While the market rotates out of tech and into defensive sectors, investors could see another rotation from debt securities to precious metals this month. That’s because in his speech at Jackson Hole on Aug. 22, Federal Reserve Chair Jerome Powell alluded to upcoming interest rate cuts at the central bank’s FOMC meeting scheduled for Sept. 16–17.
That caused stocks to rally after Powell's speech. The S&P 500 flirted with its all-time high while gaining 1.52% on the day. But investor euphoria wasn’t limited to the equities camp. The news was celebrated by gold bugs, as the precious metal historically experiences bullish price movement when investors flee fixed income due to lower yields and rotate into other safe-haven assets.
That’s something that could play out in a lower-rate environment, with gold—and gold ETFs—becoming increasingly attractive for investors if the Fed lowers its benchmark federal effect funds rate. The odds of that happening next month stand at 88.3%, according to the CME’s FedWatch Tool.
Lower Rates Aren’t the Only Bullish Factors for Gold
Since hitting its record high in April, gold has traded sideways between $3,500 to $3,180, having failed to break through resistance twice—once in June and once in July—before retreating. But as summer gives way to fall, the precious metal has tailwinds suggesting a golden opportunity.
Beyond the Fed’s soon-to-be revised monetary policy, the U.S. dollar continues to weaken amid a backdrop of tariffs, sticky inflation, and President Donald Trump’s ongoing criticism of the central bank’s chairman and its governors. As of late August, the greenback had retreated 10.69% from its year-to-date high of $109.98 to $98.22.
The U.S. dollar has a historical inverse correlation with gold. When the former weakens, the latter strengthens, and vice versa. That’s particularly relevant amid periods of creeping inflation during which gold serves as a hedge.
Ongoing geopolitical unrest is also bullish. U.S.-brokered peace talks with Russia and Ukraine have stalled, and with Israel continuing its military campaign in Gaza, safe-haven assets should continue to see rising demand.
That resulted in Swiss-based UBS Group raising its price target for gold last week to $3,600, citing persistent U.S. macroeconomic risks, de-dollarization trends, and strong investment demand for ETFs and central banks, which together are expected to drive the price of gold higher in the near-to-medium term.
So here are three gold-backed ETFs that can provide investors with exposure to gold without having to own the physical metal itself.
1. The SPDR Gold Trust
Perhaps the most well-known is the SPDR Gold Trust (NYSEARCA: GLD), which is backed by gold bullion stored in secure vaults.
With $102.72 billion in assets under management (AUM), it’s the largest gold ETF on the market, the first U.S.-listed gold ETF, and the first commodity ETF backed by a physical asset.
The GLD is also one of the best-performing gold ETFs, having gained nearly 597% since its inception on Nov. 18, 2004.
The fund is highly liquid with an average daily trading volume of 10.14 million shares, and it offers investors a manageable expense ratio of 0.40%.
Over the past 12 months, the fund has been popular among institutional investors, with inflows of $24.22 billion significantly higher than outflows of $7.88 billion. Current short interest is just 2.86% of GLD’s 333.4 million shares outstanding.
2. iShares Gold Trust
The iShares Gold Trust (NYSEARCA: IAU) is also a gold-backed ETF.
Though much smaller than the GLD at $48.41 billion in AUM, the IAU has outperformed its predecessor with a gain of more than 648% since its inception on Jan. 28, 2005.
The fund also offers sound liquidity with an average daily trading volume of 7.9 million shares.
At 0.25%, the IAU has a lower expense ratio than the GLD.
It also boasts higher institutional ownership at 59.67% versus GLD’s 42.19%, and lower short interest at just 0.92% of its 766.15 million shares outstanding—a 13.69% decrease in short interest from the month prior.
3. SPDR Gold MiniShares Trust
The newcomer of the group, the SPDR Gold MiniShares Trust (NYSEARCA: GLDM), is backed by physical gold and offers the lowest expense ratio on this list at just 0.01%.
Launched on June 25, 2018, the ETF has gained nearly 168% while amassing $16.3 billion in AUM.
While less liquid than the GLD or the IAU, the fund still sees an average daily trading volume of 3.78 million shares.
Institutional buying has outweighed institutional selling over the past 12 months, with $3.55 billion in inflows against $947.28 million in outflows.
Short interest stands at 1.66% of its 244.35 million shares outstanding.