Have ASX Gold ETFs Kept Pace With Gold Price Surge?

We evaluate whether Exchange Traded Funds (ETFs) traded on the ASX have kept pace with the recent surge in the gold price. The ETFs mainly invest in gold bullion held in vaults.

Gold Price Climbs

Gold hit a record US$2280.53 an ounce, fueled by robust U.S. manufacturing data that caused investors to reduce bets for a June rate cut by the US Federal Reserve.

Analysts, despite a key inflation gauge climbing 2.8% year-on-year, are generally still expecting a rate cut in June.

Retail investors are joining the buying spree, with data from ETF fund flows indicating increased purchases of ETFs that hold gold bullion.

The gold price has risen 14.1% to US$2280.53, translating to a 19.8% increase in Australian dollars, reaching an all-time high of A$3499 an ounce.

ASX Gold ETFs Performance

We investigate whether ASX-listed gold ETFs have mirrored the rise in the gold price. Here’s a breakdown:

Global X Physical Gold ETF (ASX: GOLD): +18.4% YOY Gain

GOLD offers access to physical gold on the stock exchange, eliminating the need for personal storage. It aims to track the gold price in Australian dollars, before fees and expenses. The management fee is 0.40% per annum.

BetaShares Gold Bullion Currency Hedged ETF (ASX: QAU): +10.8% YOY Gain

QAU is backed by physical gold bullion and tracks the gold price, hedged for currency movements in the AUD/USD exchange rate (before fees and expenses). The management fee is 0.59% per annum.

iShares Physical Gold ETF (ASX: GLDN): +12.1% YOY Gain

GLDN tracks the spot price of gold by holding securities backed by physical gold bars. Interestingly, GLDN invests 100% of its funds in another iShares ETF – the U.K.-traded iShares Physical Gold ETC (LSE: SGLN), which itself holds 100% in gold bullion bars.

Perth Mint Gold ETF (ASX: PMGOLD): +12.0% YOY Gain

The Perth-based ETF PMGOLD, owned by the Western Australian Government and run by Gold Corporation, invests in gold bullion bars. PMGOLD offers the unique feature of converting holdings to a Perth Mint Depository account, allowing clients to redeem for various Perth Mint bullion bars. It boasts the lowest management fee among ASX gold ETFs at 0.25% per annum.

VanEck Gold Bullion ETF (ASX: NUGG): +18.0% YOY Gain

NUGG offers investment in Australian-sourced gold, with the option to convert units into physical gold bullion. The management fee is 0.25% per annum.

Summary

ASX Gold ETFs haven’t perfectly mirrored the USD gold price increase but have performed well overall. Two ETFs (GOLD & NUGG) slightly surpassed the AUD gold price increase.

Key Risks

Investing in gold bullion ETFs carries inherent risks, including:

  • Gold price volatility
  • Currency fluctuations
  • Custody risk (security of stored gold)
  • Gold bullion risk (physical risks associated with gold)
  • Concentration risk (limited investment diversification)
  • Liquidity risk (potential difficulty buying or selling)
  • Operational risk (unexpected events impacting the ETF)
  • Regulatory and tax risks

Commodity ETFs are suited for experienced investors comfortable with price volatility and bullish on the gold price.

 

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JustStocks Advisor
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Disclaimer

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