ETF Profile: SPDR Gold Trust (NYSEARCA:GLD) In Focus
Christian Magoon: The SPDR Gold Trust can be referred to in a number of ways – the largest physical gold ETF in the world, the first gold ETF to launch in the U.S. market, the most expensive U.S. listed physical gold ETF. These descriptions of the SPDR Gold Trust (NYSEARCA:GLD) are all correct. GLD is perhaps the most widely known ETF in the world. It contains around $65 billion of investor assets and effectively delivers many of the benefits ETFs provide to investors.
The SPDR Gold Trust launched in 2004 and was designed to track the price of gold, less fees and expenses. To do this GLD became the first ETF in the United States to have its shares backed by physical gold stored in a vault. Here’s a snapshot from the GLD profile page on GoldETFs.biz highlighting key data points for the SPDR Gold Trust as of May 12, 2012.
SPDR Gold Trust: A Big Success
The SPDR Gold Trust has become a massive success for two reasons. First it revolutionized access to physical gold for investors through its convenient and liquid structure. Through GLD, investors are able to invest in and trade gold as easy as shares of stock. GLD provided a new alternative to the cumbersome process of holding the precious metal itself. Indeed the convenience of GLD is reflected in the average share volume that it achieves on a daily basis. According to Yahoo Finance, that number stands at over 11 million shares trade a day over the last three months as of May 12, 2012.
The other factor driving SPDR Gold Trust success is gold’s price performance. The price of gold has been consistently rising over the last 10 plus years making it one of the best performing assets investors could own. GLD’s launch occurred shortly into the bull run. Here’s a graph comparing the performance of the SPDR Gold Trust to the S&P 500 ETF, SPY, since late 2004 when GLD launched. GLD has delivered an unmistakable level of out-performance.
Critics & Competitors
The SPDR Gold Trust is not without its critics or competitors today. GLD is the most expensive physical gold ETF in the U.S. and some wonder why a fund with such scale is not able to pass cost savings on to share holders. Others believe that GLD’s exclusive storage of gold in London presents too much risk and should be diversified. Competitors have seized on these trends by offering lower priced alternatives and ETFs that have different vault locations or measures of geographic diversification. These competitors include IAU from iShares and SGOL and AGOL from ETF Securities. Here’s the list of all physical gold ETFs listed in the U.S. from GoldETFs.biz.
SPDR Gold Trust Concluding Thoughts
Despite critics and competitors the SPDR Gold Trust continues to lead all competitors in assets and trading volume. Its scale in both of these areas makes it the preferred vehicle for larger institutions with significant sums to invest and traders who seek the lowest spreads between bid and ask prices. The SPDR Gold Trust is now used as the proxy for gold prices in the financial media, becoming the “Kleenex” of the gold world. Clearly GLD will go down in history as a ground breaking ETF transforming access, convenience and liquidity to the gold markets for all types of investors.
Christian Magoon is Publisher of GoldETFs.biz and IndiaETFs.com. He is also CEO of Magoon Capital, a strategic consultant firm to asset managers. Christian Magoon is an ETF insider, having launched over 40 ETFs in the United States to date. A widely recognized thought leader on finance and market issues, Christian regularly contributes to many financial media outlets. Prior to forming Magoon Capital in 2010, Christian was President of Claymore Securities (now Guggenheim Investments), where he built one of the fastest growing and most innovative ETF businesses in the country, gathering more than $3 billion in AUM in three years. He launched more than 40 ETFs, introducing many “firsts” to the U.S. market, including the first Frontier Markets, Sector Rotation, Solar Energy, Timber, BRIC and suite of China focused ETFs. Christian consistently provides his industry insights and knowledge as a commentator in the U.S. media speaking publicly on macro investment issues and ETF related topics. Follow him on Twitter @ChristianMagoon. In 2008, he was named by Institutional Investor News as one of the five people to watch in the U.S. ETF marketplace. In 2011, Financial Planning magazine dubbed Christian an “ETF Pioneer.”