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Gold ETF Fee Battle Intensifies

ETF Professor

While gold and the related exchange traded funds are struggling this year, some investors remain fond of the yellow metal and some ETF issuers are rewarding that faith with lower expenses.

Upstart ETF issuer GraniteShares announced a new, reduced annual expense ratio for the GraniteShares Gold Trust (NYSE: BAR).

What To Know

BAR debuted in August with an annual fee of 0.20 percent, or $20 on a $10,000 investment. At the time, BAR was the least expensive gold ETF on the market.

While the environment for gold has been challenging since BAR came to market, some investors are displaying enthusiasm for the low-cost gold ETF. BAR has about $280 million in assets under management, easily making it one of the most successful commodities ETFs to come to market last year.

Why It's Important

BAR's low fee inspired fee cuts and the debut of competing, low-cost gold funds, but GraniteShares is taking its low-cost leadership. The company announced it's paring BAR's annual fee to 0.1749 percent, or $17.50 per year on a $10,000 investment. That renews BAR's status as the least expensive gold fund currently available to U.S. investors.

BAR's fee cut was announced as some analysts are forecasting a rebound for the yellow metal and precious metals miners.

"Although there is little evidence that inflation is accelerating (as of now) or that the end of this bull market is imminent, we argue that gold miners should be given a larger weight in investors’ portfolio for the following reasons: i) the economic cycle continues to mature; ii) asset valuation multiples are expanding and asset bubbles are emerging in certain areas; iii) budget deficits are increasing at alarming rates; and iv) quarterly earnings will face tougher comps in 2019, bringing into question how much longer this record-breaking bull market can continue,” said CFRA Research equity analyst Matthew Miller in a recent note.

What's Next

BAR and rival gold ETFs could benefit from short covering as bearish traders have recently load up on short gold positions.

“For the week ending September 25, money managers increased their speculative gross long positions in Comex gold futures by 609 contracts to 98,513, while short positions increased by 1,823 contracts to 182,190. This means that gold’s net short position is 83,677 contracts,” according to Miller. “The gold market could be poised for a short-covering rally, as investors are likely to start closing out their record level of short positions, given gold’s resilience to not break below key levels of support.”

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