SSGA launches first US-listed gold ETP with strong dollar risk mitigation

Jan 30th, 2017 | By | Category: Commodities

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State Street Global Advisors (SSGA), in collaboration with the World Gold Council, has unveiled the SPDR Long Dollar Gold Trust (NYSE: GLDW), a physically-backed gold exchange-traded product which seeks to mitigate the effect of a rising US dollar on gold prices.

SSGA launches first US-listed gold ETF with strong dollar risk mitigation

The SPDR Long Dollar Gold Trust (NYSE: GLDW) combines both a long position in physical gold and long dollar exposure against a basket of non-US currencies, thereby seeking to mitigate the effect of a rising US dollar on gold prices.

“The price of gold and the US dollar have historically tended to move in opposite directions,” said Nick Good, co-head of the Global SPDR business at SSGA. “By lessening the dollar’s potential impact on gold, GLDW seeks to provide investors the opportunity to realize the potential benefits of using gold as a strategic portfolio diversifier, while offering the ability to buffer against the potential adverse effects of a strong dollar on gold.”

The ETP tracks the Solactive GLD Long USD Gold Index which combines both a long position in physical gold and long dollar exposure against a basket of non-US currencies. Performance of the US dollar against this currency basket is expected to increase or decrease the amount of gold held by the Trust. GLDW holds physical gold in the form of 400 ounce London Good Delivery bars stored in the Custodian’s London vault.

Henning Kahre, Head of Research, Solactive AG, said: “We are very excited to be providing GLDW with this new index. Gold is often used in portfolios as a diversifier and as a safe haven instrument for tail risk events. The Solactive GLD Long USD Gold Index, as the basis of the new SPDR Long Dollar Gold Trust, offers investors exposure to gold as though they’ve purchased it in a basket of foreign currencies.”

The ETP has a total expense ratio (TER) of 0.50%.

During the past three years of persistent dollar strength, from 31 December 2013 to 30 December 2016, the gold price fell from $1,205 to $1,146 per ounce – a 5% decline. However, when the effect of a strengthening dollar is removed, gold priced in non-US currencies, such as the euro, increased from €873 to €1,096, a 25% increase.

The ETP is designed to be used as a strategic complement to the existing SPDR Gold Shares (NYSE: GLD), launched by SSGA and the World Gold Council in November 2004. GLD is the first US-listed gold ETP, is backed by physical gold bullion, and currently holds more than $30.6bn in assets under management.

Joseph Cavatoni, Managing Director USA and ETFs, World Gold Council, commented: “For investors and advisors incorporating currency movements into their investment thesis, the SPDR Long Dollar Gold Trust provides a convenient vehicle to lessen the potential impact of the dollar on gold prices by creating the economic effect of owning gold with a basket of non-US currencies. Together, GLDW and GLD may allow investors to enjoy the diversification benefits of holding gold in either strong or weak dollar environments.”

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