Active Gold

WisdomTree Active Gold

WisdomTree combines gold miners and gold futures

USA

Gold ETFs are a well-worn path at this stage. But WisdomTree has a new idea that uses gearing, futures and mining shares.

The WisdomTree Efficient Gold Plus Gold Miners Strategy Fund (GDMN) will be actively managed (transparent) and will buy both gold mining shares and gold futures on the margin.

For every $100 invested in GDMN, the fund will invest $90 in the shares of global gold mining companies like Newcrest, Barrick Gold, Newmont. The remaining $10 will be used to buy $90 worth of gold futures on margin. This will mean the fund is geared and has $180 worth of gold exposure for every $100.

GDMN charges 0.45%.

Bernie’s commentary – market timing

Gold ETFs had a rough time last year. US and European physical gold ETFs saw billions in outflows. But even harder hit were gold mining ETFs. VanEck’s famous gold miners ETF (GDX) bled $1.5B --meaning it lost almost 15% of its AUM in just twelve months.

Some have blamed gold’s hard times on bitcoin and cryptocurrency. The Financial Times argues, without providing supporting evidence, that “Investors flee gold for cryptocurrencies as inflation worries perk up”. In a similar vein, some crypto ETF issuers have claimed that bitcoin is gold for millennials. 

From where I sit, it’s highly unlikely that bitcoins will be a successful substitute for gold. The two have very different volatility profiles.

A more likely reason for gold’s bad run is that the stock market is doing well. Gold is a safe haven. It does well when the stock market does badly, like 2008 (GFC), 2011 (Eurozone debt) and 2020 (covid). When the stock market thunders up – as it has the past 12 months –tactical investors feel they don’t need it. So they sell their gold, and buy riskier assets instead like stocks and bitcoin.

Either way, it is an interesting time to be launching a gold ETF. And this approach is new. Maybe WisdomTree is picking the bottom of the market.