Filed Pursuant To Rule 433
Registration No. 333-217785
January 28, 2019
Debunking 5 Common Gold Misconceptions January 2019 | By George Milling-Stanley, Head of
Gold Strategy, Global SPDR ETFs; and Diego Andrade, Senior Gold Research Strategist, Global SPDR ETFs Gold is again attracting investor The potential for possibly lowering portfolio volatility interest to start 2019. This interest with an
allocation to gold is not the only reason to consider owning gold, and weve found there are a number of outdated isnt surprising investors tend to notions holding back investors from making a long-term flock to gold when
uncertainty is allocation in gold. To tackle this issue, weve put together a heightened and when equity returns list of what we perceive to be five common misconceptions about gold and what we believe to be the reality behind these
Q4 may 2018 be overstretched when US gold as -backed we saw ETFs in common misunderstandings. accumulated around $2.5 billion while Misconception 1: Golds Only Function is as an 1 Inflation Hedge the S&P was down as much as
19.8 %. Reality Although gold has historically tended to perform well during periods of high and sustained inflation that has As we have highlighted in a number of earlier research work not always been the case. The blue boxes in the
chart below gold may be able to perform several roles within a balanced highlight times in the early 1990s and 2000s that gold prices investment portfolio, including: did not surge even though the inflation risk premium, or the amount
of extra yield investors require to protect against 1. Acting as a diversifier Gold has the potential to inflation, did increase. In other words, gold may play an play a diversifying role in a portfolio because it important role in portfolios,
but there are other drivers historically has not correlated strongly with other to its return than an increase in prices. major asset classes held in a typical portfolio.2 Golds potential diversifying value was in full display
2018 when the S&P 500 Index dropped a -14.26% and Figure 1: Inflation Risk Premium & Price of Gold Dont
LBMA Gold Price PM (USD/oz) appreciated 7.73%. Always Move in Lockstep
2. Reducing total portfolio risk Including a gold allocation within a balanced portfolio may reduce Price of Gold ($/Troy Ounce) Inflation Risk Premium (BPS)
its overall volatility and improve risk-adjusted 2,000 180 returns because gold has demonstrated a -0.01 and 0.06 correlation to the S&P 500 Index and 1,500 120 Bloomberg Barclays U.S. Aggregated Bond Index, respectively, since the 1970s.3 For investors who are already comfortable with a given level of risk, adding 1,000 60 a small gold allocation may allow them to move further out along the risk spectrum in some of their 500 0 other investments, and that may also improve risk-adjusted returns.
0 Sep Apr Oct May Dec -60
3. Potential hedge against unexpected events 1992 1999 2005 2012 2018
Gold has a track record of at times holding
its value or rising when other assets are falling LBMA Gold Price PM (US/oz) US Sell 5 Year & Buy 10 Year Bond Yield Spread
in a differentiated manner.4
Source: Bloomberg Finance L.P. & State Street Global Advisors (SSGA) Research, from September 1, 1992 to December 31, 2018.
Debunking 5 Common Gold Misconceptions
Figure 2: Standard Performance of SPDR® Gold Shares (GLD®) as of December 31, 2018
1 Month (%) QTD (%) YTD (%) 1 Year (%) 3 Years (%) 5 Years (%) 10 Years (%) Since Inception 11/18/2004 (%)
NAV 5.23 7.84 -1.54 -1.54 6.03 0.90 3.59 7.40 Market Value 4.94 7.53 -1.94 -1.94 6.11 0.86 3.43 7.31 LBMA Gold Price PM 5.05 7373 -0.93 -0.93 6.45 1.21 3.93 7.81
Gross Expense Ratio: 0.40%.
Performance quoted represents past performance, which is no guarantee of future results. Investment return and principal value will fluctuate, so you may have a gain or loss when shares are sold. Current performance may be higher or lower than that quoted. Visit spdrs.com for most recent month-end.
Performance returns for periods of less than one year are not annualized. Index returns are unmanaged and do not reflect the deduction of any fees or expenses. The market price used to calculate the Market Value return is the midpoint between the highest bid and the lowest offer on the exchange on which the shares of the Fund are listed for trading, as of the time that the Funds NAV is calculated. If you trade your shares at another time, your return may differ.
