Gold ETF Assets Surge But A Closer Look At The Data Tells A Different Story (GLD, GDX)
Christian Magoon: Global gold ETF assets just hit a new high, but are gold ETF products really in their glory? Gold ETF funds like the SPDR Gold Trust (NYSEARCA:GLD) that track gold prices are up marginally over the last year and in 2012. Gold stock ETFs like the Market Vectors Gold Miners ETF (NYSEARCA:GDX) have suffered dreadful double digit losses over the last year. Adding to the growing carnage is the slowdown of the economies of the two largest demand drivers of gold: India and China. So is it time to celebrate gold ETFs? Probably not, although this new high water mark for assets may be setting up an attractive entry point for astute investors…
As a quick recap on why gold ETF products are gaining investor assets, consider these factors:
ETFs provide convenient exposure to physical gold or gold related stocks. Once a brokerage account is established, investors can easily access gold markets.
ETFs are priced attractively relative to mutual fund alternatives and the associated costs of buying and storing physical gold. Currently, the lowest gold ETF expense ratio is .25bps or one quarter of one percent a year.
Gold ETF products enable investors to target many unique areas of the gold space including gold prices, mining stocks and leveraged and inverse gold strategies. Today over 22 products are available to U.S. investors.
ETFs feature daily transparency of their holdings, allowing investors to know exactly what they own. In addition, physical gold ETFs have inspection reports performed by third parties which report back to shareholders of the fund.
ETFs trade on major stock exchanges like the NYSE Euronext or the NASDAQ and have second by second pricing. Selling a gold ETF is as simple as selling a stock, both of which can be done with a click of the mouse or a call to an advisor or online brokerage firm.
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.”