Commodities, Currencies, Funds / ETFs, Metals

Gold ETFs See Respectable Inflows Of $7.3 Billion – Which One Is In Your Portfolio: GLD Or IAU?

Gold Bull

Gold has seen its best start to the year since 1974. Exchange traded funds (ETFs) that follow the price of the metal have become more popular. According Susquehanna International Group, plain (un-levered) long gold ETFs have seen inflows of $7.3 billion so far this year.

Just to put things in perspective of when we’ve seen two months of inflows in the past, it was the year of 2009!

The most popular gold ETF, SPDR Gold Shares GLD, has grown by $5.5 billion this year. According to CNBC, that’s more than twice the net inflows seen by the second-most popular ETF, iShares MSCI USA Minimum Volatility $USMV.

According to the news agency:

Demand for gold has been so strong that new shares of the iShares Gold Trust fund (IAU) were suspended temporarily from being issued in March. In February, IAU saw its largest creation activity in a decade.

While gold prices may see some pullbacks as investors cash out their profits, Stacey Gilbert of Susquehanna International Group said the flows into gold ETFs haven’t yet notably slowed.

So far all we’ve seen is a gold rally turn into an “official” bull market by virtue of prices advancing 20%. It’s an encouraging sign of strength; but it’s not in itself confirmation of a larger trend in force. A major bull market is characterized by a series of higher highs and higher lows over a period of months to years.

So far, gold has rallied around 22% from a low over a period of a few weeks. This rate of ascent isn’t sustainable in perpetuity. A healthy bull market ebbs and flows – it takes two steps forward and one step back, as It were.

That’s why a price correction after a 20%+ advance would be normal and healthy. If it’s a major bull market, then prices will go on to make a higher high, followed by a higher low.

We bet the vast majority of our readers get exposure to gold via exchange traded funds. So the question is how the two top rival gold ETF’s, GLD and IAU, compare?

GLDIAU-table

We can easily notice from the above table that GLD was launched first in November 2004 and is notably bigger, roughly four times the size of IAU, in terms of total net assets. Although it seems investors favor the SPDR product it’s worth to keep in mind that it charges 15 bps more than iShares to cover expenses. The difference in the total expense ratio comes at the cost of GLD’s performance in relation to the IAU. Here is the chart.

GLDIAU

Which ETF would you buy to gain exposure to gold: GLD or IAU? Have your say in our poll and feel free to share your comments below.

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