Gold’s meteoric rise above the $3,000 per ounce mark has greatly impacted gold-linked ETFs, which have given investors different channels to ride the bullion’s rise.
SPDR Gold Trust ETF GLD: The gold price-tracking ETF has gained over 13% for the year. The fund offers exposure to the price of gold through physical bullion holdings, serving as protection against inflation and economic uncertainty. Also, with a beta of as low as 0.19, GLD appears more favorable among risk-averse investors.
VanEck Gold Miners ETF GDX: Providing exposure to gold miners, GDX has fared better than physical gold ETFs, with a year-to-date gain of over 28%. The fund invests in a portfolio of leading gold mining stocks, offering leveraged exposure to the price action of gold. Leading gold mining names are present in this ETF, such as Agnico Eagle Mines Ltd AEM and Gold Fields Ltd GFI. However, investors should be cautious about potential equity risk based on company performance and overall market volatility. The beta of GDX at approximately one (0.95%) makes it better for investors with more risk tolerance.
Key Drivers Behind The Gold Rally
There are indeed several factors that have made the historic spike in gold possible. Rising hostilities, such as the recent Israel-Gaza clashes, have amplified global uncertainties, prompting investors to seek safe-haven assets such as gold.
Again, concerns regarding the persistence of inflation and a potential stagflationary environment have seen gold gain popularity. The recent Federal Reserve comments to hold rates steady at the moment and reduce rates twice this year have raised hopes for interest rate reductions by the end of the year, which has sustained gold prices.
Furthermore, Priority Gold says that consistent buying by central banks has been behind the gold demand, which has driven its price gains.
In summary, gold’s record rally has delivered significant profits for mining and physical gold ETFs. Depending on personal tolerance for risk and investment objectives, one can choose between straight exposure using vehicles like GLD and leveraged exposure from mining ETFs like GDX.
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