After hitting a peak of $1,921.50 back in 2011, gold prices have suffered a fairly straight trip south. Gold is down 40% over the past three-plus years, and you can thank a host of issues — a rising dollar, a lack of inflation and, in general, a lot of positive economic data.
Interest in gold continues to fall, according to recent data from the U.S. Commodity Futures Trading Commission. “Net long positions in gold fell 26 per cent for a sixth week last week and at the fastest rate since November,” Financial Times reports. At this point, it’s safe to say that gold is pretty hated by most investors.
Which might make it an interesting rebound play at this point.
Gold isn’t without some bullish tailwinds. Dwindling mine supplies, continued central bank easing, general economic malaise along with ramped up buying by China and India have to the potential to light the fire under gold prices. DoubleLine Capital’s Jeffrey Gundlach believes these factors should help gold move to a range of $1,400-$1,500 per ounce in the next year or so.
For investors, that spells opportunity. And the easiest way to capitalize on that opportunity: gold ETFs. Here are four different flavors you can buy today.
Gold ETFs to Buy Today: iShares Gold Trust (ETF) (IAU)
When it comes to physically backed gold ETFs, everyone seems to flock to the uber popular SPDR Gold Trust (ETF) (NYSEARCA:GLD), which boasts nearly $28 billion in assets under management.
However, its smaller but similar rival — the iShares Gold Trust (ETF) (NYSEARCA:IAU) — might be a better bet for investors.
Like the GLD, IAU owns and stores physical gold bullion, coins and bars in a vault on behalf of investors. That provides direct exposure to the rise and fall of gold prices. The difference — and perhaps the real win for investors — comes down to costs.
To pay for operating expenses, physically backed ETFs will sell off a portion of gold each quarter or year to meet those expenses. That creates some tracking error when it comes to spot gold prices because each share of the fund represents the value of the gold in the vaults. Given time, that can take a little money out of your pocket.
The IAU only charges 0.25% in expenses, or $25 annually for every $10,000 invested, versus the GLD’s 0.4%. That difference means that by owning the SPDR, investors are “losing” more gold per share than with IAU. And naturally, you also lose that extra 15 basis points in pure performance annually.
All in all, if investors want a physically backed gold ETF, the IAU is the way to go.
Gold ETFs to Buy Today: Sprott Gold Miners ETF (SGDM)
With a solid long-term track record in the commodities space, Eric Sprott is no slouch when it comes to gold investing.
One of his missions has been to make gold and natural resource investing available to regular retail investors, and the latest gold ETF to bear his name is the Sprott Gold Miners ETF (NYSEARCA:SGDM).
As the name implies, SGDM bets on the miners of the precious metals. By buying the gold miners, investors can gain additional leverage thanks to the sector’s fixed costs of production.
However, unlike most other gold miner funds, SGDM is a “smart beta” fund.
SGDM tracks the Sprott Zacks Gold Miners Index — an index that uses various sscreens to find gold miners with the highest “gold beat,” or sensitivity to gold’s price movements. It then adds other requirements that look at profitability and revenue growth. This creates a different (and theoretically better) gold ETF than some other miner-focused funds.
I say “in theory” because in its short life (it launched in July 2014), SGDM hasn’t performed too well. In fact, its -32% return has been downright horrible.
However, it should realize any price movement in gold better than rivals as rebound takes place.
Expenses for the fund run at just 0.57%.
Gold ETFs to Buy Today: AdvisorShares Gartman Gold/Euro ETF (GEUR)
One of the reasons why gold — along with most commodities — has been in the dumps lately is because of the strong U.S. dollar. It takes fewer has to do with the rising U.S. dollar. In short, gold is priced in dollars, so when the dollar strengthens, it takes fewer greenbacks to buy the same amount of gold — which naturally lowers the metal’s price.
The AdvisorShares Gartman Gold/Euro ETF (NYSEARCA:GEUR) steps around that issue by using not dollars to buy gold, but the euro.
This gold ETF goes long gold futures — betting on price increases — while shorting euro currency futures. In short, that provides less downside on an investor’s gold position as the dollar rises. Conversely, should the dollar fall, GEUR and its euro-priced gold should get a boost.
The relationship has worked. Since its inception in February 2014, GEUR has improved 4% vs. a 13% decline for GLD. The difference in returns has only accelerated in recent months as the dollar has continued to strengthen against the euro.
GEUR is not a one-size-fits-all ETF — it’s a very targeted strategy for a particular economic climate. It’s also expensive compared to most other gold ETFs, charging 0.77% in operating expenses.
Gold ETFs to Buy Today: Credit Suisse Gold Shares Covered Call ETN (GLDI)
Once of the biggest problems that some investors have with gold is that it doesn’t pay any sort of dividend. It basically just sits there and shines.
However, it’s not impossible to get income out of gold.
The Credit Suisse Gold Shares Covered Call ETN (NASDAQ:GLDI) owns and sells covered call options on the previously mentioned GLD. These call option premiums generate additional income for the fund, which GLDI then pays out monthly to investors. That income is meant to help hedge losses when gold prices are on the decline … and if the markets drift sideways, that income can boost returns.
According to its last year of payments, GLDI offers a whopping 12% yield. That huge dividend, along with the general protection offered by gold when things get rocky, can make GLDI an invaluable addition to a diversified portfolio.
GLDI charges 0.65% in expenses.
As of this writing, Aaron Levitt did not hold a position in any of the aforementioned securities.