Misconception 2: Gold does not Pay any Figure 3: Gold Demand By Source
Interest or Produce any Income, so it has Demand (Tonnes) Q32018
no Value Fabrication
Reality There are many reasons to buy gold beyond its Jewellery 1,637.6 Technology 250.7 potential value as an investment. For instance, many
Sub-total above fabrication 188.3 people purchase gold for cultural and religious purposes.
Total bar & coin demand 806.6
Jewelry represents the largest source of annual demand for ETFs & similar products -42.3 gold, accounting for more than 49 percent of demand for the
Central bank & other inst.* 315.5 precious metal in the first three quarters of 2018. Within gold jewelry consumption, China and India purchased more than Gold demand (Fabrication Basis) 3004.2 half of the worlds gold jewelry last year, and while demand Surplus/Deficit.** 343.5 fell in both countries last year, their historical affinity for Source: World Gold Council, Gold Demand Trends Q3 2018, as of November 1, 2018. gold remains strong.5 So, while investment demand is
* Excluding any delta hedging of central bank options. important for setting the price of gold, it is actually a small ** Surplus/deficit: This is the difference between total supply and gold portion of overall demand. This highlights how gold demand demand. Partly a statistical residual, this number also captures demand is different than traditional assets and actually does not in the OTC market and changes to inventories on commodity exchanges, respond to business cycle changes in the same way as many with an additional contribution from changes to fabrication inventories. other commodities.
Misconception 4: Gold does not Deserve an Misconception 3: Buying or Selling by Central Allocation in a Portfolio Because it is Volatile Banks is the Primary Driver of Gold Prices
Reality While central bank purchases and sales are an Reality Gold actually ranks around the midrange in terms important factor in gold prices, central bank activity rarely of volatility when the precious metals price is compared affects more than 10% of each years demand or supply. From with various stock and bond indices.* (See Figure 4). 1989 to 2009, central bankers were net sellers to the private Moreover, if one considers that indices tend to be less sector of about 10% of the annual gold supply; since 2010, volatile than their individual stock or bond components, central banks have been net purchasers of about 10% of golds potential volatility may be less of a concern. In other annual demand. Meanwhile jewelry regularly accounts for words, claiming that gold might be overly volatile relative to around 50% or more of end-user demand, and the use of gold other investments may be misguided.
* Indices representing gold, stocks and bonds in the above comparison are as follows: in industrial and technological applications accounts for up Gold = LBMA Gold Price PM (USD/oz); Equities = MSCI EAFE Index, MSCI EAFE to another 10%. Investment demand has historically ranged Index; Bonds = Bloomberg Barclays US Treasury Index, Bloomberg Barclays US from roughly 10% to 30% annually. Corporate High Yield Index, Bloomberg Barclays Global Treasury Ex-US Index.
State Street Global Advisors 2
3 Debunking 5 Common Gold Misconceptions
Misconception 5: A Tightening Cycle Leads to Negative Gold Prices
Reality The traditional view is that when the Fed starts raising rates the economy is growing well and countering inflation is starting to be a concern. Interest rates and inflation are often linked together due to their impact on real rates, which has historically affected gold prices. There may be short-term noise, but interest rate hikes are not necessarily negative for gold. The ten interest rate tightening cycles we analyzed since 1971, when gold effectively became free-floating, had resulted in an average increase of 37% in the price of gold.6 In line with prior tightening cycles, gold is currently up 21.88% (as of December 31, 2018) from the price level we saw in December 17, 2015 when the current interest rate tightening cycle just began.
Throughout the 1970s, inflation was a huge concern that forced the Fed to raise rates aggressively in early 1980, which helped real rates stretch to 9% and average 4.50% for the entire decade.7 Those rates along with other variables that affect the gold price played a key role in golds poor performance during the 1980s. However, we believe the long-term trend of real rates is currently in golds favor.
Today we are in a different macro environment than we were in the 1970s and 1980s. As Figure 5 shows at the start of the current tightening cycle real rates and gold were at 0.13% and $1,049.40, respectively. After 9 rate hikes both have increased to 0.51% and $1,279.00, respectively, as of December 31, 2018. The other variables that drive the price of gold have helped the price appreciate as real rates increased, but we believe the most important thing investors need to keep in mind is that all tightening cycles behave differently and real interest rates remain at levels that have historically benefited gold prices.
