3 New Gold ETFs to Check Out


A few weeks ago, AdvisorShares launched three new gold ETFs.

  1. The Gartman Gold/Yen ETF (NYSEARCA:GYEN)
  2. The Gartman Gold/Euro ETF (NYSEARCA:GEUR)
  3. The Gartman Gold/Pound ETF (NYSEARCA:GGBP)

The idea for these funds comes from some comments that Dennis Gartman — a famous money manager who often appears on CNBC – has made in which he claims to be “long of gold in Yen/Euro/Pound terms,” meaning that he is long gold and short one or more of these three currencies.

The idea likely drew some inspiration from the overwhelming success of WisdomTree’s (NASDAQ:WETF) Japan Hedged Equity Fund (NYSEARCA:DXJ), which is long of Japanese stocks and short the Yen as a hedge. This fund became immensely popular towards the beginning of last year when the Yen began to fall and Japanese stocks began to rise — it experienced the best of both worlds and grew to be one of the world’s largest ETFs.

WisdomTree, AdvisorShares, and others have been milking this concept of being long of a certain asset or asset class and short a currency in order to hedge the risk of owning foreign stocks (as was the case for the DXJ) or to enhance returns.

Investors who are looking for a “safe haven” asset should certainly consider one or more of the above funds for the following reason. In an environment in which safe haven assets perform well, one of these assets will likely be the U. S. Dollar. Gold may be one of these assets, too — in 2008 while virtually every asset fell against the U. S. Dollar, gold rose 6 percent. Had you owned gold in terms of, say, the Euro, your return would have been substantially greater as this bet would take into consideration the fact that both the U. S. Dollar and gold act as safe-haven assets.

These ETFs make it easy for retail investors to express a rather complex viewpoint with one easy trade, and I like them for this. They are also inexpensive with expense ratios of just 0.65 percent.

Unfortunately, these funds are highly illiquid. This could be due to a couple of things. First, these ETFs are less than a month old and I think a lot of investors simply don’t know that they exist yet. There hasn’t been a lot of publicity promoting them. I, for one, only learned about them because I am on AdvisorShares’ mailing list and they sent me a notification that these funds ere being launched. The Denis Gartman “brand” really isn’t that strong the way that, say, Warren Buffet’s brand is, and products bearing his name haven’t attracted much interest. Two other ETFs — the ETRACS Fischer-Gartman Risk On ETF (NYSEARCA:ONN) and the Risk Off ETF (NYSEARCA:OFF) — have $12 million and $10 million in assets, respectively.

Second, while gold has been in favor lately, there hasn’t been much interest in safe-haven assets. True, there have been a few sharp down days and temporary scares in Turkey and the Ukraine, but there really hasn’t been any fears entering the market with the S&P 500 touching yet another all time high yesterday.

Nevertheless, I think investors may want to keep an eye on these ETFs, assuming that they don’t play in the FOREX or futures markets. There will be times in the future that they are appealing alternatives to the more popular SPDR Gold Trust (NYSE:GLD). For instance, if there is further turmoil in the Ukraine, I suspect that this will generate weakness in the Euro as investors flock to the Dollar. However, gold will also perform well. We saw these two market moves on Monday when fear of a Russian/Ukrainian conflict escalated. While this fear has died down for now, we can see it re-emerge very quickly and with vehemence. This will make the GEUR fund attractive.

We may also see further weakness in the Japanese Yen that was so prevalent in 2013. There is no sign that the weak Yen policy of Shinzo Abe is coming to an end, and if we see continued weakness in the Yen investors may become interested in the GYEN.

Finally, the British Pound has been unusually strong, with the Guggenheim CurrencyShares British Pound Fund (NYSEARCA:FXB) climbing 11 percent over the past year. It is approaching strong resistance, and if it falls again GGBP will be a superior option to GLD.

Like with all new and illiquid ETFs, investors should be extra careful and use limit orders. These three funds give retail investors far more flexibility than they had in the past, and while they haven’t had the need or inclination to take advantage I suspect that they will in the not too distant future.

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