Rethinking Gold ETFs

Many investors have given up on the idea that gold merits consideration in their portfolios due to years of depreciation in the dollar price of the yellow metal. For one thing, the SPDR Gold Trust (GLD) is still reeling from 35% bear market losses since the heyday of 2011’s euro-zone crisis. Similarly, sharp increases in the value of GLD shares at the start of 2014 and 2015 were both met with vicious selling pressure and, eventually, more declines.

Perhaps ironically, investors who lack trust in European banks have not given up on gold entirely. In fact, over the last six months, gold denominated in euros has catapulted nearly 16%. Investors interested in capturing the uptrend that began with the official announcement of European quantitative easing (QE) may want to look at the AdvisorShares Gartman Gold/Euro ETF (GEUR). Note: The average daily dollar volume of $550,000 may be a turn-off for more active traders.

Gold In Euros

Yet before one gives up entirely on the prospect of owning gold in dollars via GLD, consider what negative bond yields in Europe are communicating. The markets, albeit manipulated by central bank intervention, guarantee that you will lose money by holding 5-year German or 5-year Swiss government bonds to maturity. The yields are -0.15% and -0.45% respectively. On the other hand, holding an instrument with a negligible loss might be a viable method for avoiding a fragile banking system.