The Takeaway for Investors
Todays uncertain market environment may be the ideal time for investors to rethink any of these common misconceptions about gold and the potential role gold can play in an investment portfolio.
Figure 4: Golds Volatility Historically Tends to be Lower than Certain Equities
0 5 10 15 20 25 Volatility 20.2 19.0 17.3 16.0 14.4 7.4 7.5 3.5 Dow Jones US Select REIT Index MSCI Emerging Markets Index LBMA Gold Price PM (USD/oz) MSCI EAFE Index Bloomberg Commodity Index Bloomberg Barclays US Corporate High Yield Index Bloomberg Barclays Global Treasury Ex-US Index Bloomberg Barclays US Treasury Index Source: Bloomberg Finance L.P., State Street Global Advisors, date as of December 31, 2008 to December 31, 2018 reflect annualized monthly averages for 120 months. Past performance is no guarantee of future results.
Figure 5: Golds Return has been Higher Under Low and Moderate Real Rate Regimes*
$/oz % Real Rates Gold Spot Price ($/oz) -2 -1012 1,000 1,100 1,200 1,300 1,400 Dec 2015 Jul 2016 Feb 2017 Oct 2017 May 2018 Dec 2018 Source: Bloomberg Finance, L.P., State Street Global Advisors, as of December 31, 2018.
Past performance is not a guarantee of future results. Performance above does not reflect charges and expenses associated with the fund or brokerage commissions associated with buying and selling exchange traded funds. Performance above is not meant to represent the performance of any investment product.
** Gold Price represented by LBMA Gold Price; Real Rates represented by 10-year Treasury note yield minus US core Consumer Price Index (excluding food and energy).
Debunking 5 Common Gold Misconceptions
1 Source: Bloomberg Financial L.P. and State Street Global Advisors, date as of Glossary
December 31, 2018. Bloomberg Barclays Global Treasury ex-U.S. Index A benchmark designed
2 Since 2000, the correlation of gold to stocks, bonds and other commodities was to track the fixed-rate local currency sovereign debt issued by investment-grade
-0.01, 0.29, and 0.43, respectively. Source: Bloomberg Financial L.P. & State Street countries outside the US. Bonds must have a remaining maturity of one year or more. Global Advisors, date as of 12/31/2018. Computed using monthly return data from
Bloomberg Barclays U.S. Corporate High Yield Bond Index The Barclays
January 2000 to December 2018. Correlation measures the degree to which the
U.S. High Yield Index covers the universe of fixed rate, non-investment grade debt. deviations of one variable from its mean are related to those of a different variable Eurobonds and debt issues from countries designated as emerging markets (sovereign from its respective mean. Stocks represented by S&P 500 Index; Bonds represented rating of Baa1/BBB+/BBB+ and below using the middle of Moodys, S&P, and Fitch) by the Bloomberg Barclays U.S. Aggregate Index; Commodities represented by are excluded, but Canadian and global bonds (SEC registered) of issuers in non-EMG
Bloomberg Commodity Index. Index returns reflect all items of income, gain and loss countries are included. The index includes both corporate and non-corporate sectors. and the reinvestment of dividends and other income. Bloomberg Barclays U.S. Aggregate Bond Index A benchmark that provides a
3 Bloomberg Finance L.P. & State Street Global Advisors; S&P 500 monthly measure of the performance of the US dollar denominated investment grade bond correlation is from 8/31/1971 to 12/31/2018 and Bloomberg Barclays U.S. market, which includes investment grade government bonds, investment grade Aggregate Bond Index monthly correlation is from 3/31/1976 to 12/31/2018. corporate bonds, mortgage pass through securities, commercial mortgage backed
4 Source: Bloomberg Finance L.P., State Street Global Advisors, as of December 31, securities and asset backed securities that are publicly for sale in the US. 2018. Notes: Dot-Com Meltdown: 2/29/20003/30/2001 LBMA Gold Price PM
(USD/oz) returned -12.2%, MSCI AC World TR returned -20.6% and Bloomberg Bloomberg Barclays U.S. Treasury Index US dollar-denominated, fixed-rate, Barclays US Aggregated Bond Index TR returned 14.0% ; September 11 Terrorist nominal debt issued by the US Treasury. Treasury bills are excluded by the maturity Attacks: 8/31/20019/28/2001 LBMA Gold Price PM (USD/oz) returned 7.4%, constraint, but are part of a separate Short Treasury Index.
