Gold prices hit a record high again, but why did the gold stock ETF close the board and fall to the limit?

Finance Associated Press

2024-04-08 17:01Published on the official account of Cailianshe under Shanghai Shanghai Poster Industry Group

Finance Associated Press, April 8 (edited by Ling Yu) Although the COMEX gold price experienced a "squat jump" and hit a record high this morning Beijing time, the spot prices of gold futures on the Shanghai Futures Exchange and the Shanghai Gold Exchange also rose by about 3%.

COMEX黄金期价走势（来源：Wind）

Although many gold ETFs once led the ETF list in the market, ChinaAMC gold stock ETF, which had previously performed unbeatably, was suspended for an hour in the morning, and then lay firmly on the fall limit as soon as it opened.

ChinaAMC CSI CSI Gold Industry ETF Intra-market Trend Today (Source: Wind)

Compared with the QDII-ETF that has continued to "have a high fever", the cross-market arbitrage of gold stock ETF is not too high threshold and difficulty, and the premium repair has also come quite decisively, and the previous on-site premium rate of 30% has faded by more than half to less than 14% after today's fall limit close.

On the one hand, the price of gold continues to rise, on the other hand, the trend of related ETFs in the market is divergent, when the global gold price continues to rise, how to allocate gold ETFs? First of all, we must first figure out what is the difference between these gold-themed ETFs.

Commodity ETF and Equity ETF Differences: Volatility

Up to now, there are a total of 16 gold-themed ETFs that can be traded on the floor in the secondary market, although the names are similar, but they are different from the underlying indexes, tracking three different indexes respectively.

Among them, although there are differences in the descriptions of tracking the "Shanghai Gold Spot Price (SGA Gold 9999)" and the "Midday Benchmark Price of Shanghai Gold Centralized Pricing Contract (Contract Code: SHAU) of Shanghai Gold Exchange", both of them are based on the trend of the gold spot price of Shanghai Gold Exchange, and compared with the investment strategies defined in the relevant product contracts, the proportion of gold spot contracts in the fund's assets is not less than 90%.

Source: Bosera Gold ETF (159937.SZ) Fund Contract

Source: Harvest Shanghai Gold ETF (159831.SZ) Fund Contract

In contrast, the relatively youngest and most prominent gold stock ETF is as its name suggests, with the secondary market gold concept stock index as the investment target. According to the design of the issuer China Securities Index Company, the CSI CSI CSI Gold Industry Index (SSH Gold Stocks, 931238.CSI) is selected from the listed companies in Shanghai, Shenzhen and Hong Kong as index samples from the listed companies in Shanghai, Shenzhen and Hong Kong. As with most similar sector indices, it is routinely adjusted semi-annually.

Due to the difference in investment targets, in terms of product types, according to the secondary classification of Dongcai Fund, the 14 ETF products tracking the spot price trend are "commodity funds", while the two gold stock ETFs are "index stock funds".

To describe the difference between these two categories of products in the words of a gold stock ETF fund manager: "The stock prices of listed companies in the gold industry are highly correlated with the gold price, but the upward and downward elasticity is higher than that of physical gold".

Source: Yongying CSI CSI Shanghai-Shenzhen-Hong Kong Gold Industry Stock ETF2023 Annual Report

The actual ETF movement also confirms this view:

Superimposed comparison of the past trends of the ETF products with the largest surviving indices of the three major indices (source: Wind)

Starting from the listing date of the gold stock ETF products with a long duration, the overall trend of the three representative ETF products is similar during the same period, but the volatility of equity ETFs is significantly greater than that of the two commodity ETFs.

The quality of the same underlying index products is very different

Just as the vast majority of multi-products track the same index, due to the small differences in the design of ETF products, there will be significant first-mover advantage differences in scale and liquidity between different ETF products with the same underlying index under the premise that the total amount of funds allocated to the same industry/thematic index is limited.

Although it is not concentrated in a single product, this is also reflected in gold-backed ETFs:

According to the pre-market statistics on April 8, 2024, the total scale of the four gold ETFs established before 2015 reached 37.274 billion yuan, accounting for 94.95% of the total scale of all existing gold-themed ETFs, and these four ETFs have also become the only four products with an average daily turnover of more than 100 million yuan among all the above products by virtue of their scale advantages.

Larger product size and liquidity help stabilize on-market price fluctuations - compared with several gold spot ETFs that have been established for many years, the ChinaAMC Gold Stock ETF that fell today has just been established in January this year and is in the process of withdrawing "help funds", while feeder funds have not yet been established and over-the-counter participation channels have not yet been fully unblocked.

On the other hand, because the volatility of gold stocks itself is greater than that of gold spots, the sentiment of gold prices that have been hitting record highs in the past month has been amplified by the secondary market, and the "odd goods" of gold stock ETFs can be "brushed" far beyond the average daily turnover rate of commodity gold ETFs without the blessing of T+0, and create a premium of more than 30%. However, under the repair of today's fall limit and the possible further "value return" in the future, ChinaAMC Gold Stock ETF will gradually be on par with the Yongying Gold Stock ETF, which was established earlier...... When the two curves are compared, the investment strategy will return to the same pace.

SSH Gold Equity Index and Two Related Products (Source: Wind)

ETF investment is different from stock investment, and the criteria for judging the differences between ETF products in the same industry are clearer and more direct than those between listed companies - looking at volatility, and further dismantling, looking at the subtle differences in the underlying index, as well as more direct differences in scale and liquidity.

On the premise that the bullish gold price can continue to rise, if you are more inclined to medium and long-term allocation under the premise of controllable risks, four gold spot ETFs with a scale of "3 billion +" are more stable choices, on the contrary, if you are more interested in α "trading" market participants, then gold stock ETFs may be able to provide a more rewarding investment experience.

(Finance Associated Press, Ling Yu)

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