Gold ETFs, including the SPDR Gold Shares (NYSEArca: GLD), the iShares Gold Trust (NYSEARCA: IAU) and the SPDR Gold MiniShares (NYSEArca: GLDM), have pulled back in recent days as market participants have revisited riskier assets, including equities.
However, data suggest some investors remain fond of bullion and the related low-cost ETFs, even if that fondness is merely for small portfolio allocations.
Gold ETFs previously rallied amid increased expectations of a U.S. rate cut, even as some investors locked in profits from bullion’s recent rally. Gold is believed by many investors to be inversely correlated with interest rates. Rising interest rates make bonds and other fixed-income investments more attractive so that the money will flow into higher-yielding investments, such as bonds and money market funds, and out of gold, which offers no yield at all during times of higher interest rates, and back into gold ETFs.
“The World Gold Council (WGC) on Tuesday launched a new consumer research report highlighting opportunities for gold for those working in both retail investment and jewelry markets,” reports Jackson Chen for Mining.com. “Based on feedback from a survey of 18,000 people, the research looks at a range of markets including China, India, North America, Germany and Russia, and highlights insights into attitudes towards gold around the world: How and why people buy gold, and also their reasons for not buying.”
Going With GLDM
GLDM, which launched last year as a cost-effective alternative to GLD, has rapidly become a favorite of cost-conscious retail investors. The ETF, which charges just 0.18% per year, recently topped $1 billion in assets under management. GLDM is 22 basis points cheaper than GLD on an annual basis and less expensive than IAU, too.
Investors rushing to GLD, GLDM and related ETFs as a quick and easy way to gain exposure to gold price movements as they hedge against market risks, help protect their purchasing power in times of inflationary pressures or capitalize on increasing demand from the emerging markets with a growing middle-income class.
The WGC “report states that more than a third (38%) of retail investors and fashion enthusiasts that have never bought gold in the past are warming up to the idea. This shows big potential – according to the WGC – for the gold market to grow if untapped sources of demand can be converted,” according to Mining.com.
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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.