With the return of geopolitical tension, gold price spiked to the highest level in nearly seven years. This is especially true as a U.S. drone strike in Iraq that has killed Iranian General Qassem Soleimani has ratcheted up tensions between Washington and Tehran leading to investors’ flight to safety.
Following the attack, Iran’s President Hassan Rouhani said it would no longer abide by any limits on its enrichment of uranium and Iraq’s parliament voted to expel U.S. troops from the country. On the other hand, President Donald Trump threatened Tehran that America will hit Iran "harder than they have ever been hit before" if it carried out retaliatory attacks or expelled U.S. troops from the country. The move has sparked fears of broader conflicts (read: Iraq Attack: Sector ETF Winners and Losers).
Against this backdrop, gold is considered a great store of value and hedge against market turmoil.
Apart from geopolitics, the latest economic data has made investors’ jittery. The U.S. manufacturing sector fell into its deepest slump in more than a decade in December due to tit-for-tat tariffs in U.S.-China trade war though the long-awaited Phase 1 deal between Washington and Beijing could limit further downside.
With this, the yellow metal has entered 2020 with strong momentum and is building on the largest annual gain in almost a decade, which was driven by a weaker dollar, lower interest rates and trade war fears. The central banks across the globe have been on a monetary easing spree that is boosting demand for the yellow metal. The Fed slashed interest rates three times last year and the European Central Bank also cut interest rates in a package of easing measures. Lower rates will continue to weigh on the dollar against the basket of currencies, raising the metal’s attractiveness as it does not pay interest like fixed-income assets.
ETFs to Tap
Given this, investors could tap the rise in bullion price with the help of ETFs. We have highlighted five gold ETFs that could be excellent plays for investors, who believe that gold will continue to move higher amid rocky fundamentals (see: all the Precious Metals ETFs here).
SPDR Gold Trust ETF (GLD - Free Report)
This is the largest and most-popular ETF in the gold space with AUM of $44.6 billion and average daily volume of around 9.5 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%. The fund has a Zacks ETF Rank #3 (Hold) with a Medium risk outlook (read: Gold to Shine in 2020: ETFs to Consider).
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 $18 billion and trades in solid volume of 20 million shares a day on average. The ETF charges 25 bps in annual fees and has a Zacks ETF Rank #3 with a Medium risk outlook.
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 $1.3 billion in its asset base and trades in a solid volume of 864,000 shares per day. The product has an expense ratio of 0.17% and a Zacks ETF Rank #3 with a Medium risk outlook.
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 expense ratio of just 0.18%, GLDM has gathered $1.1 billion in AUM and trades in solid average daily volume of 1.2 million shares. It has a Zacks ETF Rank #3 (read: Best ETF Strategies for 2020).
GraniteShares Gold Trust (BAR - Free Report)
With AUM of $602.9 million and expense ratio of 0.17%, the fund tracks the performance of gold price. It trades in a moderate volume of 184,000 shares per day on average and has a Zacks ETF Rank #3.
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