ETF Talk: Another Golden Opportunity

“The desire for gold is not for gold. It is for the means of freedom and benefit.” — Ralph Waldo Emerson

Gold has long been used as currency and as a status symbol across human civilizations.

We find gold in the tombs of great kings from antiquity (like the Mask of Agamemnon or the coffin of Tutankhamun) and in our modern-day vaults. Gold is so valuable to us that we even use it as a standard for perfection and to describe ethical behavior — the “golden rule,” winning a gold medal as first prize.

I think it’s safe to say that gold has long been an important part of human culture. Why gold, you may ask, and not some other metal as our all-important mineral?

Well, practically speaking, gold is chemically inactive and not susceptible to corrosion. Gold can be cast as coin, easily shaped or used to gild books, statues and all other kinds of metal, wood or stone objects without rusting or fading over time.

Gold stays glittering, then, for thousands of years, promising everlasting wealth. And you and I, dear readers, follow in a long line of men before us seeking to benefit from the stability and freedom that the yellow metal offers. So, this week, let’s peer at another golden opportunity to capture freedom and benefit: SPDR MiniShares Gold Trust (NYSE: GLDM).

GLDM is a U.S.-listed, physically gold-backed exchange-traded fund (ETF). It represents fractional, undivided beneficial ownership interests in the Trust, which holds physical gold bullion. GLDM provides a convenient way for investors to access the gold market and is intended to provide a lower total cost of ownership over longer periods of time. Its objective is to reflect the performance of the spot price of gold bullion using gold bars held in London vaults.

Unlike its sibling, SPDR Gold Shares (NYSE: GLD), GLDM holds a fraction of the amount of gold per share (hence, “mini”), allowing investors to place smaller orders and diversify their portfolios.

The fund hit a 52-week high this week, up from a low of around $36 last October, reflecting investor sentiment regarding the reliability of the tangible precious metal. Expectations of a June rate cut by the Federal Reserve could see the fund driving even higher.

GLDM has $7.6 billion in assets under management, and it comes with one of the lowest expense ratios among the gold ETFs at just 0.10%.

Chart courtesy of Stockcharts.com

If you’ve been paying attention, you know that gold has been rallying since late last year, shooting up some 9% in March and continuing to reach new highs this month. The rally is the result of several factors, including geopolitical conflicts in the Middle East and Ukraine, inflation and buying by central banks — and it continues to move up despite a strong U.S. dollar and job growth in March.

When gold trends, it trends well. And the latest new highs offer fresh evidence that supports the bull case for gold. Within gold trends, reactionary pullbacks are common. Those are not ideal for portfolio volatility; however, they do offer good opportunities to get into or add to long positions. And GLDM gives investors a golden opportunity to get long-term exposure to gold.

To quote another great writer (the golden playwright, William Shakespeare), “Gold — what can it not do, and undo?”

As always, I am happy to answer any of your questions about ETFs, so do not hesitate to email me. You may see your question answered in a future ETF Talk.