM of $57.7 billion and an average daily volume of around 8 million shares. The fund tracks the price of gold bullion measured in U.S. dollars and has an expense ratio of 0.40% (read: 5 ETFs That Gained Most Investors' Love Last Week).
iShares Gold Trust (IAU - Free Report) ): This ETF offers exposure to the day-to-day movement of the price of gold bullion. It has an AUM of $26 billion and trades in a solid volume of 6 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 $6 billion in AUM and trades in a solid average daily volume of 1.7 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 an AUM of $13.2 billion and an average daily volume of around 23 million shares. The fund follows the NYSE Arca Gold Miners Index, holding 51 stocks in its basket. Canadian firms account for about 42% of the portfolio, while the United States (19.1%) and Australia (10.8%) 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 94 stocks in its basket, Canadian firms dominate the fund’s portfolio at 55.1%, while Australia (18.6%) round out the top two. VanEck Vectors Junior Gold Miners ETF has an AUM of $4.4 billion and charges 52 bps in annual fees. It trades in a heavy volume of 7.4 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 39 securities in its portfolio. Canadian firms take half of the portfolio, whereas the United States takes the next spot at 21.2% 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 $427.6 million and trades in a good volume of 83,000 shares per day.
Leveraged Gold ETFs
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 $184.2 million in its asset base. Volume is good at about 119,000 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 $83.4 million in its asset base so far and trades in an average daily volume of 4,000 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 87 bps in annual fees and has gathered $569.5 million in its asset base. Volume is heavy, with around 3 million shares exchanged per day, on average.
Direxion Daily Junior Gold Miners Index Bull 2x Shares (JNUG): 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 $308 million in its asset base. Volume is heavy, exchanging about 2 million shares per day on average.