Exchange traded funds (ETFs) are cheap, but that doesn’t mean they’re not getting cheaper. One gold fund provider is engaging in a good old-fashioned price war to entice gold traders to its side of the camp, and it appears to be working.
On July 1, BlackRock lowered the annual expenses on its gold ETF the iShares Comex Gold Trust ETF (NYSEArca: IAU) to 0.25% from 0.40%, writes William Baldwin for Forbes. Market leader in gold ETFs, State Street-managed SPDR Gold Shares ETF (NYSEArca: GLD) is maintaining its 0.40% expense ratio. [ETF Trends Podcast: All You Need to Know About Metals ETFs.]
IAU ended the month of July with a gain of 4 metric tons of gold, to 90 tons. As more people buy the gold ETF, brokerage firms need to create more shares by acquiring more of the physical metal. GLD, on the other hand, lost 19 tons, but still maintains around 1,282 tons. After the splitting its stock and lowering fees, IAU is now experiencing a 50% boost in daily trading volume.
The lower fees only benefit long-term buy-and-hold investors. For the short-term trader, both funds have high liquidity, which provide trades with bid/ask spreads that are often only a penny a share.
ETF Securities offers the ETF ETFS Gold Trust (NYSEArca: SGOL), which stores gold in Switzerland as compared to other funds with gold stored in New York, London and Toronto. SGOL has an expense ratio of 0.39%.
Gold hovers around $1,170 an ounce on the Comex, gaining as equities turned lower and the dollar remained weak, report Claudia Assis and April H. Lee for MarketWatch. However, Kitco Metals analyst Jon Nadler believes that the gold traders are reducing holdings of gold and related ETFs as the eurozone situation stabilizes. Leonard Kaplan, president of Prospector Asset Management, comments that gold supply is high and jewelry demand is large absent. [Why Gold ETFs Are Declining.]
For more information on gold, visit our gold category.
Max Chen contributed to this article.
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.