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Will Gold ETFs Continue to Shine?

After wild swings, gold showed a strong rebound at the start of the fourth quarter. The fall in U.S. dollar and a decline in yields bolstered the demand for the yellow metal. Additionally, the demand for inflation hedge and growing recession fears are driving investors toward gold, as it is considered a safe haven.

As such, gold ETF rallied over the past week with GraniteShares Gold Trust BAR, iShares Gold Trust IAU, SPDR Gold Shares GLD, iShares Gold Strategy ETF IAUF, and Aberdeen Standard Physical Swiss Gold Shares ETF SGOL gaining 6% each. All these ETFs have a Zacks ETF Rank #3 (Hold).

Factors Driving Gold Price

The combination of factors is acting as a catalyst for gold price. The ongoing war in Ukraine and four-decade-high inflation have raised the demand for bullion as a safe-haven asset. Inflation in the United States was higher-than-expected in August, lifting the appeal for bullion as an inflation hedge (read: 5 Sector ETFs to Win from August Inflation Data).

The consumer price index climbed 8.3% year over year in August, down from an 8.5% rise in July but higher than an 8.1% increase expected by analysts. Inflation also rose 0.1% from July and is still hovering near a 40-year high with the overall cost of food increasing 11.4%, the highest increase since May 1979.

Fed Chair Jerome Powell raised interest rates by 75 bps for the three consecutive months of the third quarter to tame inflation, pushing the benchmark interest rate to 3.0-3.25%, the highest level since 2008. The central bank also signaled that additional large rate hikes are on the way. While higher rates are weighing on gold prices, global uncertainty boosted the demand for the metal as a safe haven (read: Guide to Interest Rates Hike and ETFs).

Russia’s invasion of Ukraine has resulted in supply-chain issues while most of the developed and developing economies are witnessing a slowdown. Bouts of weak economic data across the globe added to the global slowdown fears. U.S. mortgage rates topped 6.5% for the first time since mid-2008, signaling that the hot housing market is cooling rapidly. U.S. manufacturing activity grew at its slowest pace in almost two and a half years in September, according to the Institute for Supply Management.

Meanwhile, economic activity in China, the world's second-largest economy, has been declining and the property sector is also suffering. Eurozone inflation for August also rose to another record high. Gold is often used as a means of preserving wealth during times of financial and political uncertainty. It usually does well when other asset classes struggle.

Here’s a detailed discussion on the five ETFs mentioned earlier:

GraniteShares Gold Trust (BAR)

GraniteShares Gold Trust is designed to seek the performance of the price of gold. It provides an investment similar to an investment in gold through a Trust without having to open a metal account. GraniteShares Gold Trust is also among the lowest cost gold ETFs on the market having an expense ratio of 0.17%. It has amassed $829.9 million in its asset base while trading in an average daily volume of 1.5 million shares.

iShares Gold Trust (IAU)

iShares Gold Trust offers exposure to the day-to-day movement of the price of gold bullion. It is backed by physical gold under the custody of JP Morgan Chase Bank in London. iShares Gold Trust charges 25 bps in annual fees. It is liquid and popular, trading in average daily volumes of 5.4 million shares and has AUM of $25.6 billion.

SPDR Gold Trust ETF (GLD)

SPDR Gold Trust ETF tracks the price of gold bullion measured in U.S. dollars and is kept in London under the custody of HSBC Bank USA. It is an ultra-popular gold ETF with AUM of $50.6 billion and a heavy volume of about 5.5 million shares a day. SPDR Gold Trust ETF charges 40 bps in fees per year from investors (read: ETF Asset Report of Third-Quarter 2022).

iShares Gold Strategy ETF (IAUF)

iShares Gold Strategy ETF offers exposure to the price performance of gold and is designed to simplify tax filings as the fund does not require K-1 tax reporting. It has amassed $38.6 million in its asset base and trades in an average daily volume of 3,000 shares. iShares Gold Strategy ETF charges 28 bps in annual fees.

Aberdeen Standard Physical Swiss Gold Shares ETF (SGOL)

Aberdeen Standard Physical Swiss Gold Shares ETF tracks the price of gold bullion. The Trust holds allocated physical gold bullion bars stored in secure vaults in Zurich, Switzerland and London, the United Kingdom. Aberdeen Standard Physical Swiss Gold Shares ETF has amassed $2.2 billion in its asset base and trades in a solid volume of 2.4 million shares per day. It is one of the lowest-cost choices in the space with an expense ratio of 0.17%.

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SPDR Gold Shares (GLD): ETF Research Reports
iShares Gold Trust (IAU): ETF Research Reports
abrdn Physical Gold Shares ETF (SGOL): ETF Research Reports
GraniteShares Gold Trust (BAR): ETF Research Reports
iShares Gold Strategy ETF (IAUF): ETF Research Reports
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