Gold (GCQ24) has been on a remarkable upward trajectory, reaching an all-time high of $2,481 per ounce as recently as July 17. Cash gold (GCY00) is up a healthy 15% since the beginning of the year, edging out the S&P 500 Index's ($SPX) return of 13.8%. Silver (SIU24), often considered gold's more volatile cousin, has also racked up significant gains, up an impressive 21.6% in 2024.
The latest burst higher in gold and silver prices is primarily fueled by expectations of impending interest rate cuts by the Federal Reserve. With the market now pricing in a 100% probability of a rate cut in September, lower interest rates are expected to benefit gold by reducing the opportunity cost of holding non-yielding assets.
Citigroup analysts have also projected that gold prices could surge even higher, potentially reaching $3,000 per ounce within the next six to 18 months. This outlook is supported by increasing inflows into gold-backed ETFs, reflecting growing investor confidence in gold as a safe-haven asset.
For those looking to capitalize on this golden opportunity, several exchange-traded funds (ETFs) offer the opportunity to gain exposure to precious metals. Here are three standout funds that provide unique strategies to ride the potential upside of gold and silver in the coming months.
#1. SPDR Gold Shares (GLD)
SPDR Gold Shares (GLD), the largest and most liquid gold ETF, has been riding the wave of gold's impressive rally in 2024. GLD is up 16% YTD, right on track with the precious metal itself.
That's no doubt because GLD aims to track the performance of gold bullion by holding physical gold in the form of London Good Delivery bars, each weighing 400 ounces, stored in secure vaults. This approach provides investors a convenient and cost-effective way to gain exposure to gold prices without the logistical challenges of owning and storing physical gold. The fund's structure allows it to closely mirror the price movements of gold, making it an attractive option for both institutional and retail investors.
The ETF's popularity is evident in its substantial assets under management (AUM), currently at $64.8 billion. This size not only provides stability, but also ensures ample liquidity for investors. Speaking of liquidity, GLD boasts robust trading activity, with a 30-day average daily trading volume of approximately 5.97 million shares. This high level of liquidity is crucial for investors, as it allows for easy entry and exit into positions without the risk of slippage.
GLD also has a fairly active options market, with average daily volume in the low six figures.
It's worth noting that GLD carries an expense ratio of 0.40%, which, while slightly higher than some competitors, remains reasonable for its category. This fee structure, combined with the fund's robust performance and high liquidity, continues to attract investors seeking exposure to gold.
#2. ProShares Ultra Gold (UGL)
ProShares Ultra Gold (UGL) offers investors a supercharged approach to gold exposure, perfect for those looking to capitalize on short-term price swings in the precious metal market. The fund's AUM stands at $253.8 million, cementing its position as a key player in the leveraged commodity ETF space.
UGL's leveraged strategy is straightforward, yet potent: it aims to deliver twice (2x) the daily performance of the Bloomberg Gold Subindex. To pull this off, the fund uses a mix of financial instruments like swap agreements, futures contracts, and options. This strategic approach allows UGL to amplify gold's price movements without actually holding any physical gold.
That said, the fund is designed to deliver 2x returns over a one-day time frame - which means that over longer holding periods, that “2x factor” isn't something investors should count on. UGL is currently up 27.4% on a YTD basis.
This performance drives home the ETF's potential for substantial returns in bullish gold markets, while also highlighting its relatively higher volatility - particularly over longer time frames.
When it comes to liquidity, UGL is no GLD, but the 2x fund holds its own; the fund's average daily trading volume over the past three months has hovered around 179,243 shares. This level of liquidity means that investors should consider entry prices carefully, since bid/ask spreads can be wider.
It's worth noting that UGL comes with an expense ratio of 0.95%. While this is on the higher side compared to non-leveraged gold ETFs, it's par for the course with other leveraged commodity funds. This heftier fee reflects the complex strategies and daily rebalancing needed to maintain the fund's 2x leverage.
#3: Sprott Physical Gold and Silver Trust (CEF)
The Sprott Physical Gold and Silver Trust (CEF) offers a unique way to invest in precious metals by combining gold and silver in one investment vehicle. CEF's strategy is simple, yet effective: it invests in unencumbered and fully allocated physical gold and silver bullion, specifically in London Good Delivery bar form.
Currently, the trust's allocation is about 65.79% gold and 34.09% silver, giving investors balanced exposure to both metals without the hassle of owning and storing physical bullion.
Over the past year, CEF's performance has been noteworthy, up 20.7%. In 2024 alone, the trust has rallied 17%.
CEF's AUM stands at a hefty $4.82 billion, reflecting strong investor interest in the closed-end fund. The trust's average daily trading volume of around 364,855 shares ensures that investors can easily buy or sell shares.
One of CEF's attractive features is its relatively low management expense ratio of 0.49%. This low expense ratio, combined with the trust's strong performance and high liquidity, makes it appealing for both long-term investors and those looking to diversify their portfolios with precious metals.
The trust's balanced approach to gold and silver allocation provides a hedge against inflation and currency fluctuations, while offering the potential for capital appreciation.
The Bottom Line on Precious Metals ETFs
With gold and silver prices hitting new highs and the potential for further gains driven by expected rate cuts, now is an opportune time to consider investing in precious metals. ETFs like SPDR Gold Shares (GLD), ProShares Ultra Gold (UGL), and Sprott Physical Gold and Silver Trust (CEF) offer diverse and convenient ways to gain exposure to these markets. Whether you're looking for direct investment in gold, leveraged returns, or a combination of gold and silver, these ETFs provide flexible options to enhance your portfolio.
On the date of publication, Ebube Jones did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
