Commodities & Metals

China and Iran Increase Interest in Major Gold ETFs

Jon C. Ogg

Published: May 8, 2019 7:40 am

Last Updated: January 30, 2020 9:03 pm

If one thing has proven true over the years and works in favor of the gold bugs, it is that the price of gold thrives on geopolitical uncertainty. With U.S. interest rate hikes on hold and with negative bond yields back to dominating the news in Europe, now we have a fragile trade deal with China being backtracked on the core points by China and Iran partially withdrawing from its 2015 nuclear program agreement. This is a pressure cooker for the price of gold.

U.S. Equity futures were down yet again on Wednesday, but gold was trading up $3.10 at $1,289.16 in early-bird trading on Wednesday.

The SPDR Gold Trust (NYSEARCA: GLD) is the largest gold exchange-traded fund by far, with more than $30.4 billion in assets under management. The ETFdb.com gold bullion screener showed that the iShares Gold Trust (NYSE: IAU) is a distant second place with about $11.9 billion in assets. The expense ratio is higher for the SPDR Gold Trust at 0.40% than the 0.25% for iShares Gold Trust.

Some investors are likely to target the gold miners and production companies as well. After all, higher gold prices mean better prices realized for miners and producers.

The VanEck Vectors Gold Miners ETF (NYSEARCA: GDX) owns companies that lead the world’s gold mining efforts, and it had nearly $8.8 billion in assets under management and was down by 1.8% so far in 2019. Barrick Gold Corp. (NYSE: GOLD) and Newmont Goldcorp Corp. (NYSE: NEM) dominate the gold mining ETFs in general, as both gold giants have recently closed on major mergers. Wall Street sees higher returns ahead for each of the combined companies, more than 10% higher for Barrick and over 30% for Newmont.

Many other gold ETF products also will be moving higher on the renewed geopolitical tensions. Sometimes we just have to capture the largest and most liquid to show the greatest moves and influence.

The SPDR Gold Trust closed up 0.33% at $121.21 on Tuesday and was indicated up 0.45% at $121.79 early Wednesday. Its 52-week range is $111.06 to $127.21.

The iShares Gold Trust closed up 0.33% at $12.29 on Tuesday and was indicated up at $12.33 in the premarket on Wednesday. This fund has a 52-week range of $11.25 to $12.90.

The VanEck Vectors Gold Miners ETF took it on the chin on Tuesday with a 2.8% drop to $170.48, but that was with a broad sell-off in the major markets with less than 6% of the S&P 500 components being able to post small gains due to such broad-based weakness in the market. The ETF has a 52-week range of $143.87 to $208.88.

For more speculative ETF players in gold miners, there is also the VanEck Vectors Junior Gold Miners ETF (NYSEARCA: GDXJ), which actually managed to post a 2% gain to $29.05 on Tuesday. It has a 52-week range of $25.91 to $35.04 and has almost $3.6 billion in assets under management. Its expense ratio is 0.54% and some of its top 10 companies by weighting are listed on foreign stock exchanges rather than the major U.S. exchanges. ETFdb showed it was down 3.7% year to date.