Can Gold Fund Reclaim Title of World’s Largest ETF?

January 5th at 2:16pm by Tom Lydon

An exchange traded fund that holds gold bullion briefly wrestled away the title of the world’s largest ETF over the summer, before falling prices and investor outflows cut into the fund’s assets under management.

In August, SPDR Gold Shares (NYSEArca: GLD) surpassed SPDR S&P 500 (NYSEArca: SPY) as the biggest ETF by assets, with both funds holding over $70 billion at that time. [ETF Spotlight: SPDR Gold Shares (GLD) Becomes the Largest ETF]

Currently, the gold ETF houses about $64.5 billion in assets, compared with $97 billion in the S&P 500 ETF, which is back in the top slot. The stock fund is the oldest U.S.-listed ETF, having launched in early 1993.

For the gold ETF to retake the title, it will need a rebound in gold prices and renewed investor interest.

Gold prices, along with ETFs that track them, hit record highs in 2011 as safe-haven investors flocked to the precious metal in the late summer months when the markets were at their most volatile. While gold has been losing strength since reaching its lofty highs, some analysts say the fundamental factors backing the precious metal remain strong. [Can Gold ETFs Push to a New Record High in 2012?]

Goldman Sachs projects gold prices will end the year at $1,940 an ounce, or a little higher than the $1,925.10 high in early September 2011, reports Mike Obel for the International Business Times.

Separately, Deustche Bank told its clients that markets in the middle of a commodity super-cycle and gold prices will continue to draw support from negative real interest rates. [Gold ETFs Try to Regain 200-Day Average]

“Our strongest conviction trade remains long precious metals and specifically gold,” Deutsche Bank wrote in a recent note. “In an environment where real interest rates are negative and the U.S. equity risk premium is high we expect this will sustain strong private and public sector demand for gold.”

In other Wall Street research, Barclays does not think the gold market has reached bubble status yet and also expects higher physical investment demand going into 2012.

“Our strongest conviction trade remains long precious metals and specifically gold,” Barclays sad in a research note, according to the report. “According to the measures we employ, gold would need to move above $2,170 per ounce for prices to be considered extreme and for the market to start displaying bubble characteristics.”

According to CIBC’s Barry Cooper, Managing Director of Institutional Equity Research, gold will hit $2,000 this year and $2,200 in 2013. Cooper cites positive fundamental factors, including lower global supply, high investment demand, central banks exhibiting higher demand for physical gold, low interest rates, uncertain economic outlook and strong jewelry demand from China and other Eastern countries. [Gold, Silver ETFs Rise Late as Bargain Hunters Pounce]

SPDR Gold Shares


For more information on gold, visit our gold category.

Max Chen contributed to this article.

Full disclosure: Tom Lydon’s clients own GLD.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.

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