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After making small gains in the first quarter, gold is set to shine in the coming months buoyed by dovish central banks, a slowdown in economic growth and geopolitical tensions.
The latest Fed minutes revealed that the central bank will be patient on rising interest rates this year, citing uneasiness over the U.S. and global economies, subdued inflation, and the messy attempt by the U.K. to leave the European Union. Lower interest rates will continue to weigh on the dollar against the basket of currencies, raising the yellow metal’s attractiveness as it does not pay interest like fixed-income assets. The European Central Bank also plans to maintain its rates in the wake of a slowing economy.
Though hopes of a U.S.-China trade deal has bolstered investors’ risk appetite, it also led to speculation of higher gold demand from China and have fueled strong optimism in the gold bullion market. Further, the cut in global growth outlook by the International Monetary Fund (IMF) as well as fresh round of U.S.-EU tariff threat compelled investors to take flight to safety lately (read: Profit From These ETFs if Market Turmoil Heightens).
The IMF warned that global growth is slowing more than expected and thus reduced the growth outlook to 3.3% for this year, down 0.2 percentage points from the previous expectation. This is the third cut since October and marks the slowest expansion since 2016. Meanwhile, Trump threatened to slap tariff on European goods worth $11 billion, escalating global trade war fears.
Moreover, declining earnings trends bolstered optimism in the gold outlook as first-quarter earnings are expected to turn negative for the first time since the second quarter of 2016. S&P 500 earnings are expected to decline 4% from the same period last year despite 4.6% higher revenues and net margins are also likely to witness 100 basis points compression, per Earnings Trends (read: Beat Q1 Earnings Woes With These Sector ETFs & Stocks).
If these weren’t enough, central banks across the globe have been on the best gold-buying spree in a half century, thereby resulting in a higher price of the metal. The trend of central banks accumulating bullion and increasing their gold reserves doesn’t seem to stop anytime soon as countries are seeking to reduce their dependence on the U.S. dollar. In particular, China's central bank increased its gold reserves for the fourth consecutive month in March.
The combination of these factors will support the bullish sentiment for gold and continue to boost to prices in the months ahead. Given this, we highlight six popular gold ETFs that could be excellent plays for investors who believe that the gold bullion will continue to move higher. All these funds are up nearly 2% so far this year and has a Zacks ETF Rank #3 (Hold).
This is the largest and most-popular ETF in the gold space with AUM of $31.7 billion and average daily volume of around 8.8 million shares. The fund tracks the price of gold bullion measured in U.S. dollars, and kept in London under the custody of HSBC Bank USA. Expense ratio comes in at 0.40%.
This ETF offers exposure to the day-to-day movement of the price of gold bullion and is backed by physical gold under the custody of JP Morgan Chase Bank in London. It has AUM of $12.7 billion and trades in solid volume of 14.2 million shares a day on average. The ETF charges 25 bps in annual fees (read: Will the Rally in Gold ETFs Continue?).
This product also tracks the price of gold bullion and is backed by physical bullion under the custody of JPMorgan Chase Bank. It has amassed $885.5 million in its asset base and trades in lower volume of 48,000 shares per day. The product has an expense ratio of 0.17%.
This product seeks to reflect the performance of the price of gold bullion. With an expense ratio of just 0.18%, GLDM has gathered $658.4 million in AUM within 10 months of debut while trading in solid average daily volume of 673,000 shares (read: 4 Commodity ETFs to Tap at New Highs).
With AUM of $467 million and expense ratio of 0.17%, the fund tracks the performance of gold price. It trades in good volume of 251,000 shares per day on average (see: all the Precious Metals ETFs here).
This product seeks to provide investors with a convenient and cost-efficient way to buy and hold gold through an exchange-traded product with the option to take physical delivery of gold. It charges 40 bps in fees per year and has AUM of $151.4 million. OUNZ trades in average daily volume of 48,000 shares.
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Here's Why Gold ETFs Are Set to Shine
After making small gains in the first quarter, gold is set to shine in the coming months buoyed by dovish central banks, a slowdown in economic growth and geopolitical tensions.
