Breaking News
0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

The Weak Gold Price Makes This ETF A Good Value

By Investing.com (Tezcan Gecgil/Investing.com )ETFsApr 12, 2021 07:35AM ET
www.investing.com/analysis/the-weak-gold-price-makes-this-etf-a-good-value-200572472
The Weak Gold Price Makes This ETF A Good Value
By Investing.com (Tezcan Gecgil/Investing.com )   |  Apr 12, 2021 07:35AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 

Despite the significant run-up in prices of many commodities, gold has had a lackluster year so far. It started 2021 around $1,900/oz. and is currently lower, just shy of $1,745.

That's a far cry from its intraday record-high of almost $2,075 seen in August 2020. At the time, market volatility catapulted gold into the limelight for its safe haven status, and the yellow metal's performance outstripped the returns of the technology-heavy NASDAQ 100 index. But since then, gold has given back most of the impressive gains. The return over the past 12 months is, in fact, close to just 3%.

Given the up move in the price of gold since March, market participants wonder whether Q2 could be an opportune time to buy the shiny metal. We're currently bullish on gold (as well as silver, which we'll cover in a separate article soon) for the rest of the year. Among other factors, rising inflation could be a catalyst for a long-term upside.

Gold Futures Weekly
Gold Futures Weekly

There are different ways to invest in gold, starting with buying the physical bullion. Gold’s investment case is rooted in the history of humanity. Ancient civilizations used the metal in jewelry and coins. The special characteristics of the metal make it difficult to counterfeit, but relatively easy to transport. Therefore, many cultures regard it as an important store of wealth. In the US, most financial planners would recommend allocating around 5% of a long-term portfolio to gold.

The other way to invest in gold is via exchange-traded funds (ETFs). Therefore, today’s article introduces an ETF for gold bulls who might want to bet on a continued upward trajectory in price.

iShares Gold Trust

  • Current Price: $16.61
  • 52-Week Range: $15.94 - $19.76
  • Expense Ratio: 0.25%

The iShares Gold Trust (NYSE:IAU)) provides exposure to the daily movement of the price of gold bullion. The fund started trading in January 2005, and net assets stand at $28 billion.

IAU Weekly
IAU Weekly

Since the start of the year, IAU is down almost 8%. For those investors who believe the fundamental backdrop is supportive of gold, the fund could provide a convenient way to access gold.

From a technical perspective, the $17.5-level may act as resistance in the coming days and IAU could trade between $16 and $17. If the bulls have the upper hand, then $18 may well be the next target. Options on IAU are also available that could help some put together more sophisticated strategies.

On a final note, we need to remind readers that the ETF will implement a 1-for-2 reverse stock split on May 24. At the time, this reverse stock split will increase the share price and decrease the number of outstanding shares. However, for investors, the total value of shares outstanding and the total value of the investment will not be affected.

There are two other similar ETFs that could appeal to investors. They are the SPDR® Gold Shares (NYSE:GLD) and the SPDR Gold MiniShares (NYSE:GLDM). Year-to-date (YTD), they are also both down around 8%.

Bottom Line

The past several months have been frustrating for gold bulls. But we believe Q2 might be a good time to increase exposure incrementally as the price of gold is likely to have made a short-term bottom in March.

Owning some gold through miners is another way to stay ahead of the curve. As the price of the yellow metal rises, miners' margins generally improve, and profits increase.

Potential investors should look for companies with a strong asset base, experienced management, and a robust balance sheet. Names we like might include:

  • Barrick Gold (NYSE:GOLD) — down 6.9% YTD;
  • Kinross Gold (NYSE:KGC) — up 0.9% YTD.
  • Newmont (NYSE:NEM) — up 2.7% YTD;
  • Wheaton Precious Metals (NYSE:WPM) — up 0.7% YTD.

We have to remind readers that miners tend to overshoot the price action in the metal, both to the upside and the downside. Thus, prices of mining stocks can typically turn around in a hurry.

Finally, there are ETFs that invest in various miners, such as the VanEck Vectors Gold Miners ETF (NYSE:GDX) or the VanEck Vectors Junior Gold Miners ETF (NYSE:GDXJ). Year-to-date, they are down 3.6% and 10.3% respectively. We plan to cover these funds in the coming weeks.

The Weak Gold Price Makes This ETF A Good Value
 

Related Articles

The Weak Gold Price Makes This ETF A Good Value

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Comments (5)
David Smith
David Smith Apr 12, 2021 6:27PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Tezcan Gecgil, regarding your recommendation of similarly structured GLD and GLDM, I've spent quite a bit of time doing my due diligence into GLD. Would you happen to know why there is a clause in the GLD prospectus that states GLD has no right to audit subcustodial gold holdings? The GLD managing organizations sure went out of their way to create this glaring audit loophole. What is the purpose of this loophole? Additionally, the GLD organizations promise that this fund is 100% backed by actual physical gold but yet they staunchly deny retail investors the right to any of their listed physical gold. I remember there was a highly publicized visit by CNBC's Bob Pisani to GLD's gold vault. This visit was organized by GLD's management to prove the existence of GLD's gold but the gold bar held up by Mr. Pisani had the serial number ZJ6752 which did not appear on the most recent bar list at that time. It was later discovered that this "GLD" bar was actually owned by ETF Securities.
David Smith
David Smith Apr 12, 2021 6:27PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
They are not at all straightforward about GLD's insurance as well. Their representatives will not confirm nor deny the existence of GLD's insurance. I recommend anyone curious about this to confirm via calling GLD's publicly listed number for general inquiries at 866 320 4053 and ask about this clause from the GLD prospectus: "The Custodian maintains insurance with regard to its business on such terms and conditions as it considers appropriate which does not cover the full amount of gold held in custody." Exactly how much of the fund is insured? They will not give you a straight answer and might even throw in some bizarre excuse which I've experienced. Why hide this information from investors? The people behind GLD certainly do not seem like the most honest types.
Alan West
Alan West Apr 12, 2021 2:42PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Interest rates going up means gold going down.
Md. Musfiqur Rahman
Md. Musfiqur Rahman Apr 12, 2021 12:59PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
thanks
Michael Lalwani
Michael Lalwani Apr 12, 2021 9:59AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
It still down for daily
Mubashir Hussain
Mubashir Hussain Apr 12, 2021 7:41AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
nice
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
or
Sign up with Email