The gold ETF market endured a rough-and-tumble stretch during much of 2015. This extended the sector's losing streak that stretched back to 2013, when the price of precious metals began a multi-year slump.
The landscape finally started to improve late last year, and has continued as gold prices recovered significantly to begin 2016.
While this surge has been felt across the spectrum of gold-backed ETFs, some funds have performed better than others. In particular, the Direxion Shares ETF Trust (NUGT) has outpaced its counterparts.
SPDR Gold Trust (GLD)
The largest gold ETF, the SPDR Gold Trust ETF (GLD), is always seen as the bellwether of the sector. It boasts a market cap of over $27 billion and a stockpile of more than 733 tonnes of gold bullion behind it, or 23.57 million troy ounces.
After falling throughout October and November, GLD has been on a 3-month climb that really took off in mid-January. When people buy shares of GLD, gold bullion is added to the fund's stockpile. Conversely, when shareholders are dumping their stakes, there are outflows from the fund's gold holdings. Following years of fairly consistent outflows, the swift rebound in gold prices has helped propel GLD back to a prominent place in the financial markets.
GLD advanced about 1% in after-hours trading on Tuesday, nearing its 52-week high of $120/share.
The popular iShares Gold Trust (IAU) has enjoyed similar success. Although GLD is perhaps more well-known, IAU has lower fees. This makes it attractive to long-term "buy-and-hold" investors—although you would be better off buying physical gold bullion in that case, anyway. GLD's advantage is in its high trade volumes and high liquidity.
Direxion Shares Exchange Traded Fund Trust (NUGT)
GLD and IAU haven't been the only beneficiaries of the rally in gold prices. There are a variety of gold ETFs out there, some of which largely track the rising price of the precious metal. Others are more closely tied to gold miners, which poses greater risks but also potentially greater rewards.
Another one of the bullion-based ETFs is the Direxion Shares ETF Trust (NUGT). This fund has been more volatile than most of its counterparts of late, seeing price swings greater than 10% over just a few trading days. After a rough patch last week, the fund has recovered. NUGT gained better than 6% in after-hours trading, pushing its per-share price back near $55.
Unbelievably, NUGT has surged about 200% since hitting a low of $17.40/share in mid-January.
One of the overarching themes that we can take away from the recent success for the gold ETF market has been investor's preference for safe-haven protection from economic weakness across the globe. In the words of Joe Foster, senior gold strategist at Van Eck Global, "Gold can act as a financial hedge against these risks."
The opinions and forecasts herein are provided solely for informational purposes, and should not be used or construed as an offer, solicitation, or recommendation to buy or sell any product.