History, Growth, and Leading Funds

Binance CEO Changpeng Zhao (CZ) ignited a discussion on the history of gold-backed ETFs on X, piquing interest in these investment vehicles among crypto and traditional investors.

Gold ETFs offer exposure to gold in a more accessible and liquid format, which appeals to a broad range of investors. Initially launched in 2004 with SPDR Gold Shares (GLD), gold-backed ETFs have since expanded, reflecting increasing demand for gold as a hedge against economic uncertainties.

SPDR Gold Shares (GLD): The Pioneer Gold ETF

GLD debuted on the New York Stock Exchange on November 18, 2004, marking a significant milestone in investment history by providing a more accessible way to invest in gold. Shortly after its launch, GLD attracted over $1 billion in inflows, signaling robust demand.

By 2011, during a surge in gold prices, GLD temporarily became the world’s largest ETF by total value. It surpassed the SPDR S&P 500 ETF, underscoring gold’s appeal during economic volatility. The ETF’s growth highlights gold’s enduring role as a safe-haven asset in times of financial uncertainty.

Expansion of Gold-Backed ETFs

Since GLD’s inception, the market for gold ETFs grew notably. As of mid-2021, there were 11 additional gold ETFs in the U.S. alone. Globally, there are now over 90 active gold-backed ETFs. These offerings expanded, catering to a broader range of investors seeking convenient and regulated exposure to gold.

The growing number of gold ETFs reflects an increasing interest in commodities, especially during economic shifts. Investors are drawn to the regulated nature of ETFs, which offer transparency and liquidity. Hence, gold ETFs continue to grow, demonstrating gold’s appeal as a hedge against inflation and geopolitical risks.

Leading Gold ETFs by AUM

As of 2021, SPDR Gold Shares (GLD) remains the largest gold-backed ETF with $78 billion in assets under management (AUM). Besides GLD, iShares Gold Trust (IAU) follows with $33 billion in AUM. Both ETFs represent the majority of gold ETF investments, indicating strong investor preference for established funds.

In addition, smaller gold ETFs like SPDR Gold MiniShares (GLDM), Physical Gold Shares ETF (SGOL), and iShares Gold Trust Micro ETF (IAUM) offer varied investment thresholds. They cater to different financial capacities while still providing exposure to physical gold. Furthermore, some ETFs like VanEck Merk Gold ETF (OUNZ) and Goldman Sachs Physical Gold ETF (AAAU) even offer physical gold conversion options.

Key Market Dynamics

The top seven gold-backed ETFs collectively hold $129 billion in assets, showcasing their substantial role in global markets. GLD alone accounts for about 60% of this total, reflecting its dominance. This top-heavy distribution emphasizes investor preference for large-cap ETFs when seeking gold exposure.

Besides the variety of fund options, the gold ETF market caters to diverse strategies, ranging from traditional to micro-focused investments. While some funds offer synthetic exposure, others link directly to physical gold, addressing demand for both physical and indirect investment options.

Gold-backed ETFs established themselves as crucial components of diversified portfolios. They serve as effective tools for risk management, particularly in times of inflation and market volatility. With $129 billion in AUM, gold ETFs continue to demonstrate their relevance, providing a transparent and liquid means of exposure.