The SPDR Gold Shares (NYSEArca: GLD), the world’s largest gold-related exchange traded product, has been the dominant name in gold ETF investing since coming to market nearly 13 years ago. However, as is often the case in the ETF space, one fund’s success can inspire competition and that has certainly been true of GLD.
One of GLD’s primary competitors is the iShares Gold Trust (NYSEArca: IAU) and the rivalry between those two ETFs is heating up.
“Even in its best month since February, bullion gained only 2.2 percent in July, and concern is mounting that rising interest rates may crimp further gains. That’s helping drive investors who want to continue owning the metal toward lower-cost funds. Bullion held by SPDR Gold Shares, the largest ETF backed by the metal, have shrunk to the smallest in more than a year, while holdings in the cheaper iShares Gold Trust are near an eight-month high,” reports Luzi-Ann Javier for Bloomberg.
Moreover, in the face of a stronger dollar and speculation that the Federal Reserve could raise interest rates over the mid- and long-term, gold prices could still move modestly higher with some help from increased demand out of the emerging markets, namely China and India.
GLD saw $2.4 billion in net outflows over the past month, and overall gold ETF inflows slowed dramatically over the first half from last year’s record pace, according to the World Gold Council.
“Demand for H1 2017 was down 14% compared to last year, but in some respects the market was in better shape. Last year’s growth was solely down to record ETF inflows, while consumer demand slumped. So far this year we have seen steady ETF inflows in Europe and the US, jewelry demand has recovered with good growth in India, while retail investment and technology demand is up too,” Alistair Hewitt, Head of Market Intelligence at the World Gold Council, said in a note.
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Lower fees are “part of the reason iShares Gold has attracted investors into its ETF at a time when its biggest rival, SPDR Gold, saw a monthly outflow of $2.4 billion in July. That was the largest redemption since 2013, when the metal was languishing in a bear market. SPDR Gold charges a fee of 40 basis points of the net asset value. IShares Gold has an expense ratio of 25 basis points,” according to Bloomberg.
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Tom Lydon’s clients own shares of GLD.