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Headlines
- Gold's value continues to rise, supported by de-dollarization, central bank acquisitions, and geopolitical uncertainties.
- Major gold ETFs, including GLD, IAU, and BAR, offer accessible options for those seeking exposure to gold's performance.
- Factors such as increasing U.S. debt, geopolitical tensions, and economic uncertainty further strengthen gold's position as a reliable asset.
The COMEX August gold futures contract was trading at $2,405.90 per ounce on July 19. By early September, gold had risen to a new high, surpassing the $2,530 level. Several ETFs provide accessible exposure to gold, including the Gold SPDR (GLD), the iShares Gold Trust (IAU), and the Granite Shares Gold Trust (BAR).
New Highs for Gold
Gold stocks have been in an upward trend for 25 years, consistently reaching new highs. The global shift away from the U.S. dollar has been a significant factor contributing to gold's rise. In 2022, a pivotal moment occurred when China's President Xi and Russia's President Putin solidified a "no-limits" alliance. Shortly after, Russia's economy stabilized through trade agreements with China and other nations, reducing reliance on the U.S. dollar.
For nearly a century, the U.S. dollar has served as the world's reserve currency, primarily used in pricing commodities and facilitating international transactions. However, the Chinese-Russian alliance and subsequent sanctions have initiated a wave of de-dollarization. As China, Russia, and their allies seek alternative payment systems, the U.S. dollar's dominance is waning. As a result, gold, the world's oldest exchange medium, has gained prominence as countries diversify their foreign currency reserves with the precious metal. China and Russia are leading global gold producers, collectively accounting for approximately 22.7% of the world's annual output.
Meanwhile, Saudi Arabia has also moved away from the U.S. dollar, ending a 50-year petrodollar agreement. The Saudis now sell crude oil to China in exchange for yuan, while India pays for oil in rupees. As the global landscape shifts, gold's value continues to rise.
Central Banks Increase Gold Reserves
Central banks around the world hold gold as a critical component of their foreign currency reserves. Since 2004, the total amount of gold held in these reserves has grown by nearly 19%. The primary buyers have been Russia, China, India, and Turkey, nations that are actively participating in the de-dollarization process. Given that Russia and China are also leading gold producers, they are likely retaining much of their domestic production, further boosting their gold reserves beyond official statistics.
China and Russia are also at the forefront of developing a BRICS currency with some gold backing, challenging the U.S. dollar's reserve currency status. As central banks, monetary authorities, and governments continue to accumulate gold, it sends a clear signal that gold remains a valuable asset.
ETF Options for Gold Exposure
For those seeking exposure to gold, the physical market for bars and coins is the most direct approach. However, there are several ETF options that offer convenient access to gold's performance:
- GLD: The Gold SPDR is the most liquid gold ETF, trading at $231.29 per share. With nearly $69.290 billion in assets under management, GLD trades an average of over 6.44 million shares daily and charges a 0.40% management fee.
- IAU: Trading at $47.28 per share, the iShares Gold Trust has over $29.67 billion in assets. IAU averages over 6.8 million shares traded daily and charges a 0.25% management fee.
- BAR: The Granite Shares Gold Trust trades at $24.70 per share and has over $841 million in assets. BAR trades an average of nearly 753,000 shares daily and charges a 0.17% management fee.
