Consequently, if an investor is concerned about the markets and wants an alternative asset that provides a lower correlation to traditional stocks and bonds to hedge a portfolio, one can take a look at gold ETFs that are physically backed by gold bullion stored in bank vaults.
For starters, the SPDR Gold Shares (NYSEArca: GLD), the world’s largest ETF backed by physical holdings of gold, has been a go-to option for large traders, hedge funds and institutional investors seeking to capitalize on its large pool of liquidity and tight bid-ask spreads. GLD has almost $33.0 billion in assets under management, an average volume of 7.1 million shares and a 0.40% expense ratio.
Similarly, the iShares Gold Trust (NYSEArca: IAU) is another large option with a lot of active trading. IAU has $7.8 billion in assets under management and an average volume of 5.2 million shares. Additionally, IAU is the cheapest of the gold ETF options with a 0.25% expense ratio.
Consequently, individual retail investors who do not need to move millions of dollars of gold but rather sit on to their gold exposure may find IAU a cheap buy-and-hold option. Something like GLD would be a better play for large institutional-sized traders who may execute huge trades due to the fund’s tight spreads and activity.
Alternatively, since IAU and GLD shares are backed by gold stored in London vaults, investors can take a look at the ETFS Physical Swiss Gold Shares (NYSEArca: SGOL) to diversify gold exposure. If something were to happen in London that could affect the gold stored there, SGOL investors will be relieved to know that their gold exposure is stored in Swiss vaults. SGOL has $982.6 million in AUM, a lower average volume of 31,000 and a 0.39% expense ratio.
Additionally, unlike other gold ETFs, the Van Eck Merk Gold Trust (NYSEArca: OUNZ), a relatively new player in the gold space, allows investors to take physical delivery of gold bullion for shares of OUNZ, but potential gold share converters should be aware that fees for physical delivery are significant. OUNZ has $100.3 million in AUM, an average volume of 42,000 and a 0.40% expense ratio. [Merk Gold Trust Makes First Delivery]