The SPDR Gold Trust ETF, created by the World Gold Council in November 2004, is the biggest ETF tracking the price of the precious metal. State Street, based in Boston, is the sales and marketing agent for the fund, which is physically backed by gold bars deposited in a London vault. It's one of at least three such U.S.-based ETFs. New York-based BlackRock Inc.'s iShares Gold Trust had a market value of almost $10 billion on Aug. 19.

The growth in SPDR Gold Trust this year has been largely driven by the rising value of gold, as the number of shares outstanding in the fund increased by about 1 percent. Since July 1, the number of shares in Gold Trust has climbed by 7.1 percent, contributing to the gain in assets.

Haven With Risk

Investors turn to gold in times of financial and economic turmoil as an alternative store of wealth to stocks and the dollar and a hedge against inflation. Cash and Treasuries are also haven investments, and are considered safer than gold, according Northern Trust's McDonald.

"Gold is not a substitute for cash or Treasury bonds," he said. "Because of the lack of an earnings stream behind it, when sentiment shifts, gold can go in the other direction and will have more momentum behind it."

BlackRock's Russ Koesterich, iShares' global chief investment strategist, wrote in an Aug. 19 report that investors looking for a defensive investment amid concerns about the global market should consider a "strategic allocation" to gold even after the metal's rise over the past few weeks.

"Recent signs from Washington and the Fed point to a continued erosion of the dollar relative to foreign currencies," Koesterich wrote. "Gold tends to do best when the dollar is eroding."

Paulson's Stake

U.S. Global's Holmes said the value of the dollar relative to bullion has dropped 98 percent since President Richard Nixon dropped the gold standard in August 1971. As gold continues to rise, it's "prudent" for investors to hold about 5 percent of their assets in gold or gold-mining stocks, he said.

Paulson & Co., the hedge fund run by billionaire John Paulson, was the largest holder in SPDR Gold Trust as of June 30, with 31.5 million shares, or 7.4 percent of outstanding stock, according to regulatory filings.

The holdings are used for the New York-based hedge fund's gold-denominated share classes, which have outperformed the firm's dollar classes this year. The investment accounts for about a third of the firm's $35 billion in assets, according to a person familiar with the fund, who asked not to be named because the information is private. Most of Paulson's personal investments in his hedge fund are held in the gold share classes, the person said.

The SPDR S&P 500, opened in January 1993, is the oldest existing product in the ETF industry, which oversees $1.1 trillion in assets in the U.S. It's one of three U.S. ETFs larger than $1 billion that track the Standard & Poor's 500 Index, excluding leveraged and inverse funds.

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