A return to a risk-on sentiment helped to fuel a sell-off in gold, but as selling pressure begins to subside, look for investors to come back to the precious metal. ETF investors looking for gold exposure should consider the iShares Gold Trust (IAU).

Generally, IAU seeks to reflect the performance of the price of gold. The Trust seeks to reflect such performance before payment of the Trust’s expenses and liabilities.

The Trust does not engage in any activities designed to obtain a profit from, or to ameliorate losses caused by, changes in the price of gold. The advisor intends to constitute a simple and cost-effective means of making an investment similar to an investment in gold. An investment in physical gold requires expensive and sometimes complicated arrangements in connection with the assay, transportation, warehousing, and insurance of the metal.

Per the fund’s website, IAU provides investors with:

  1. Exposure to the day-to-day movement of the price of gold bullion
  2. Convenient, cost-effective access to physical gold
  3. Use to diversify your portfolio and help protect against inflation

Despite the recent weakness in gold, IAU is still up 16% within the past year. The fund comes with an expense ratio of 0.25%, which is 18 basis points below its category average.

IAU Chart

Why Are Equity Markets Weighing On Gold?

Last week, the U.S. Federal Reserve decided to keep interest rates static for the time being, which should have kept the dollar at bay. However, the greenback is rallying thanks to strength in the equities market — a major factor for gold prices moving forward.

“Gold prices are slightly higher and silver is posting good gains in midday U.S. trading Wednesday, on upside corrections from Tuesday’s selling pressure,” a Kitco News article said. “Rallying global equity markets this week are still a bearish weight on the safe-haven metals. April gold futures were last up $1.30 at $1,834.70 and March Comex silver was last up $0.558 at $26.96 an ounce.”

“Global stock markets were mostly firmer overnight,” the article added further. “U.S. stock indexes are mostly firmer at midday. The U.S. indexes have made strong recoveries after the recent declines. Stock index prices are back near their recent record highs. Risk appetites are more upbeat this week amid generally good corporate earnings reports and ideas Americans will soon get another stimulus package from the government, along with a boost in federal spending in areas such as infrastructure.”

For more news and information, visit the Equity ETF Channel.