A few firsts in the U.S. ETF industry stick out to ETF nerds. November 18, 2004, was one of them. This was when the first — and still largest — gold ETF, the SPDR Gold Shares ETF (GLD), launched. GLD provided greatly welcomed liquidity and efficiency to a hard asset.
Fast-forward nearly 20 years. Leaders from State Street Global Advisors and the World Gold Council rang the closing bell at the New York Stock Exchange. VettaFi attended this week to celebrate with the team. I even got a photo of myself turned into gold. Priceless, I know.
With $74 billion in assets, GLD was recently the 21st largest ETF. However, the gold ETF’s 6.5 million average shares traded is much higher than some ETFs with a greater asset base. For many investors, particularly institutions and large RIAs, GLD remains the favored way to gain commodity exposure. The ETF’s staying power has been impressive.
Growing Competition for GLD
In the past two decades, GLD has faced competition as other large asset managers brought gold ETFs to market. Nearly all of them have lower expense ratios than GLD’s 0.40%. As these products gained traction, State Street Global Advisors offered their own more retail-friendly alternative. The SPDR Gold MiniShares ETF (GLDM) launched in 2018. GLDM has a more modest 0.10% expense ratio, and the younger sibling has gathered over $9 billion in assets.
Since GLD and GLDM both track the price of gold, they were both up 30% year-to-date through November 11. These gains were slightly ahead of the 27% for the SPDR S&P 500 ETF (SPY). Many investors who turned to gold ETFs as an alternative to stock or bond ETFs were rewarded.
The Appeal of Gold ETFs
According to State Street Global Advisors research, gold’s diverse, global demand among both cyclical and countercyclical sectors can help drive two key strategic benefits for portfolios. They have persistently low correlations to other asset classes and the ability to protect against tail risks. These characteristics may aid in providing efficient portfolio diversification while reducing portfolio drawdowns and volatility. This could result in improved risk-adjusted portfolio performance.
In January 2024, the first spot cryptocurrency ETFs began trading, providing investors with exchange-based access to a new investment style. They have been extremely popular. Bitcoin is often referred to as digital gold. However, spot bitcoin ETFs have performed differently than GLD this year and may do so in the future. We think both bitcoin and gold can find their place within a portfolio for many investors.
Happy 20th birthday GLD. May you continue to shine for decades to come.
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