To the delight of goldbugs everywhere, the price of gold, silver and other precious metals has delivered strong results thus far this year.
During the first quarter, there was increased demand for gold among both central banks and Chinese consumers, according to the World Gold Council’s gold demand report, and that’s pushed up prices. Central banks added 228 tonnes of gold to their global reserves in the first three months of the year. China, meanwhile, saw its first post-Covid quarter with no lockdowns, which spurred gold buying by consumers there.
As a result, the SPDR Gold Shares exchange-traded fund (GLD) has gained 10.64% since the start of the year, which puts it ahead of ETFs linked to different core asset classes like U.S. bonds and global real estate. The Vanguard Total Bond Market ETF, for instance, is up by only 3.22% while the iShares Global REIT ETF has increased by only 3.15%.
With almost $60 billion in assets, the SPDR Gold Shares fund is the largest gold-linked exchange-traded product. Its share price is designed to reflect one-tenth the price of gold bullion. Launched in 2004, the fund is also the oldest exchange-traded product backed by the physical precious metals.
There’s been an upswing in the prices of other precious metals as well, and that’s been reflected in the success of funds like the abrdn Physical Precious Metals Basket Shares ETF (GLTR). Like the SPDR Gold Shares fund, this abrdn fund holds stakes in the physical metals, but it’s diversified into gold, silver, platinum and palladium, so it offers a broader investment solution for advisors who want to own the precious metals complex without increasing the risk of holding a single commodity.
The precious metals inside the abrdn fund are held in protected vaults in England and Switzerland. The fund has gained 6.34% so far this year. It has an annual charge of 0.60%.
For advisors who prefer equities over physical metals, the iShares MSCI Global Gold Miners ETF (RING) offers exposure to a portfolio of 34 stocks involved with mining, producing and transporting precious metals. The iShares fund’s asset base, $436 million, is smaller than the SPDR Gold Shares fund’s, but the its dividend yield is almost 2.36%, where the SPDR fund’s is zero.
One of the longstanding knocks against exchange-traded products linked to precious metals is that investors can’t actually take physical delivery of their gold and silver. However, skeptical investors and conspiracy theorists who want to see and hold their gold can now invest in vehicles that let them do it.
The VanEck Merk Gold Trust ETF (OUNZ) lets shareholders convert their fund shares into physical gold bars and coins in customizable denominations, something that popular and widely held gold products like the SPDR Gold Shares and the iShares Gold Trust (IAU) vehicles can’t offer.
The act of receiving physical gold from the VanEck fund is not considered a taxable event, since the fund’s shareholders are simply receiving something they already own. The fund’s annual fee of 0.25% does not include the delivery costs of receiving physical gold if the investor asks for it.
Diversifying portfolios that are heavy on stocks and bonds with precious metals is something advisors should consider. And the ETF marketplace offers plenty of unique and affordable opportunities.