Beating the S&P 500 isn't easy — and usually requires speculation. But this year, a literally rock-solid investment is topping the global stock benchmark.
Shares of nine of the 10 gold ETFs with the highest assets under management, including SPDR Gold Trust, iShares Gold Trust and SPDR Gold MiniShares Trust, are up more than 21% this year, says data from S&P Global Market Intelligence and ETFDB. That outperforms the roughly 17% gain by the S&P 500.
More remarkably, even if you include the S&P 500's dividends, gold is still winning. The total return of the S&P 500 this year is 19.02%, slightly shy of gold's gain. Why is gold doing so well?
Gold Takes Off Past The S&P 500
Gold is now trading for more than $2,500 per Troy ounce. That pushes the value of the yellow metal to an all-time high.
Volatility in global markets is bullish for gold. Fears about a slowing U.S. economy makes investors cling to gold for its intrinsic value. Additionally, talk about falling interest rates around the world make gold, which doesn't pay interest, more appealing than when interest rates are high. Stir in geopolitical conflicts and strong government buying and you get a good environment for rising gold prices.
"Gold historically does well during times of market uncertainty and is a safe haven for many investors as a real asset," said Todd Rosenbluth, director of research at Vetta Fi. "The uncertainty about the Fed's next moves and persistent inflation created a favorable environment."
Sizing Up The Gold ETFs
SPDR Gold Trust is the largest gold ETF based on assets. It currently holds $69.1 billion in assets.
Like the other gold ETFs, SPDR Gold Trust owns claims to physical gold. But it also charges 0.4% annually, which is higher than the 0.32% average of the largest-in-assets gold ETFs. That's why for many investors, the SPDR Gold MiniShares Trust, which charges just 0.1% annually, might make more sense.
Rosenbluth says choosing the right gold ETF depends on how long you plan to hold it and how much. "With gold ETFs the time horizon of the investment matters," he says. "GLD is a more expensive ETF but it trades a lot with tight spreads. GLDM, GraniteShares Gold Trust and iShares Gold Trust Micro are better for buy and hold investors as they have lower expense ratios."
Where Gold Fits In Your S&P 500 Portfolio?
Most investors own little to no commodities in their portfolios. Most rely on government bond positions to offer stability. But Treasuries simply have been more of a drag than a lift.
"For the first time ever, long duration Treasuries have delivered negative performance in the 10 months following the last Fed rate hike in July 2023," said George Milling-Stanley, gold analyst at State Street Global Advisors in a report. "Long duration Treasuries have experienced a notable drawdown since August 2020 and have delivered virtually no return since 2012."
Some investors might choose to rely on gold ETFs at least for part of their volatility-control in portfolios. Milling-Stanley is calling for gold prices to be stable. His base case, which has a 50% chance of coming true he says, calls for gold prices to hover at between $2,200 to $2,500 a Troy ounce. The bearish scenario of gold falling to just $2,000 is only 20% likely to happen, he says.
And low-risk is where gold ETFs may fit in. "Many investors have an allocation to gold in a broadly diversified portfolio as the asset class performs very differently than stocks or bonds," Rosenbluth said.
Top Gold ETFs
Most are racing ahead of the S&P 500 this year.
| ETF | Symbol | YTD | Assets ($ billions) | Fee |
|---|---|---|---|---|
| SPDR Gold Trust | GLD | 21.2% | $69.1 | 0.40% |
| iShares Gold Trust | IAU | 21.4% | 29.5 | 0.25% |
| SPDR Gold MiniShares Trust | GLDM | 21.5% | 8.7 | 0.10% |
| abrdn Physical Gold Shares | SGOL | 21.4% | 3.5 | 0.17% |
| iShares Gold Trust Micro | IAUM | 21.5% | 1.4 | 0.09% |
| VanEck Merk Gold Trust | OUNZ | 21.3% | 1.1 | 0.25% |
| GraniteShares Gold Trust | BAR | 21.4% | 0.8 | 0.18% |
| Goldman Sachs Physical Gold | AAAU | 21.4% | 0.8 | 0.18% |
| Invesco DB Precious Metals Fund | DBP | 21.4% | 0.2 | 0.75% |
| FT Vest Gold Strategy Target Income | IGLD | 9.0% | 0.1 | 0.85% |
| SPDR S&P 500 ETF Trust | SPY | 17.5% | 567.9 | 0.1% |
