North American Gold ETF Buying Jumped From $71 Million to $7.7 Billion in One Month. Can GLDM Hold Up?

In just one month, North American gold ETFs saw a staggering 108-fold increase in buying, jumping from $71 million in July to $7.7 billion in August. This surge landed right before the Federal Reserve's September rate hike, which pushed real yields to 2.68%. Despite GLDM charging a low 0.10% fee and holding physical bullion, it fell 3% after the Fed's decision, with spot gold dropping 1.2% to $4,240.10 per ounce.

The Fed's rate increase led to a record 4,189 metric tons of global holdings for gold, as per the World Gold Council's August tally. While the August figure covers all North American physically backed gold ETFs, including GLD, IAU, IAUM, SGOL, and GLDM, rising fund assets may not always equate to new money. Some of the $7.7 billion in assets could be due to markups on existing shares rather than fresh inflows.

GLDM's objective is straightforward: provide affordable, physically backed exposure to spot gold. Its track record includes returns of 16% over one year, 143% over five years, and a remarkable 236% over ten years, aligning closely with the underlying metal. However, recent performance has been less impressive, with GLDM down 3% over the past month and week, and 1% on the day of the Fed decision.

The real yield, currently at 5.00%, is the highest in the trailing year and near the 99.6th percentile. This presents a headwind for gold as it raises the opportunity cost of holding an asset that yields nothing. The measured decline in GLDM's value against a backdrop of multi-month highs in real yields suggests demand driven by structural factors rather than pure momentum chasing.

The fund's low 0.10% fee and physical backing make it a potentially efficient choice for investors who believe in the long-term value of gold, particularly if rising real yields pose a challenge to its appeal.