Will Gold Dazzle or Disappoint in 2024?

Investors confront compelling cases both for and against gold and related ETFs.

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Reviewed by: Ron Day
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Edited by: James Rubin

Spot bitcoin ETFs hold the spotlight, as the SEC nears a decision on multiple applications for these products. So in the midst of this potentially historic moment, it is a great time to look at what investors have considered an “alternate currency” for centuries.  

Gold not only has a long history as a “store of value” in financial markets, but it also once served as the core of the monetary system. 

The "gold standard" was a system in which most countries valued their currencies as a common unit–gold. Today, the U.S. dollar has replaced it, and cryptocurrency enthusiasts argue that in the future, decentralized money e.g. bitcoin will be the new version of the gold standard. 

So, every time cryptocurrency gets volatile (upwardly of late), investors, especially industry veterans who lived through the gold standard era and its aftermath, start talking up gold again. With the beginning of the new year, ETF investors tracking the “yellow metal” makes sense, just in case it soars beyond its most recent all-time high of $2,135 of Dec. 4.

GLD, the Gold Proxy 

The SPDR Gold Shares (GLD) was the first ETF to track the price of gold bullion. It debuted in late 2004, which means it is fast-approaching, ironically, its “China Anniversary” (20 years since its listing). GLD leads a long list of gold-linked, gold stock and gold-related ETFs, including some that allow investors to take the other side of the gold trade and profit from declines. You can see the full list of them in etf.com’s ETF Screener

Using GLD as a proxy for investing in gold, that $58 billion ETF gained about 13% in 2023, after a pair of slightly down years in 2021 and 2022. Still, gold has been digging its own hole of sorts for the past 10 years, averaging a 5.1% annual return versus 12.1% for the S&P 500 Index over that time period.  

While GLD has appreciated by 334% since its 2004 inception, we all know that markets are increasingly about on-the-spot results. And what gold’s price has done is move around a lot. There’s more to that than is immediately apparent. GLD sits around $192 this week, just as it did back in March of 2022, and in August of 2020. Its price has traded between that high level and a low of $150 a share for nearly four years. That probably sounds wonderful to swing traders, but not to long-term gold bugs.  

We've Seen These Gold Prices Before 

Even more distressing to eternal fans of gold investing is that GLD peaked at just $186 in 2011, a time where I recall, everyone on Wall Street assumed it would go much higher quickly. Spoiler alert: it didn’t. 

The macro investing case for gold is clear: the U.S. dollar might be imperiled, due to government spending that appears endless. If that were securitized and listed as an ETF, we could all have a nice time investing in it. But I digress. 

Gold is also a limited supply situation, a commodity. And it remains synonymous with a form of currency to many. Those two factors likely add some level of long-term support to GLD and its peers, even with Bitcoin invading its turf.

GLD and the Gold Rally

Finally, the recent gold rally has renewed excitement, especially for those who get excited every time it surges. But as 2024 begins, GLD and other gold ETFs face a similar market issue to some major stock market indexes. While the technical/chart picture has momentum, we’ve been here before. Many times, in fact.  

So, when market psychology seems more dominant in investor activity (how else do you explain some of the moves we’ve seen in sketchier parts of the market lately?), gold must still prove itself.

Will 2024 be a golden year? Stay tuned. 

Rob Isbitts was an investment advisor for 27 years before selling his practice to focus on ETF research and education. He is based in Weston, Florida. Contact him at  [email protected] and follow him on LinkedIn.