(August 23, 2011) — State Street Global Advisors’ (SSgA) gold exchange-traded fund has become the biggest ETF in the industry.
The company announced that its gold ETF — with $76.7 billion in assets as of August 19 — gained 16.35% over the last month, 23.55% over the past three months, and 29.72% year-to-date.
The superior performance of the ETF reflects the fact that gold has historically performed well during times of financial and economic stress as a result of investors seeking alternative stores of wealth to hedge against inflation. Industry sources note that because commodities like gold are generally uncorrelated to the movements of stock and bond markets, they serve as helpful diversification tools, consequently driving up the popularity of the asset class.
While gold has enjoyed rising popularity amid volatile markets, some investors have become more skeptical about embracing the asset. In the face of a weakening in the US dollar in recent years, the billionaire investor and philanthropist George Soros had increased his stake in gold, silver and other precious metals. Yet, in early May, according to the Wall Street Journal, Soros’s New York-based $28 billion hedge fund — Soros Fund Management — decreased its holdings of the SPDR Gold Trust by 4.7 million shares to 49,400 shares, valued at $6.9 million at March 31.
The news was discouraging to gold investors because Soros has been perceived as a leader in pursuing gold over the past two years, according to Mark Luschini, chief investment strategist at Janney Montgomery Scott, a regional broker-dealer. “Anytime someone of that prominence and success from an investment management standpoint makes such a change in allocation, many investors are likely to follow,” he told aiCIO, adding that for a typical investor, gold is still a smart standalone investment when around 3-5% of a portfolio.
To contact the <em>aiCIO</em> editor of this story: Paula Vasan at <a href='mailto:pvasan@assetinternational.com'>pvasan@assetinternational.com</a>; 646-308-2742