The physical gold ETF space has been on the rise for several years now, as investors and issuers alike have been hopping in on the surging precious metal. There are currently four funds that offer exposure to physical gold: SPDR Gold Trust (GLD), iShares COMEX Gold Trust (IAU), Physical Swiss Gold Shares (SGOL), and the Physical Asian Gold Shares (AGOL). The latter two products store their gold overseas while GLD and IAU store the majority of their bullion in U.S. vaults [for more gold ETF news and analysis subscribe to our free newsletter].
These four funds each have their own unique features that set them apart. GLD is by far the most popular and most trade-able gold fund out there as it was the first of its kind. IAU wins on a cost basis, as it charges 15 basis points less than GLD and 14 less than SGOL and AGOL. And obviously, the latter two offer unique gold storage options in Switzerland and Singapore respectively.
|Inflows (in millions)|
The Battle For Inflows
2010 was a hands-down victory for GLD, as it took in nearly $6 billion in total assets. IAU and SGOL held their own quite nicely and AGOL had yet to make its debut. The following year shook things up, as gold surged to its historical high and endured a fair amount of volatility, investors showed an overwhelming amount of confidence in the cheapest gold fund, IAU. Both SGOL and AGOL were able to continue their trend, but GLD actually lost assets, as big name investors likely grew wary about choppy markets for this commodity [see also Get Ready For the Gold Bull Run].
That brings us to 2012, where GLD has taken back its dominant lead. And it should come as no surprise, especially given the fact that billionaires like George Soros and John Paulson placed significant bets on the fund. IAU is shaping for a strong year, as it looks to chip away at its much larger competitor. But there is another trend that investors should note among SGOL and AGOL.
AGOL’s flows have been very low on the year, as were unable to find a conclusive and consistent figure, but it falls well below its counterparts. The flows of these products as a whole have come to a standstill compared to when they first debuted, suggesting the novelty of overseas gold storage may have worn off. Though many like the idea of storing gold overseas to avoid any sort of confiscation from our government, many have questioned how safe these two ETFs can really be if they are listed on U.S. exchanges.
The Bottom Line
Plain and simple, there will be no stopping GLD anytime soon. Barring a major scandal that the fund actually holds no gold, it seems that this fund is poised to maintain its position as the second largest ETF in the world, and may perhaps make a run at SPY in the coming months. IAU seems content with its low-cost niche and appears to be generating a fair amount of consistency which is ideal for long term investors. The final two funds are certainly ones to keep an eye on as they appear to be losing steam as the months and years go on.
Disclosure: Long IAU.