The latest Fed minutes revealed that the central bank will be patient on rising interest rates this year, citing uneasiness over the U.S. and global economies, subdued inflation, and the messy attempt by the U.K. to leave the European Union. Lower interest rates will continue to weigh on the dollar against the basket of currencies, raising the yellow metal’s attractiveness as it does not pay interest like fixed-income assets. The European Central Bank also plans to maintain its rates in the wake of a slowing economy.
Though hopes of a U.S.-China trade deal has bolstered investors’ risk appetite, it also led to speculation of higher gold demand from China and have fueled strong optimism in the gold bullion market. Further, the cut in global growth outlook by the International Monetary Fund (IMF) as well as fresh round of U.S.-EU tariff threat compelled investors to take flight to safety lately (read: Profit From These ETFs if Market Turmoil Heightens).
The IMF warned that global growth is slowing more than expected and thus reduced the growth outlook to 3.3% for this year, down 0.2 percentage points from the previous expectation. This is the third cut since October and marks the slowest expansion since 2016. Meanwhile, Trump threatened to slap tariff on European goods worth $11 billion, escalating global trade war fears.
Moreover, declining earnings trends bolstered optimism in the gold outlook as first-quarter earnings are expected to turn negative for the first time since the second quarter of 2016. S&P 500 earnings are expected to decline 4% from the same period last year despite 4.6% higher revenues and net margins are also likely to witness 100 basis points compression, per Earnings Trends (read: Beat Q1 Earnings Woes With These Sector ETFs & Stocks).
If these weren’t enough, central banks across the globe have been on the best gold-buying spree in a half century, thereby resulting in a higher price of the metal. The trend of central banks accumulating bullion and increasing their gold reserves doesn’t seem to stop anytime soon as countries are seeking to reduce their dependence on the U.S. dollar. In particular, China's central bank increased its gold reserves for the fourth consecutive month in March.
The combination of these factors will support the bullish sentiment for gold and continue to boost to prices in the months ahead. Given this, we highlight six popular gold ETFs that could be excellent plays for investors who believe that the gold bullion will continue to move higher. All these funds are up nearly 2% so far this year and has a Zacks ETF Rank #3 (Hold).
SPDR Gold Trust ETF (GLD - Free Report)
This is the largest and most-popular ETF in the gold space with AUM of $31.7 billion and average daily volume of around 8.8 million shares. The fund tracks the price of gold bullion measured in U.S. dollars, and kept in London under the custody of HSBC Bank USA. Expense ratio comes in at 0.40%.
iShares Gold Trust (IAU - Free Report)
This ETF offers exposure to the day-to-day movement of the price of gold bullion and is backed by physical gold under the custody of JP Morgan Chase Bank in London. It has AUM of $12.7 billion and trades in solid volume of 14.2 million shares a day on average. The ETF charges 25 bps in annual fees (read: Will the Rally in Gold ETFs Continue?).
Aberdeen Standard Physical Swiss Gold Shares ETF (SGOL - Free Report)
This product also tracks the price of gold bullion and is backed by physical bullion under the custody of JPMorgan Chase Bank. It has amassed $885.5 million in its asset base and trades in lower volume of 48,000 shares per day. The product has an expense ratio of 0.17%.
SPDR Gold MiniShares Trust (GLDM - Free Report)
This product seeks to reflect the performance of the price of gold bullion. With an expense ratio of just 0.18%, GLDM has gathered $658.4 million in AUM within 10 months of debut while trading in solid average daily volume of 673,000 shares (read: 4 Commodity ETFs to Tap at New Highs).
GraniteShares Gold Trust (BAR - Free Report)
With AUM of $467 million and expense ratio of 0.17%, the fund tracks the performance of gold price. It trades in good volume of 251,000 shares per day on average (see: all the Precious Metals ETFs here).
VanEck Merk Gold Trust (OUNZ - Free Report)
This product seeks to provide investors with a convenient and cost-efficient way to buy and hold gold through an exchange-traded product with the option to take physical delivery of gold. It charges 40 bps in fees per year and has AUM of $151.4 million. OUNZ trades in average daily volume of 48,000 shares.
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 >>