MSCI AC World TR returned -9.1% and Bloomberg Barclays US Aggregated Bond Bloomberg Commodity Index A broadly diversified commodity price Index TR returned 1.2%; 2002 Recession: 2/28/20028/30/2002 LBMA Gold Price index distributed by Bloomberg Indexes that tracks 22 commodity futures and PM (USD/oz) returned 5.4%, MSCI AC World TR returned -12.2% and Bloomberg seven sectors. No one commodity can compose less than 2 percent or more
Barclays US Aggregated Bond Index TR returned 4.9%; Global Financial Crisis: than 15 percent of the index, and no sector can represent more than 33 percent
11/30/20073/31/2009 LBMA Gold Price PM (USD/oz) returned 17.0%, MSCI AC of the index.
World TR returned -48.6% and Bloomberg Barclays US Aggregated Bond Index TR Consumer Prices (CPI) Consumer Prices (CPI) are a measure of prices paid returned 5.7%; Sovereign Debt Crisis I: 4/30/20108/31/2010 LBMA Gold Price by consumers for a market basket of consumer goods and services. The yearly PM (USD/oz) returned 5.7%, MSCI AC World TR returned -8.3% and Bloomberg (or monthly) growth rates represent the inflation rate.
Barclays US Aggregated Bond Index TR returned 4.8%; Sovereign Debt Crisis II:
Dow Jones U.S. Select REIT Index A benchmark of US REITs and REIT-like 2/28/201110/31/2011 LBMA Gold Price PM (USD/oz) returned 22.0%, MSCI securities that screens for market capitalization, liquidity and percentage of revenue AC World TR returned -8.1% and Bloomberg Barclays US Aggregated Bond Index derived from ownership and operation of real estate securities. It is float market cap
TR returned 6.4%; Brexit: 6/22/20166/27/2016 LBMA Gold Price PM (USD/ weighted and quoted in dollars. oz) returned 4.7%, MSCI AC World TR returned -5.6% and Bloomberg Barclays
US Aggregated Bond Index TR returned 0.91%. Past performance is not a LBMA Gold Price The LBMA Gold Price is determined twice each business day guarantee of future results. Performance above does not reflect charges (10:30 a.m. and 3:00 p.m. London time) by the participants in a physically settled, and expenses associated with the fund or brokerage commissions electronic and tradable auction administered by the IBA using a bidding process associated with buying and selling exchange traded funds. Performance that determines the price of gold by matching buy and sell orders submitted by above is not meant to represent the performance of any investment the participants for the applicable auction time. product. Performance data above derived from total return indices. MSCI EAFE Index An equities benchmark that captures large- and mid-cap
5 World Gold Council, Gold Demand Trends Full Year 2017, published 02/06/2018. representation across developed market countries around the world, excluding
6 Source: Bloomberg Financial L.P. & State Street Global Advisors, the US and Canada. as of December 31, 2018. MSCI Emerging Markets Index The MSCI Emerging Markets Index captures
7 Source: Bloomberg Financial L.P. & State Street Global Advisors, large and mid-cap representation across 23 emerging markets countries. With 834 as of Date December 31, 2018. constituents, the index covers approximately 85% of the free float-adjusted market capitalization in each country.
Learn More Standard Deviation Measures the historical dispersion of a security, fund or index For more information, please visit spdrs.com/gld. around an average. Investors use standard deviation to measure expected risk or volatility, and a higher standard deviation means the security has tended to show higher volatility or price swings in the past.
