SPDR® Gold Shares (GLD)

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On this episode of the “ETF of the Week” podcast, Tom Lydon discussed the SPDR® Gold Shares (GLD) with Chuck Jaffe of “Money Life.” The pair talked about several topics regarding the fund to give investors a deeper understanding of the ETF overall.

ETF of the Week: SPDR® Gold Shares (GLD)

Chuck Jaffe: One fund on point for today and we expect to talk about it. This is the ETF of the week. Welcome to the ETF of the week where we get the latest take from Tom Lydon, vice chairman at VettaFi, where they have a full suite of tools that are going to help you be a better, smarter, savvier investor in exchange traded funds.

If you want to learn more about it, make sure you check out VettaFi.com. Tom Lydon, it’s great to chat with you again.

Tom Lydon: Great to be back. Thanks, Chuck.

Chuck Jaffe: Your ETF of the week is?

Tom Lydon: It is the SPDR® Gold Shares (GLD).

Chuck Jaffe: And Tom, any time we’re going to talk gold, well, it begs an important question which is why you love gold right now.

Tom Lydon: Well, Chuck, it’s it’s surprising because people have not been paying attention to gold. But guess what? Gold just hit an all-time high. It just crossed above $2,100/oz when nobody was looking. A lot of people have felt a little bit of disappointment in commodities specifically gold in the last year or so. Part of that was China.

A lot of people felt a year ago China was going to have a great rebound. With that, there’s a lot of commodity demand that goes on, especially in emerging market countries when they do have rebounds. And it didn’t happen. And because it didn’t happen, a lot of retail investors sold their gold holdings. There was almost $40 billion that was sold out of gold spot-related ETFs.

The good thing, though, is that in that same period, central banks were grabbing up gold left and right. The accumulation of gold that they had over that period of time, fortunately, surpassed the amount that retailers were selling. And part of that is stabilization as we’ve seen higher and higher interest rates across the world. We’ve seen slippage in economies.

Fortunately, that has helped with inflation, especially here in the U.S. But the key thing, Chuck, as we look forward is what’s going to happen in the future. Where we are today is most advisors and investors feel that the Fed is done hiking interest rates. And that’s really good for gold because historically, when the Fed is done hiking interest rates and may be on the precipice of actually cutting interest rates most investors feel like that it is going to happen.

Historically, that’s been a great period of time. At the same time, since gold is very much tied to the dollar, we may see for the first time in an extended period of time, almost since the financial crisis with major cuts in interest rates that are going to be expected in the next year or so, the dollar may come back to Earth.

It’s had a pretty good run in the last ten or 15 years and if that’s the case, gold’s going to be more affordable for countries outside of the U.S. So the moon and the stars seem to be aligning for gold. We’re hitting all-time highs, which is fantastic. And also when traditional 60/40 allocations into stocks and bonds haven’t done that great over the last couple of years, a lot of investors are thinking about diversifying.

Chuck Jaffe: They certainly are. At the same time, gold historically has been a good hedge for inflation, but it hasn’t proven to be a good hedge for inflation as we’ve seen inflation come in over the last couple of years. Is this also a little bit of a “let’s hedge away some of the geopolitical risk” and gold will help do that?

Tom Lydon: Well, regardless of its geopolitical or its economic behavior or its market volatility, gold historically has provided some dampening in portfolio volatility, which is good. It should do that. But people do want to invest in something just so they don’t have a lot of bumps. They want to invest in something so they actually make money. And gold has done that over time, hence this new all-time high.

I think that’s really key and critical. But you point out that during times of inflation, gold historically has done really, really well. It did okay. I mean, in the last couple of years, it was up about 12% when you look at equity markets and Barclays AG. The bond market actually was negative so it did what it’s supposed to do, but not to the extent that most people would expect.

Now, we’ve got another thing that’s that’s coming. A lot of people are looking at crypto. They’re looking at crypto as possibly being the new gold. And we’re on the edge of maybe getting approval from the SEC for the first wave of the spot Bitcoin ETFs. So that means that funds like GLD actually own gold in vaults, and these ETFs would actually own Bitcoin as opposed to Bitcoin futures.

If that’s coming, we might see a new generation start to diversify. Maybe they will have bitcoin instead of gold or some gold and some bitcoin. It’s going to be very interesting to see what comes. And the SEC’s deadline for this is January 11th, when they need to make a decision.

Chuck Jaffe: That said, obviously a Bitcoin fund and a spot Bitcoin fund are going to be really interesting to watch with construction. There are a lot of different gold ETFs now. The GLD is not a miner’s fund, but when you’re talking about this as the ETF of the week if somebody prefers the IAUM or the OUNZ, or some of the other things out there. Thinking like “You know, maybe this is better, maybe that when you could redeem in gold, whatever it might be.” Do you care so much about construction when you’re making this call on gold, or is it these gold ETFs are holding physical gold, not mining gold?

Tom Lydon: Yeah, miners and physical gold don’t always correlate. There’s a lot of good things to be said about miners. However, it’s more expensive than ever to get an ounce of gold gold out of the ground. It operates differently. But take a look at it, because there are periods of time when the price of gold goes up. We can actually make more in miners as miners are trying to pull as much as they can out of the ground and get paid more for it. It’s not the same. And there are other spot gold ETFs. Some actually have an expense ratio that’s less. GLD was the first. It’s the bellwether for the industry. That’s why I selected it as an ETF of the Week.

Chuck Jaffe: And is it a 200-day moving average play?

Tom Lydon: It absolutely can be Chuck at the same time. Where does the money come from? Which I know is your next question. Everybody’s got a slew of cash that’s on the sidelines through this volatility that we’ve seen in the last couple of years. Most folks have taken something off the table and you have new money that’s available. So if you want to institute a 200-day average trend-following strategy now is a pretty good time to do it.

Chuck Jaffe: It’s the SPDR® Gold Shares (GLD) and it’s the ETF of the week from Tom Lydon. He is proving again that well, all good advice that glitters may not be gold, but sometimes it’s golden like today. Tom, great stuff. Thanks for joining me.

Tom Lydon: Thanks, Chuck.

Chuck Jaffe: The ETF of the Week is a joint production between VettaFi and MoneyLife with Chuck Jaffe. And yeah, that’s me. I am Chuck Jaffe and you can learn all about my hours on the weekday show by going to moneylifeshow.com or by searching on your favorite podcast app to learn all about investing in exchange traded funds to get tools that will make you a better investor.

Be sure to check out VettaFi.com. They’re on Twitter or X @Vetta_Fi. @TomLydon my guest is on Twitter, as well. The ETF of the Week podcast is here for you every Thursday. Make sure you don’t miss one by following them on your favorite podcast app. Until next week, happy investing, everybody!

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