Gold ETFs: SPDR Gold Shares Provides Scale, While AAAU Is a Budget-Friendly Option

Damodaran's Skepticism on Gold: As gold prices exceed $4,300 an ounce, valuation expert Aswath Damodaran aligns with Warren Buffett's view that gold is not a true financial asset due to its lack of cash flows, categorizing it instead as a collectible influenced by market sentiment.

Gold's Value Determinants: Damodaran emphasizes that unlike financial assets such as stocks, which generate cash and can be valued, gold's price is driven by demand and supply dynamics, similar to rare collectibles like paintings.

Factors Behind Gold's Price Surge: The recent 50% increase in gold prices is attributed to global uncertainty and a growing mistrust of central banks, expanding the market for gold buyers despite its historical underperformance compared to stocks.

Current Gold Market Performance: As of the article's publication, gold was trading at $4,149.00 per ounce, showing significant gains over the past year, with various gold-linked ETFs also demonstrating strong performance.

Comparison of ETFs: The Goldman Sachs Physical Gold ETF (AAAU) and SPDR Gold Shares (GLD) are both designed to track physical gold prices, but differ in size and cost, with AAAU having a lower expense ratio of 0.18% compared to GLD's 0.40%.

Market Performance: Gold prices have increased over 50% in 2025 due to geopolitical tensions and economic factors, leading central banks to increase their gold reserves as a hedge against inflation and uncertainty.

Fund Structure: Both ETFs hold physical gold bullion and do not disclose individual holdings, ensuring straightforward exposure to gold's performance, with SPDR Gold Shares being the largest and most liquid gold ETF in the U.S. since its launch in 2004.

Investment Considerations: Investors can choose between physical gold, gold stocks, or gold ETFs for exposure, with the cost of the ETFs being a significant factor in long-term returns, as lower fees can lead to better performance over time.

Put Contract Analysis: The $41.00 put contract for AAAU stock has a current bid of 5 cents, allowing investors to potentially buy shares at a cost basis of $40.95, which is a 2% discount from the current price of $42.05. There is a 64% chance that the contract may expire worthless, offering a 0.12% return on cash commitment.

Call Contract Overview: The $43.00 call contract has a bid of 80 cents, allowing investors to sell shares at that price if they purchase AAAU at $42.05. This could yield a total return of 4.16% if the stock is called away, with a 46% chance of the contract expiring worthless, providing a potential 1.90% extra return.

Volatility Insights: The implied volatility for the put contract is 24%, while for the call contract it is 21%. The actual trailing twelve-month volatility is calculated to be 18%, based on the last 250 trading days.

YieldBoost Concept: The article discusses the concept of YieldBoost, which refers to the additional returns investors can earn from options contracts, highlighting the potential benefits of both put and call strategies in the context of AAAU stock.

US Gold Reserves Value: The market value of the United States' gold reserves has surpassed $1 trillion for the first time, driven by a significant rise in gold prices, which are nearing $3,840 per ounce.

Declining Global Influence: Despite the soaring valuation, the U.S. share of global gold reserves has fallen to a 90-year low, now accounting for only 20% of the total, as other countries aggressively accumulate gold.

Investor Sentiment: A recent survey indicates that a speculative frenzy around gold has not yet developed, with 39% of fund managers having no allocation to gold in their portfolios, suggesting potential for further price increases.

Gold ETFs Performance: Various gold and gold miner exchange-traded funds (ETFs) have shown strong year-to-date and one-year performance, reflecting the ongoing interest in gold investments amid rising prices.

Record Inflows into Gold ETFs: In September 2025, gold-backed ETFs saw over $5 billion in inflows, the largest monthly total ever, with SPDR Gold Shares leading at $2.67 billion. Year-to-date, SPDR's GLD has attracted $13.56 billion, on track to surpass its 2020 record.

Central Banks Increasing Gold Holdings: Global central banks have significantly increased their gold purchases, now holding more gold than U.S. Treasuries, reflecting concerns about U.S. fiscal sustainability. Total gold purchases rose 45% over the summer, indicating strong institutional demand.

Positive Outlook for Gold Prices: Analysts predict gold could reach $4,000 per ounce by 2026, driven by persistent inflation and potential Federal Reserve rate cuts. Historical trends show gold performs well in similar economic conditions.

Shifts in Monetary System Favoring Gold: Structural changes in the global monetary system, including the rise of cryptocurrencies and skepticism towards fiat currencies, are enhancing gold's appeal as a long-term hedge against economic uncertainty.

U.S. Gold Reserves Decline: U.S. gold reserves have reached a 90-year low, dropping from over 50% of global reserves to just 20%, while other countries are significantly increasing their gold holdings, reaching a 49-year high.

Global Central Banks Shift: For the first time since 1996, foreign central banks now hold more gold than U.S. Treasuries, indicating a major shift in global financial strategies and a potential rebalancing in the market.

Investor Sentiment on Gold: Despite rising gold prices, a significant portion of institutional investors (39%) have no allocation to gold, suggesting a cautious approach rather than a speculative frenzy.

China's Gold Demand: China has seen a surge in non-monetary gold imports, and with the festival season in India, demand for gold is expected to increase, supported by ongoing global economic uncertainties.