State Street Global Advisors 4
Debunking 5 Common Gold Misconceptions
ssga.com | spdrs.com
Important risk information Act of 1936 (the CEA). As a result, shareholders of the Trust do not have the The views expressed in this material are the views of George Milling-Stanley and protections associated with ownership of shares in an investment company registered
Diego Andrade through 01/25/2019 and are subject to change based on the market under the 1940 Act or the protections afforded by the CEA. and other conditions. GLD shares trade like stocks, are subject to investment risk and will fluctuate in
Investing involves risk, and you could lose money on an investment in SPDR® Gold market value. The value of GLD shares relates directly to the value of the gold held
Trust (GLD®). by GLD (less its expenses), and fluctuations in the price of gold could materially and adversely affect an investment in the shares. The price received upon the sale of the
ETFs trade like stocks, are subject to investment risk, fluctuate in market value and shares, which trade at market price, may be more or less than the value of the gold may trade at prices above or below the ETFs net asset value. Brokerage commissions represented by them. GLD does not generate any income, and as GLD regularly sells and ETF expenses will reduce returns. gold to pay for its ongoing expenses, the amount of gold represented by each Share Commodities and commodity-index linked securities may be affected by changes will decline over time to that extent. in overall market movements, changes in interest rates, and other factors such as The World Gold Council name and logo are a registered trademark and used with the weather, disease, embargoes, or political and regulatory developments, as well as permission of the World Gold Council pursuant to a license agreement. The World Gold trading activity of speculators and arbitrageurs in the underlying commodities.
Council is not responsible for the content of, and is not liable for the use of or reliance
Frequent trading of ETFs could significantly increase commissions and other costs such on, this material. World Gold Council is an affiliate of GLDs sponsor. that they may offset any savings from low fees or costs. ®
GLD is a registered trademark of World Gold Trust Services, LLC used with the
Diversification does not ensure a profit or guarantee against loss. permission of World Gold Trust Services, LLC.
Investing in commodities entails significant risk and is not appropriate for Standard & Poors®, S&P® and SPDR® are registered trademarks of Standard & Poors all investors. Financial Services LLC, a division of S&P Global (S&P); Dow Jones is a registered Important Information Relating to SPDR® Gold Trust (GLD®): trademark of Dow Jones Trademark Holdings LLC (Dow Jones); and these trademarks have been licensed for use by S&P Dow Jones Indices LLC (SPDJI) and sublicensed
The SPDR Gold Trust (GLD) has filed a registration statement (including a for certain purposes by State Street Corporation. State Street Corporations financial prospectus) with the Securities and Exchange Commission (SEC) for the products are not sponsored, endorsed, sold or promoted by SPDJI, Dow Jones, S&P, offering to which this communication relates. Before you invest, you should their respective affiliates and third party licensors and none of such parties makes any read the prospectus in that registration statement and other documents GLD representation regarding the advisability of investing in such product(s) nor do they has filed with the SEC for more complete information about GLD and this have any liability in relation thereto. offering. Please see the GLD prospectus for more detailed discussion of the For more information, please contact the Marketing Agent for GLD: State risks of investing in GLD shares. The GLD prospectus is available by clicking Street Global Advisors Funds Distributors, LLC, One Iron Street, Boston, MA, here. You may get these documents for free by visiting EDGAR on the SEC 02210; T: +1 866 320 4053 spdrgoldshares.com. website at sec.gov or by visiting spdrgoldshares.com. Alternatively, the Trust or any authorized participant will arrange to send you the prospectus if © 2019 State Street Corporation. All Rights Reserved. you request it by calling 866.320.4053.
State Street Global Advisors Funds Distributors, LLC, One Iron Street, Boston, GLD is not an investment company registered under the Investment Company Act of MA 02210.
1940 (the 1940 Act) and is not subject to regulation under the Commodity Exchange
© 2019 State Street Corporation. All Rights Reserved.
State Street Global Advisors ID15377-2028663.5.1.AM.RTL 0119 Exp. Date: 04/30/2019
SPDR® GOLD TRUST has filed a registration statement (including a prospectus) with the SEC for the offering to which this communication relates. Before you invest, you should read the prospectus in that registration statement and other documents the issuer has filed with the SEC for more complete information about the Trust and this offering. You may get these documents for free by visiting EDGAR on the SEC Web site at www.sec.gov. Alternatively, the Trust or any Authorized Participant will arrange to send you the prospectus if you request it by calling toll free at 1-866-320-4053 or contacting State Street Global Advisors Funds Distributors, LLC, One Lincoln Street, Attn: SPDR® Gold Shares, 30th Floor, Boston, MA 02111.