Gold ETFs (exchange-traded funds) are the perfect way for investors to get exposure to physical gold without actually having to own it. And with gold prices on the move, now is the perfect time to start researching gold bullion ETFs.
Gold Prices on the Move
The last time gold had a net positive year was 2012, when bullion prices inched up close to five percent; closing out at $1,647 per ounce. Since then, so-called encouraging U.S. economic data and a soaring bull market have been putting pressure on gold prices.
Currently trading at around $1,205 per ounce, gold prices have fallen roughly 36% since the beginning of 2013. But 2015 could be the year gold experiences a renaissance; gold- and bullion-related ETFs have been experiencing their best rally since January, as the once red-hot U.S. dollar begins to lose steam and weak economic data continue to stream out of Greece and China.
Gold prices are up five percent since the middle of March, buoyed by a number of catalysts. First, the U.S. dollar recently hit a three-month low following the release of disappointing U.S. jobs data. U.S. retail sales were unchanged in April as households reined in their purchases of big-ticket items. This is bad news after first-quarter GDP came in at a dismal 0.2%.
There is also concern about when the Federal Reserve will begin raising interest rates. Higher interest rates mean the U.S. economy is doing better, which weighs down the price of gold. That said, one of the big questions is: will gold prices climb higher as a result of a weaker dollar or will rising interest rates reverse the current rally?
Gold to Profit From Global Boom-Bust
Outside of our borders, there is growing concern about whether Greece can meet its financial obligations with the European Central Bank (ECB), the European Union (EU), and the International Monetary Fund (IMF). Or will it default on its loans, paving the way for an exit from the eurozone? Then there are concerns about whether countries like Spain or Portugal could follow suit.
China is another concern. The second biggest economy in the world is slowing down at the same time its stock market is at record highs. Should the bubble burst, investors will rush into gold; just like they did a few years ago.
Gold will look increasingly attractive should the largest two economies in the world follow the same path of boom-bust.
Interestingly, gold prices have also been testing a support level of $1,140 since November 2014. In fact, that level has been broached three times. What this means is there are a lot of buyers at this level and sellers aren’t strong enough to bring the prices lower. If you’re a technical trader, this is called a “triple bottom” and it points to a possible reversal in the price of gold bullion.
Top 3 Gold ETF Stocks
If you don’t have the space to store or don’t want to add physical gold to your investment portfolio you could always consider a few gold ETFs.
1. ETFS Physical Swiss Gold (NYSEArca/SGOL)
ETFS Physical Swiss Gold (NYSEArca/SGOL) is designed to offer investors a simple, cost-efficient way to access the gold bullion market. The ETF has roughly 772,594 troy ounces, or $930.2 million of assets under management.
The physical gold bullion bars are stored in secure vaults in Zurich, Switzerland, and are subject to two vault inspections each year. One is done randomly. If only Fort Knox was this transparent.
To ensure the physical gold is actually there, ETFS Physical Swiss Gold is not allowed to lend out its bullion.
2. iShares Gold Trust (NYSEArca/IAU)
iShares Gold Trust (NYSEArca/IAU) tracks the price performance of physical gold bullion, less fund expenses. The fund is a convenient, cost-effective way to access physical gold and to diversify your portfolio to help protect against inflation.
The ETF has 5.35 million ounces in trust with $6.45 billion of assets under management, secured in vaults in London, New York City, and Toronto. The fund’s vaults were last inspected on May 15, 2015 (you can read the report here). At the close of business on May 15, the Trust held title to 13,344 bars of gold with a total of 5.35 million ounces.
3. Market Vectors Junior Gold Miners ETF (NYSEArca/GDXJ)
Market Vectors Junior Gold Miners ETF (NYSEArca/GDXJ) provides investors with exposure to small and medium-capitalization companies in the gold and/or silver mining industry.
The junior miners are listed in Australia, Canada, China, South Africa, the United Kingdom, and the U.S., owning gold properties around the world. To be included in the index, junior minors must generate at least 50% of their revenue from gold or silver mining.
The top five junior mining companies in the ETF include: Osisko Gold Royalties Ltd. (TSX/OR) at six percent; Hecla Mining Company (NYSE/HL) at four percent; Centamin Egypt Ltd. at 4.21%; Northern Star Resources Limited (ASX/NST) at four percent; and IAMGOLD Corporation (NYSE/IAG).