Will The Gold ETFs Rally Stay As Coronavirus-Led Inflows Rise?

The coronavirus pandemic is sparking fears of a global economic recession among investors as the outbreak is disrupting global supply chains and economic activities. In fact, the global equities are headed toward the second-worst week since the 2008 global financial crisis. Moreover, President Trump’s latest announcement on suspending all travel to the United States from Europe, except the United Kingdom, for 30 days has raised virus fears among market participants. Thus, in the wake of the current scenario, market participants are rushing to safe-haven assets like gold. Notably, gold holdings in ETFs have already risen 170.5 tons this year through Mar 10 (read: ETFs to the Rescue as Coronavirus Wreaks Havoc).

Apart from virus-related concerns, further interest rate cuts are lowering the opportunity cost of investing in non-yielding bullion. The Bank of England has trimmed its benchmark rate by 50 basis points (bps) to 0.25% on Mar 11. The U.S. central bank had cut the target range for its federal funds rate by 50 bps to 1-1.25% during an emergency move on Mar 3, addressing the possible economic fallout owing to the coronavirus outbreak (read: Emergency Fed Cut Less Effective: ETFs That Should Survive).

It is being believed that adequate steps by the governments and central banks to control the coronavirus pandemic will help the stock market rebound. Market participants are waiting for further information on the steps the government’s plan to take to mitigate the looming concern while they continue to invest in the yellow metal-backed funds to seek refuge.

Summing up, the following comment from Rob Haworth, senior investment strategist at U.S. Bank Wealth Management, shows how the current scenario looks conducive for investments in precious metals — “given the uncertain nature concerning the severity of the coronavirus, low global interest rates, central banks expected to provide even more liquidity and a high level of negative yielding debt globally, there is plenty of price support for precious metals.”

Gold ETFs to Shine

Gold ETFs mostly move in tandem with gold prices. The SPDR Gold Shares (NYSE:GLD) (TSXV:GLD) , iShares Gold Trust IAU, SPDR Gold MiniShares Trust (TSXV:GLD) and GraniteShares Gold Trust (TSX:BAR) are some of the popular ETFs. These funds have a Zacks ETF Rank #3 (Hold). Below we have discussed them in detail:

GLD

This is the largest and most-popular ETF in the gold space, with AUM of $51.71 billion and average daily volume of around 9.6 million shares. The fund reflects the performance of the price of gold bullion, less the Trust's expenses. At launch, each share of this ETF represented about 1/10th of an ounce of gold. Expense ratio is 0.40% (read: ETF Strategies to Play the Rising Virus-Induced Volatility).

IAU

This ETF offers exposure to day-to-day movement of the price of gold bullion. It has AUM of $20.79 billion and trades in solid volume of 20.3 million shares a day, on average. At launch, each share of this ETF represented about 1/100th of an ounce of gold. The ETF charges 25 bps in annual fees (read: ETFs to Play as Goldman Forecasts Gold to Hit $1800).

GLDM

This product seeks to reflect the performance of the price of gold bullion less GLDM’s expenses. Being one of the low-cost products with an expense ratio of 0.18%, GLDM has accumulated $1.47 billion in AUM and trades in average daily volume of 1.5 million shares. At launch, each share of this ETF represented about 1/100th of an ounce of gold (read: 3 Safe ETFs for Volatile Markets).

BAR

With AUM of $738.2 million and expense ratio of 0.17%, the fund tracks the performance of gold price less trust expenses. It trades in moderate volume of 238,000 shares per day, on average. At launch, each share of this ETF represented about 1/100th of an ounce of gold (see: all the Precious Metal ETFs here).

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