The SPDR Gold ETF (NYSEMKT: GLD) broke new ground in the world of exchange-traded funds. Rather than just giving investors an ownership interest in shares of companies, SPDR Gold represented a way for fund shareholders to get an indirect interest in an actual physical commodity. The ETF revolutionized the gold market, disrupting a business model that until then had relied on coin dealers and precious metals experts that made it expensive and logistically challenging to buy and sell physical gold.
With gold having recently soared above the $5,000 per ounce mark, shareholders in SPDR Gold have made out quite well lately. But as you’ll see in this second article in a three-part series on the ETF for the Voyager Portfolio, SPDR Gold hasn’t moved straight up, and it has gone for long periods of time without doing much in the way of performance for its investors.
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ETF investors are notorious for looking at a fund only after it has risen sharply, and that’s been the case with the SPDR Gold ETF. Over the past year, the fund has jumped 73%, culminating a three-year period in which SPDR Gold has generated average annual returns of 39%. Even when you look back over the past five years, SPDR Gold has done extremely well, returning about 24% annually and outperforming even some of the strongest stock indexes over the same period.
However, when you look back further, SPDR Gold’s returns have been a lot spottier. Between 2018 and 2022, the fund had three years when it lost money. Before that, gold had numerous boom and bust periods, rising sharply for a time only to give up most or all of those gains thereafter.
Nevertheless, when you look all the way back to the fund’s inception in 2004, SPDR Gold has done well for itself. Average annual returns amount to 11.85%. That compares to gold’s own return of 12.3% per year, but the math works out just about right because SPDR Gold charges an expense ratio of 0.40% annually to its shareholders.
Despite that performance, there’s one aspect of SPDR Gold that investors should know. It has to do with expenses and how the gold ETF makes sure it collects the fee it’s due.
Most ETFs own assets that generate income. As a result, those funds’ investors never see their fund sell stocks. Instead, to pay fees, the ETF will take some of the dividend income it receives.