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Why Investors Are Flocking to Gold ETFs

Neena Mishra
Updated ·2-min read

Gold prices are up about 10% this year and are close to their record levels from August 2020. The gains last month were largely driven by fears that a banking crisis could push the global economy into recession.

Hopes that the Federal Reserve would pause or cut interest rates this year, thanks to cooling inflation, have sent yields lower and weakened the dollar, boosting gold’s appeal.

Lower interest rates reduce the opportunity cost of owning gold, as it doesn’t yield any income. A weaker dollar makes gold prices more attractive to consumers in emerging markets like India and China, which are the world’s top gold consumers.

Gold purchases by central banks have soared in recent years, and this trend is expected to continue. Global central banks have reported net purchases of 125 tons of the precious metal in January and February, according to the World Gold Council, making it the strongest start to a year since 2010.

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I believe that gold should be a small part of any investment portfolio, mainly due to its low correlation with other asset classes. Physically backed gold ETFs provide low-cost, convenient exposure to the metal.

The SPDR Gold Trust GLD is the largest and most liquid gold ETF. Each share of this ETF represents about 1/10th of an ounce of gold. It has an expense ratio of 0.40%.

In 2018, State Street launched a cheaper version of GLD—the SPDR Gold MiniShares Trust  GLDM — with an expense ratio of 0.10%. Each shares of GLDM represents about 1/50th of an ounce of gold.

The iShares Gold Trust Micro IAUM with a per-share trading price of about 1/100th of an ounce of gold, is now the cheapest gold ETF. Its expense ratio is 0.09%.

Please watch the short video to learn more.

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SPDR Gold Shares (GLD): ETF Research Reports

SPDR Gold MiniShares Trust (GLDM): ETF Research Reports

iShares Gold Trust Micro (IAUM): ETF Research Reports

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Zacks Investment Research