Gold’s Winning Streak: Navigating Your ETF Options
Gold is extending its winning streak to a seven-week high near $4,300 per ounce, driven by geopolitical developments, a sliding dollar, and shifting Federal Reserve rate expectations. Despite recent gains, gold still trades over 20% below its record high of $5,589 per ounce in late January, according to CNBC analysis.
Key Takeaways
- Gold was recently at seven-week highs near $4,300 per ounce. Driving factors include the weakening dollar, geopolitical developments, and shifting Federal Reserve rate expectations.
- The SPDR Gold Shares (GLD) and SPDR Gold Minishares Trust (GLDM) offer direct exposure to spot gold prices. GLD is best utilized by active traders, while GLDM provides a lower-cost option for long-term investors.
- The VanEck Gold Miners ETF (GDX) provides market-cap weighted exposure to the largest global gold miners, while the Sprott Active Gold & Silver Miners ETF (GBUG) offers an actively managed approach to the gold and silver mining sector.
Investing in Spot Gold
The simplest way to play this momentum is through physically backed spot ETFs, which track gold prices directly without equity risk. With an expense ratio of 40 basis points, the SPDR Gold Shares (GLD) provides direct exposure to spot gold prices. Each share of GLD represents roughly one-tenth of an ounce of gold. Custodian banks HSBC and JPMorgan store the physical gold in London vaults. GLD holds $130.64 billion in assets with massive daily volume and deep options trading. This makes it ideal for active traders prioritizing liquidity over holding costs.
While GLD dominates short-term trading, its higher expense ratio can drag on long-term portfolio returns. The SPDR Gold Minishares Trust (GLDM) offers a cheaper alternative with a 10 basis point expense ratio. GLDM provides exposure to the same physical gold as GLD without the high daily trading volume and deep options market. Each GLDM share represents approximately 1/100th of an ounce of gold, resulting in a much lower share price than GLD. With $27.90 billion in assets, the fun is ideal for long-term investors looking to minimize holding cost.
See More: VIDEO: ETF of the Week: GLDM
Expanding Exposure With Precious Metal Miners
For investors looking to broaden their precious metal allocations beyond spot price exposure, gold miner ETFs offer equity-driven upside. High fixed operating costs mean that spot gold price changes directly impact miners’ profit margins. The VanEck Gold Miners ETF (GDX) provides market-cap weighted exposure to the largest gold mining companies globally by tracking the MarketVector Global Gold Miners Index. The fund’s top holdings include Newmont Corporation (NEM) at a 10.48% weight and Agnico Eagle Mines (AEM) at a 10.25% weight. GDX currently has $23.66 billion in total assets and charges an expense ratio of 51 basis points.
The Sprott Active Gold & Silver Miners ETF (GBUG) provides actively managed exposure to companies involved in the exploring, developing, mining, and financing of gold and silver assets. GBUG requires holdings to derive at least half their revenue or assets from gold and silver extraction. GBUG serves as the only active ETF focused on providing exposure to gold and silver miners. Some of the top holdings in GBUG include Coeur Mining (CDE) at a 3.67% weight and Eldorado Gold (EGO) at a 3.62% weight. The fund carries an expense ratio of 90 basis points with $148.2 million in assets under management.
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