Investors have several options to consider when looking to gain exposure to gold and tap into its diverse potential benefits. Understanding the potential advantages and considerations for the different gold investment vehicles – be it ETFs, mutual funds, gold bars and coins or gold mining stocks, can help an investor to determine which option is best suited to their personal investment situation.
Comparing Gold Investment Vehicles
For many investors, the case for gold ETFs may be strong relative to those for other gold investment vehicles, particularly in terms of accessibility, transparency, and cost. ETFs often provide a higher degree of flexibility for investors at a potentially lower overall cost than many of the other options do – and gold-backed ETFs are no exception.
Gold ETFs have grown to record levels in terms of popularity and AUM since 2004, when SPDR ETFs introduced the first physically backed gold ETF designed to track the price of gold bullion, SPDR® Gold Shares. Since that time, gold investing via gold-backed ETFs has grown to $239 billion in assets.3 2020 has seen gold ETF investing hit record highs, adding 21% — or US $49.1 billion4 — to global gold-backed ETF assets through July 31, and providing investors a cost-effective and efficient way to access gold’s unique benefits during 2020’s market volatility.
Although gold-backed ETFs have seen positive inflows from all regions during 2020, North American investors were responsible for adding nearly 75% of July’s total $9.7 billion of inflows into global gold-backed ETFs — that’s US $7.0 billion.5 Global investors — US investors in particular — have responded to eroding market conditions, placing assets into gold-backed ETFs as market volatility and uncertainty have risen – tapping into the diversification, liquidity and risk-adjusted returns that an allocation to gold may potentially offer6.
In November 2004, the World Gold Council partnered with SPDR ETFs to launch the SPDR® Gold Shares, the first US gold-backed exchange traded fund. The SPDR® Gold Shares’ arrival made it convenient and cost effective for investors to hold gold in their portfolios. Since then, the SPDR® Gold Shares has reached over $78 billion in assets,7 making it the largest and most liquid gold-backed ETF in the world.8
Both ETFs provide investors a relatively efficient and liquid way to access the gold bullion market through physically backed ETFs. Learn more about our heritage in the gold market , or read more about our gold ETF below.
SPDR® Gold Shares, the largest gold-backed ETF in the world by AUM,9 is designed to offer all investors easy and highly liquid access to the gold market.
All figures are in USD unless otherwise noted.
1 Source: Bloomberg Finance L.P. & State Street Global Advisors. Note: SPDR® Gold Trust GLD average daily bid-ask spread is 0.01% and tracking error is 0.00424 from 01/01/2011 to 09/30/2020. Effective March 20, 2015, the SPDR Gold Trust (GLD) adopted the LBMA Gold Price PM as the reference benchmark price of gold in calculating the Net Asset Value (NAV) of the Trust. Prior to that date, the Trust used the London PM Fix as the reference benchmark price in
calculating the NAV. SPDR® Gold MiniSharesSM Trust GLDM average bid-ask spread is 0.07% and tracking error is 0.00016 from June 26, 2018 (fund inception) to September 30,2020. GLDM has used LBMA Gold Price PM as the reference benchmark price of gold in calculating the NAV of the Trust.
2 Morningstar Direct; Note: Average Gross Expense Ratio (%) for ETFs and Mutual Funds are 0.55% and 0.89%, respectively. Average Prospectus Net Expense Ratio for ETFs and Open-end Mutual Funds
oldest Share class as defined by Morningstar, as of September 30, 2020
3World Gold Council – Global gold-backed ETF flows July 2020, date as of August 6, 2020.
4World Gold Council– Global gold-backed ETF flows July 2020, date as of August 6, 2020.
5 World Gold Council – Global gold-backed ETF flows July 2020, date as of August 6, 2020.
6 Diversification: Source: Bloomberg Finance L.P and State Street Global Advisors, as of September 30,2020. Gold has demonstrated a low (or sometimes negative) correlation to many financial asset indices over the last 20 years, with a 0.05 correlation to the S & P 500 Index and a 0.18 correlation to the Bloomberg Barclays Aggregate Bond Index from September 30, 2000 – September 30, 2020. Diversification does not ensure a profit or guarantee against
loss. Liquidity: Source: World Gold Council, as of 9/30/2020. Gold has maintained an average daily trading volume of $189 billion compared to an average daily trading volume for the S&P 500 of $212 billion for the period 1/1/2020 – 9/30/2020. There can be no assurance that a liquid market will be maintained for ETF shares Returns: Bloomberg Finance L.P. and State Street Global Advisors. During 2020 volatility, based on average monthly returns from 1/1/2020-9/30/2020, gold has provided a return of 24.57%, while the S&P 500 provided a return of 5.89 for the same period. On a longer-term basis, gold has returned 3.74% over a 10-year period from 9/30/2010 to 9/30/2020, and 10.13% for the 20 years from 9/30/2000 to 9/30/2020, while the S&P 500 provided a return of 13.73% and 6.41%, respectively, for the same periods ended 9/30/2020. Notes: gold is represented by LBMA gold price PM ($/oz.). Past performance is not a guarantee of future results.
