A golden opportunity in ETFs

Gold Global X ETFs VanEck commodities

9 July 2024
| By Laura Dew |
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Announcing its future product development plans, Global X has stated it will expand its range of gold exchange-traded funds (ETFs). 

The firm has been running the Physical Gold ETF (GOLD) since 2003, which is one of the world’s first physically backed gold exchange-traded products (ETP). This is one of the largest gold funds of its kind in Australia, standing at $3 billion in net assets.

Over five years, this ETF has returned a total return of 11.6 per cent versus a total return by the benchmark of 12.1 per cent.

The firm has now announced it will launch a currency hedged physical gold ETF in the third quarter of the calendar year. 

This will be the second gold product launched by Global X this year following the launch of the Global X Gold Bullion ETF (GXLD), which is a low-cost alternative to the larger GOLD fund and suitable for investors with a longer-term horizon. 

Looking at the outlook for gold as an asset allocation, rival ETF provider VanEck said it is seeing opportunities in gold miners. 

In its latest global economic outlook, the firm said: “One area of opportunity, we think, is gold miners. The rise of the gold price in 2023 was not matched by the returns of gold miners which lagged the performance of the yellow metal. This is unusual because typically in the past, the price of gold miners rose more than the increase in gold prices, as gold miners will add their margins to gold production normally when the price of gold increases. 

“As a result of this disconnect in 2023, gold miners were trading well below historical averages relative to the price of gold. Despite a noticeable pullback over the past three months, we still think there may still be plenty of runway for gold stocks as they reclaim their role as a leveraged play on the gold price. Our expectations of a sector re-rating are supported by continued strength in the gold price and are anchored to generally solid company fundamentals. 

“All else being equal, a gold price forecast of US$2,300 per ounce for Q2 2024, which is in line with the average spot price for this quarter, should result in higher earnings and cash flow generation for the industry in Q2 compared to Q1, when the spot gold price averaged about US$2,070 per ounce. Another strong earnings season for the sector should support further increases in valuation multiples assigned to gold equities.”
 

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