The Allure of Gold Returns: Top 5 ETFs to Play the Rally

The allure of gold has returned in recent weeks as investors anticipate U.S. interest rate cuts in June. The bullion soared to a new high of above $2,100 an ounce on Mar 4, marking a 5.6% increase over the past month. This surge in gold prices has sparked optimism among investors, who now have a variety of options to capitalize on the metal’s rally.

There are five popular options directly linked to the spot gold price or futures that investors can consider to gain exposure to the metal. These include SPDR Gold Trust ETF (GLD), iShares Gold Trust (IAU), SPDR Gold MiniShares Trust (GLDM), Aberdeen Standard Physical Swiss Gold Shares ETF (SGOL), and iShares Gold Trust Micro (IAUM). All of these ETFs have a Zacks ETF Rank #3 (Hold).

Traditionally viewed as a safe haven during periods of economic uncertainty and low interest rates, gold’s appeal has surged following a series of weak U.S. economic reports. The U.S. manufacturing sector has been in decline for 16 consecutive months, while consumer confidence and personal spending data have also shown weakness. These factors have raised expectations that the Fed might lower interest rates in June, driving up gold prices.

Gold is highly sensitive to rising U.S. interest rates, as they increase the opportunity costs of holding non-yielding bullion and weaken the U.S. dollar. Additionally, gold is considered a store of wealth during times of financial and political uncertainty, making it an attractive investment option. Factors such as the upcoming U.S. presidential election and conflicts in Ukraine and Gaza further enhance gold’s appeal to investors.

Hedge funds and money managers are actively seeking to place bullish bets on gold, with recent data showing a spike in net bullish positions on the metal. This growing optimism among investors underscores gold’s potential in the current economic climate.

Investors looking to capitalize on the rally in gold prices can consider the following options:

1. SPDR Gold Trust ETF (GLD): This ETF tracks the price of gold bullion measured in U.S. dollars and charges 40 bps in fees per year.
2. iShares Gold Trust (IAU): Backed by physical gold under the custody of JP Morgan Chase Bank in London, this ETF charges 25 bps in annual fees.
3. SPDR Gold MiniShares Trust (GLDM): This ETF seeks to reflect the performance of the price of gold bullion and charges investors 10 bps in annual fees.
4. Aberdeen Standard Physical Swiss Gold Shares ETF (SGOL): This ETF tracks the price of gold bullion and charges 17 bps in annual fees.
5. iShares Gold Trust Micro (IAUM): Offering exposure to the day-to-day movement of the price of gold bullion, this ETF has the lowest expense ratio on the market at 0.09%.

Overall, the rally in gold prices presents an opportunity for investors to diversify their portfolios and potentially benefit from the metal’s safe haven appeal. With a variety of ETF options available, investors can choose the one that best suits their investment objectives and risk tolerance.