Gold enthusiasts have found their way to the SPDR Gold Trust (NYSEArca: GLD), the largest gold exchange traded fund and second largest U.S.-listed ETF, as the unprecedented string of Fed and central bank policies have stoked fears of inflation and currency depreciation. However, there are other ways to gain exposure to gold with exchange traded products.
In 2010, the ETF attracted $5.8 billion in assets, but investors, most likely institutions, pulled $534 million in 2011, writes Jared Cummans for Commodity HQ. So far this year, GLD has added another $4.3 billion after gold dipped to $1,550 an ounce. [Gold ETF Ranks Between China and France in Bullion Holdings]
Nevertheless, investors have many options to choose from in gold ETFs and exchange traded notes. Cummans outlines different ways to play gold, which has weakened in October to around $1,700 an ounce.
The iShares Gold Trust (NYSEArca: IAU), ETFS Physical Asian Gold Shares (NYSEArca: AGOL) and ETFS Physical Swiss Gold Shares (NYSEArca: SGOL) are also physically backed by gold. AGOL stores its gold holdings in Singapore while SGOL stores gold in its Swiss vaults. IAU has a 0.25% expense ratio, and AGOL and SGOL both have a 0.39% expense ratio, compared to GLD’s 0.40% expense ratio.
Also, Market Vectors Gold Miners (NYSEArca: GDX) tracks gold miners and producers. Consequently, the fund should be more volatile as it is still an equity play. The underlying holdings are exposed to foreign assets, with Canada as the largest regional allocation.
The PowerShares DB Gold Fund (NYSEArca: DGL) invests in gold futures contracts. DGL follows a so-called optimum yield index designed to minimize the negative effects of roll yield when a market is in “contango” and maximize the positive effects when a market is “backwardated,” a company spokesman said. Essentially the fund looks out 13 months to select the best contracts in an effort to fight the corrosive effects of contango, when longer-dated futures contracts are more expensive than the commodity’s spot price.
The Gold Trendpilot ETN (NYSEArca: TBAR) holds gold bullion but also follows a trend following strategy. When the price of gold is above its 200-day simple moving average for at least five consecutive sessions, TBAR buys more gold. On the other hand, if it is bellow the trend line, TBAR switches to 3-month Treasury bills. When the underlying index is invested in gold, the expense ratio is 1.0%, and when it is invested in cash, it has a 0.50% fee.
The UBS E-TRACS S&P 500 Gold Hedged ETN (NYSEArca: SPGH) is long the S&P 500 and hedges against dollar changes with gold futures. The ETN will usually outperform an unhedged S&P 500 when gold prices appreciate relative to the dollar.
For more information on gold, visit our gold category.
Max Chen contributed to this article.
Full disclosure: Tom Lydon’s clients own GLD.
Story updated to correct the investment strategy of PowerShares DB Gold Fund (DGL).