7 Bloomberg Finance L.P. and State Street Global Advisors, as of September 30, 2020.
8 Bloomberg Finance L.P. and State Street Global Advisors, data as of September 30, 2020.
9 Bloomberg Finance L.P. and State Street Global Advisors, data as of September 30, 2020.
Bid-Ask Spread, or Spread
The difference between the highest price a buyer is willing to pay for an asset and the lowest price the seller will accept to sell. Bid-ask spreads are a key measurement of the liquidity of an asset or security.
Financial contracts that obligate buyers and sellers to buy or sell an asset — often physical commodities or financial instruments — at a predetermined future date and price. Futures contracts also stipulate the quality and quantity of the underlying asset and are standardized to facilitate trading on a futures exchange. Some futures call for physical delivery; others are settled in cash.
The ability to quickly buy or sell an investment in the market without impacting its price. Trading volume is a primary determinant of liquidity. There can be no assurance that a liquid market will be maintained for ETF shares
The potential cost associated with selling an expiring futures contract and purchasing a longer-dated contract to maintain exposure to a particular asset. When the longer-dated contract is more expensive than the expiring contract, the market is said to be in contango; therefore, “rolling” into the longer-dated contract can be a drag on performance.
Total Cost of Ownership
The purchase price of an asset plus the costs of operation.
Tracking error is a measure of how consistent a portfolio’s return is with that of its benchmark. In reality, no indexing strategy can perfectly match the performance of the index or benchmark, and the tracking error quantifies the degree to which the strategy differs from the index or benchmark by measuring the annualized standard deviation between the two values.
The tendency of a market index or security to jump around in price. Volatility is typically expressed as the annualized standard deviation of returns. In modern portfolio theory, securities with higher volatility are generally seen as riskier due to higher potential losses.
Commodities and commodity-index linked securities may be affected by changes in overall market movements, changes in interest rates, and other factors such as weather, disease, embargoes, or political and regulatory developments, as well as trading activity of speculators and arbitrageurs in the underlying commodities.
The whole or any part of this work may not be reproduced, copied or transmitted or any of its contents disclosed to third parties without SSGA’s express written consent. Nothing on this web page constitutes investment advice and should not be relied upon as such. The value of units in the GLD ETF (the “Fund”) may fall or rise. Past performance of the Fund is not indicative of future performance. Distributions from the Fund are contingent on dividends paid on underlying investments of the Fund and are not guaranteed. Listing of the Fund on the HKEX/ SGX does not guarantee a liquid market for the units and the Fund may be delisted from the HKEX/ SGX. The Fund’s Prospectus is available from State Street Global Advisors or can be downloaded from http://www.spdrgoldshares.com/
The prospectus in respect of the Singapore offer of the shares in the Trust is available and may be obtained upon request from State Street Global Advisors Singapore Limited ("SSGA") (Co. Reg. No: 200002719D). Investors should read the prospectus of the Trust before deciding whether to purchase Shares. Shares in the Trust are not obligations of, deposits in, or guaranteed by, World Gold Trust Services, LLC, SSGA or any of their affiliates. The value of Shares and the income accruing to such Shares may fall or rise. You should consider whether the Trust is suitable for you. If in doubt, you may wish to seek advice from a financial adviser before making a commitment to purchase Shares. Investors have no right to request the Sponsor to redeem their Shares while the Shares are listed. It is intended that holders of Shares may only deal in their Shares through trading on the SGX-ST. Listing of the Shares on the SGX-ST does not guarantee a liquid market for the Shares. This advertisement or publication has not been reviewed by the Monetary Authority of Singapore.
Frequent trading of ETFs could significantly increase commissions and other costs such that they may offset any savings from low fees or costs. ETFs trade like stocks, are subject to investment risk, fluctuate in market value and may
trade at prices above or below the ETFs’ net asset value. Brokerage commissions and ETF expenses will reduce returns.
Past performance is not a guarantee of future results.
Diversification does not ensure a profit or guarantee against loss.
Investing in commodities entails significant risk and is not appropriate for all investors.