ETF Spotlight on PowerShares DB Gold (NYSEArca: DGL), part of a weekly series.
Assets: $155.1 million
Objective: Seeks to track the price and yield performance of the Deutsche Bank Liquid Commodity Index – Optimum Yield Gold Excess Return Index.
Holdings: DGL holds gold futures contracts
What You Should Know
- Funds that trade futures contracts can be negatively impacted by contango, when the spot price is lower than the future price. Since DGL follows the Optimum Yield version of the index, it replaces expiring futures with new contracts in the month that will generate the highest “implied roll yield,” which ultimately helps mitigate this effect. [Contango and ETFs.]
- Funds that trade futures contracts generate K-1s at tax time. [How Commodity ETFs Are Taxed.]
- This is the only ETF that holds futures contracts on gold – the others hold gold miner stocks or physical bullion. [Coming Soon: Tax-Efficient Commodity ETFs.]
- DGL has a 0.75% expense ratio, making it one of the more expensive gold-focused ETFs.
The Latest News
- Gold has been making headlines lately, thanks to a widening fiscal crisis in Europe and market volatility in the United States.
- Futures contracts today are trading around $1,233.40, close to all-time records for gold.
- Gold is also benefiting from a wide range of appeal: it has industrial uses, safe-haven appeal and it’s viewed as an effective hedge in inflationary periods. [5 Things to Consider When Buying a Gold ETF.]
For past ETF Spotlights, visit our ETF Spotlight page.
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.