There are 8 ETFs focused on Gold Miner Equities. Due to an average weighted expense ratio of 0.51%, these ETFs represent only 24% of the revenue as it is only 20% of the assets. Although the 7 ETFs include multiple different subsets like junior miners and explorers, almost 65% of the assets are concentrated in GDX from Van Eck. The most surprising statistic for this group is the average 3-month trading volume; the miners have traded more than double the volume of Direct Gold ETPs. The interesting newcomer in this bunch is GOAU from US Global Investors, which focuses on the gold royalty miners.
The final category, Leveraged/Inverse/Options, is full of surprises. They represent the most products, but the least amount in terms of assets, revenue, and, shockingly, the lowest volume!! At an average weighted expense ratio of 0.92%, they are by far the most expensive gold ETPs. This group includes leveraged and inverse version of gold and gold miners. We also included in this group three very interesting gold derivative plays. First, we have written in the past about gold with income from GLDI, an ETN from Credit Suisse that uses a gold buy-write strategy to distribute option premium. Second, GHS from Rex ETFs, which provides 100% exposure to Gold and 100% exposure to the S&P 500 per share through a unique application of leverage. And third, GLDW from State Street, which uses futures to remove the exposure to the US dollar from gold.
How Bitcoin Comes into Gold Conversation
As we look to the future, Bitcoin and other cryptocurrencies are starting to come into the conversation as primary global currencies. While gold has been a chief store of value for a long time, Bitcoin is not even a decade old. However, that shows how fast business and currencies move today. Many people don’t know or remember that several of the initial Bitcoin filings used the same structure as GLD. We expect innovations like these to continue to drive the growth of the ETF Industry.
This article was written by Toroso Asset Management, a participant in the ETF Strategist Channel.
Click here to see disclosures.