Gold’s investment characteristics, rooted in multiple sources of demand across global economic and business cycles, may help gold serve multiple roles in an investor’s portfolio — during good times and bad.
Gold is often classified as a commodity alongside other precious metals or broader commodities, like oil and real estate. But with gold’s unique fundamentals and characteristics, it may warrant its own classification in an investor’s portfolio.
Investors can access gold in many different ways — from bars and coins to mutual funds and futures contracts. But gold-backed exchange traded funds (ETFs) offer a high degree of flexibility, transparency, and accessibility to the gold market with the cost-effective liquidity benefits of an ETF wrapper.
Learn about the different ways gold can be added to a portfolio and the potential advantages of accessing gold using an ETF.
In November 2004, State Street Global Advisors launched SPDR GLD®, the first US gold-backed ETF. GLD’s arrival made it convenient and cost effective for investors to have gold exposure in their portfolios. We’ve built a dedicated team of SPDR gold strategists to help investors understand how gold can fit in a portfolio, and launched GLDMSM in 2018 in response to growing investor need for a low-cost, gold-backed ETF option.
1 Diversification: Bloomberg Finance L.P and State Street Global Advisors, as of September 30,2020. Gold’s monthly correlation to the S&P 500 Index and Bloomberg Barclays Aggregate Bond Index over the last 20 years are 0.05 and 0.18, respectively. Gold’s daily correlation to the S&P 500 Index and Bloomberg Barclays Aggregated Bond Index in 2020 are 0.38 and 0.20, respectively. Returns: Bloomberg Finance L.P., and State Street Global Advisors. During 2020 volatility, based on average monthly returns from 1/1/2020-9/30/2020, gold has provided a return of 24.57%, while the S&P 500 provided a return of 5.89 for the same period. On a longer-term basis, gold has returned 3.74% over a 10-year period from 9/30/2010 to 9/30/2020, and 10.13% for the 20 years from 9/30/2000 to 9/30/2020, while the S&P 500 provided a return of 13.730% and 6.41%, respectively, for the same periods ended 9//30/2020. Notes: gold is represented by LBMA gold price PM ($/oz.). Past performance is not a guarantee of future results. Liquidity: Source: World Gold Council, date range from 01/01/2020 to 9/20/2020. Gold has maintained an average daily trading volume of $189 billion, or $47 trillion annually, which is on par with the S&P 500 average daily trading volume of $212 billion.
2 Bloomberg Finance L.P., and State Street Global Advisors, as of August 31, 2020.
3 Bloomberg Finance L.P, World Gold Council and State Street Global Advisors. Note: SPDR® Gold Trust GLD has a $1.4 billion daily average volume and a 0.01% average bid-ask spread from 01/01/2011 to 09/30/2020. The second biggest gold-backed ETF has a $135 million daily average volume and a 0.08% bid-ask spread from 01/01/2011 to 09/30/2020. GLD assets under manager (AUM) is $77 billion which equates to 1,268.5 tons while the second biggest gold-backed ETF AUM is $31 billion which equates to 518.1 tons, as of 09/30/2020.
A basic good used in commerce that is interchangeable, or “fungible,” with other commodities of the same type. Commodities are most often used as inputs in the production of other goods or services. For example, crude oil is a commodity that is used to make motor fuels, heating oil and lubricants.
A strategy of combining a broad mix of investments and asset classes to potentially limit risk, although diversification does not guarantee protection against a loss in falling markets.
In modern portfolio theory, diversification is an approach used to potentially reduce the overall risk of the portfolio by holding a mix of assets with low correlations to each other. The potential benefit of holding uncorrelated assets is that some investments may rise while others fall.
The ability to quickly buy or sell an investment in the market without impacting its price. Trading volume is a primary determinant of liquidity.
A risk-based profitability measurement framework for analyzing risk-adjusted financial performance; it is designed to provide a consistent view of profitability across different assets.