Gold is commonly viewed as a safe-haven asset when times get rough, but it’s prone to periods of volatility. The Wilshire wShares Enhanced Gold Trust (WGLD) that launched today seeks to provide a smoother ride via a rules-based system that rebalances between physical gold and cash based on market conditions.

WGLD is the first exchange-traded fund from Wilshire Phoenix, a New York City company created in 2018 to develop indexes, ETFs and other financial products.

According to the prospectus, the fund’s underlying Wilshire Gold Index is designed to reduce its gold exposure and boost its cash allocation when the metal’s risk profile rises as measured by the realized volatility of the LBMA Gold Price benchmark. Conversely, it will increase its gold exposure and reduce its cash allocation during periods of volatility in the S&P 500 Index.

The objective is to outperform a stand-alone investment in gold and reduce volatility without using futures, derivatives or leverage that can elevate downside risk when gold prices move in the opposite direction of a strategy’s stated long or short objective.

The index rebalances monthly. It’s calculated, maintained and published by Solactive AG. 

Technically speaking, Wilshire Phoenix Funds LLC is the sponsor of this gold trust. JPMorgan Chase Bank is the trust’s physical gold custodian, and the Bank of New York Mellon is the trust’s cash custodian. 

The Wilshire wShares Enhanced Gold Trust charges a net expense ratio of 0.65%. That’s on the high side for ETFs that invest in physical gold. The granddaddy of them all, the $66 billion SPDR Gold Trust (GLD), sports a fee of 0.40%. The other big gorilla in the space, the $30 billion iShares Gold Trust (IAU), charges 0.25%. Two smaller funds charge a category low of 0.17%.

But Wilshire Phoenix promotes its new fund with the value proposition that it’s the only product in this space that relies on a cash component to reduce the volatility of gold exposure.

The price of Comex gold is down 6.4% this year as of yesterday’s market close, and is off 14.3% from its 52-week high in early August. According to WGLD fund literature, gold significantly outperformed the S&P 500 during this century’s three big stock market implosions: the dot-com bubble, the financial crisis and the Covid-19 crash. And gold’s performance has roughly doubled that of the S&P 500 over a 20-year period through January 31.

But gold has trailed by wide margins on a 10- and five-year basis versus the S&P 500, while being slightly ahead during the one-year period ending in January. Like any commodity, gold has its ups and downs, as evidenced by the jagged peaks and valleys in Comex gold's long-term chart. Wilshire Phoenix posits that its new ETF will help mitigate the dips.

Elsewhere, the company has a Bitcoin commodity trust product in registration with the Securities and Exchange Commission.