Industry Updates

Gold ETFs start to lose their shine

George Geddes

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ETFs offering exposure to gold via the gold-mining industry or commodity-backed products are some of the best performing ETFs in 2019, however, returns have dipped after what has been a difficult September for the yellow metal.

The price of gold fell in the run-up to India’s festive period. The Indian retail market grows significantly this time of the year as there tends to be a spike in demand for gold jewellery. However, there has still been large inflows into gold ETFs amid global uncertainty surrounding Brexit and international trade wars.

The WisdomTree Physical Swiss Gold (SGBS) saw its net asset value (NAV) fall 2.1% over the course of the week commencing 23 September. This contributed to its losses for the month so far to be 2.6%.

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Equity ETFs comprised of gold mining companies have suffered even greater losses over the same periods. The L&G Gold Mining UCITS ETF (AUCP) has produced negative returns for September with -10.2%. This hasn’t been helped by a 4% loss for last week alone.

Other ETFs such as the VanEck Vectors Gold Miners UCITS ETF (GDGB), the Xtrackers Physical Gold – GBP Hedged (XGLS) and the iShares Gold Producers UCITS ETF (SPGP) have also slumped in performance having fallen 11.5%, 2.6% and 10.8%, respectively.

Despite the price of gold-backed ETFs falling this month, the products have still been trading at a premium. SGBS has been trading at a premium of 0.13% as well as XGLS trading at a premium of 0.18%, supporting the fact that demand is still high.

September’s performance for gold ETFs hasn’t impacted their year-to-date (YTD) returns. SPGP and SGBS, which have a total of $3.6bn in assets under management, have YTD returns of 37.5% and 15.7%, respectively.

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SGBS and XGLS YTD Returns - Source: Bloomberg

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AUCP, GDGB and SPGP YTD Returns - Source: Bloomberg

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