The ETF IAU Gold Trust (Ishares) allows the investor to access a daily exposure to gold bullion price variation, and is an easy way to access physical gold through a financial instrument, both liquid and whose access cost is limited to 0.25%.
Gold is a very volatile asset, and as any commodity does not give rise to a dividend and is a risky asset. AUM amount to approximately $ 10628 million.
Alternative ETFs: GLD (SPDR in USD), DGL (Invesco in USD)
Index & components
Gold has the particularity of not being correlated with equity and bond markets and has also been used as a safe haven since immemorial time, especially in periods of high inflation and financial crises, as we saw during the recent period (2007-2012) marked by the subprime crisis, then by the crisis on European peripheral debts.
In addition, gold is sensitive to other factors such as central bank purchases and currently there are significant flows of purchases from central banks of emerging countries such as China and India.
The dynamics of US interest rates are also very important for gold prices as this precious metal naturally do not deliver dividends or coupon, so the Fed policy is a central issue for gold prices and if the Fed does not accelerate the rate of hike in the coming months it should be beneficial for gold prices. On the other hand, in the event of an inflationary spiral as in the 1970s, the very sharp rise in interest rates becomes good news for gold as a safe haven.
Gold can also be seen as a diversification alongside an equity portfolio, as the evolution of the precious metal is not correlated with economic cycles and can follow a very different evolution or opposite to the trend of stock indices, but not necessarily.
Finaly gold is denominated in US $, which can have a double effect since on the one hand the dollar is itself considered as a safe haven and the decline of the dollar tends to be favorable to commodities.
Rumors of embargoes / quotas on the import of gold in India following a demonetization policy also weighed on the prices from the end of 2016, while India is the largest consumer of gold especially for jewelery.
But the FED's currently measured policy on rates and the still significant threats to possible trade conflicts between China and the US (or even with Germany and Japan), coupled with possible underestimated consequences of Brexit as well as the very large indebtedness of the largest economies (US, China, Japan, Europe) may favor a rebound of the yellow metal later on.
Latest developments
Gold rose by 13.1% in 2017, for the second year in a row (+ 8.6% in 2016), after 3 years of sharp decline between 2013 and 2015, which corresponds to the end of the European debt crisis.
Gold, on the other hand, has fallen by 6% since the beginning of the year, which is linked to the sharp rise of the US dollar against the other major currencies in recent months, whereas the yellow metal is highly correlated with the US dollar but also rising interest rates because gold does not issue dividends or coupons.
Fears about the effects of the trade war between China and the US have a potential deflationary effect which is likely to enhance the attractiveness of gold to investors. However, no clear catalyst is apparent for the moment, especially as the dollar remains very strong relative to other major currencies, which should continue until a possible US recession.
