This tracker fund is a cheap way to secure gold’s safe haven qualities

With SVB’s collapse leading to market volatility this ETF offers exposure to the prized precious metal

With concerns about systemic risk in the banking sector, gold’s qualities as a safe haven are once again coming to the fore and we’ve found an excellent way to play the precious metal.

Gold typically performs well during periods of low growth and sticky inflation and when investors are feeling nervous. Arguably all three of these factors are present and correct right now.

Even aside from the collapse of banking group SVB, the crash seen at several crypto-linked institutions and the ongoing volatility in this part of the market has blown out of the water any claims for bitcoin as an alternative store of value to gold.

One of the things which has held gold back recently has been rising interest rates and the implications for gold’s attractiveness relative to assets like cash and bonds which, after all, offer something gold doesn’t: an accompanying income stream.

Gold price

($/oz)

2,000

1,500

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iSHARES GOLD PRODUCERS UCITS ETF (SPGP)

Price: £10.46

Net assets: £1.29 billion

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Chart: Shares magazine • Source: Refinitiv

However, the collapse of SVB has led to a reduction in rate expectations, at least for the time being, and this should be supportive to gold.

A step back for the dollar, which tends to have an inverse relationship to the metal, is also helpful. On the flipside if rates are higher for longer and if the dollar strengthens these could help dull gold’s shine as a defensive asset – something investors should bear in mind.

Investing in gold miners, while it comes with operational risk, also allows you to typically secure income from dividends and enjoy outsized gains if they can deliver growth.

A diversified fund of gold producers protects you from the risk of being caught out by the failings of individual companies and iShares Gold Producers (SPGP) is a low-cost way of achieving this kind of exposure.

The exchange-traded fund has an ongoing charge of 0.55% and has delivered a five-year annualised total return of 9% versus 6.6% from BlackRock Gold & General (B5ZNJ89), the big actively managed gold mining fund which has a much higher ongoing charge of 1.16%.

Dividends are automatically reinvested into the ETF which tracks the S&P Commodity Producers Gold index, a basket of companies engaged in exploration and production of gold. Its largest holding is Barrick Gold (GOLD:NYSE), a $30 billion miner headquartered in Canada which has assets across the globe, including in the Americas, Africa and Asia.

It has a stake in Franco-Nevada (FNV:NYSE) which receives royalties on revenue from various third-party mines. It also invests in Newmont (NEM:NYSE), the world’s largest gold miner by output, and which last month made a $17 billion takeover bid for Australian rival Newcrest (NCM:ASX). [TS]