State Street Global Advisors has reduced the expense ratio for the $4.7 billion SPDR Gold MiniShares Trust (GLDM US) from 0.18% to just 0.10%.
GLDM is now the cheapest gold ETP in the US in terms of sponsor fees.
Following the price cut, GLDM is now the cheapest physically backed gold exchange-traded product in the US in terms of sponsor fees.
The move is timely, coming amid a surge in interest for safe-haven assets due to the escalating Russo-Ukrainian war.
Since Putin ordered his armed forces into Ukraine on 24 February, the price of gold has gained 2.3% to reach $1,954/oz. US Treasuries have also rallied with the yield on 10-year bonds falling from 1.97% to 1.71% over the same period. Data as of 4 March.
Although gold has trended higher over the past week, volatility in the yellow metal has notably surged. This indicates the market may be struggling to price in the long-term consequences of the unfolding conflict, while the prospect of the Federal Reserve rapidly increasing interest rates to combat rising inflation is further contributing to gold’s whipsawing effect.
GLDM was launched on NYSE Arca in June 2018 in collaboration with the World Gold Council (WGC). The ETF’s low price tag immediately appealed to investors with AUM reaching the $1bn milestone less than 15 months after the fund’s debut.
GLDM’s success may also be attributed to its per-share trading price of 1/50th of an ounce of gold, as represented by the LBMA Gold Price PM (USD).
The share pricing strategy offers a low entry point, opening up gold investment to a broader client base. It is one of the significant differences between the fund and the seasoned $64.5bn SPDR Gold Shares ETF (GLD US), the first physically backed gold ETF in the US, which was also born from the partnership between the World Gold Council and SSGA.
An investment in GLD represents 1/10th of an ounce of gold. The fund charges 0.40%, which is at the more expensive end of the fee scale for gold ETFs; however, GLD is still popular in its own right. As the largest gold ETP available, it enjoys robust liquidity and relatively low bid-ask spreads – highly valued characteristics, especially by institutional investors who wish to conduct larger trades while keeping costs low.
Indeed, as investors have renewed their interest in gold, GLD has raked in over $4.5bn net new inflows year-to-date including bumper flows of $1.3bn in just the first three days of March.
Other low-cost gold ETP providers will likely be taking notice of SSGA’s action and contemplating a move of their own.
The fund’s closest competitors in terms of price include the $70 million Goldman Sachs Physical Gold ETF (AAAU US), which comes with an expense ratio of 0.18%; the $1bn GraniteShares Gold Trust (BAR US), which is priced at 0.175%; the $2.7bn Aberdeen Standard Physical Gold Shares ETF (SGOL US), which costs 0.17%; and the $1.3bn iShares Gold Trust Micro ETF (IAUM US), at 0.15%.