Investors All In on TLT Over GLD

Investors All In on TLT Over GLD

Both ETFs have struggled with performance, as multiyear highs in interest rates weigh on prices.

sumit
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Senior ETF Analyst
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Reviewed by: Mark Nacinovich
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Edited by: Sean Allocca

Demand for the iShares 20+ Year Treasury Bond ETF (TLT) and the SPDR Gold Trust (GLD) have diverged significantly this year, even as investors look toward both funds as potential recession hedges. 

Investors added $1.4 billion to TLT this week alone, adding to a whopping $17.2 billion in total inflows year to date, according to data from etf.com. That’s equal to nearly half of the fund’s current assets under management of $38.9 billion.

Conversely, GLD saw outflows of $320 million this week and $2.5 billion in outflows this year. 

With economic concerns front and center, both ETFs have struggled as multiyear highs in U.S. interest rates weigh on their prices. TLT lost 7.5% over the past month, while GLD fell by 4.6%. 

The difference in investor interest in the two funds could be caused by their exposure to rising rates. For TLT, the long bonds within the ETF’s portfolio fall in price as interest rates rise. This week, as the 30-year Treasury bond yield touched its highest level since 2011, the price of the fund dropped to its lowest level since that year.  

Gold has a more indirect relationship with interest rates. On the margin, higher rates increase the opportunity cost of holding gold, making the metal less appealing to investors who use it as a hedge against economic troubles and as a portfolio diversifier. 

TLT vs. GLD

But while both funds have been hurt by rising rates, ETF investors haven’t been treating them the same. 

They’ve been buying up TLT, while dumping GLD. The reason for that may be because of TLT’s yield advantage.  

Both TLT and GLD might be pressured by rising rates, but TLT investors get a nearly-5% yield for their troubles. The same can’t be said for GLD, which offers no yield. 

That’s probably why ETF investors are gravitating towards TLT over GLD, even though both funds are widely seen as hedges against a potential economic downturn.

Contact Sumit Roy at [email protected].

Sumit Roy is the senior ETF analyst for etf.com, where he has worked for 13 years. He creates a variety of content for the platform, including news articles, analysis pieces, videos and podcasts.

Before joining etf.com, Sumit was the managing editor and commodities analyst for Hard Assets Investor. In those roles, he was responsible for most of the operations of HAI, a website dedicated to education about commodities investing.

Though he still closely follows the commodities beat, Sumit covers a much broader assortment of topics for etf.com, with a particular focus on stock and bond exchange-traded funds.

He is the host of etf.com’s Talk ETFs, a popular video series that features weekly interviews with thought leaders in the ETF industry. Sumit is also co-host of Exchange Traded Fridays, etf.com’s weekly podcast series.

He lives in the San Francisco Bay Area, where he enjoys climbing the city’s steep hills, playing chess and snowboarding in Lake Tahoe.