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Golden Year? Why Gold ETFs might be poised for strong returns

Mark Noble
Nicolas Piquard

In this Q&A with Horizons ETFs’ Portfolio Manager and Options Strategist, Nick Piquard, and Mark Noble, Executive Vice President of ETF Strategy, you will learn:

  • The current status of the gold market in 2023
  • The influence of the U.S. dollar on the value of gold
  • The case for gold investment: today’s opportunities
  • How to generate a yield from gold: strategies with potential

Central banks bought a reported 1,136 tonnes of gold in 2022 – the highest recorded level since 1950. A stronghold in turbulent markets, gold not only holds its value but historically, its value has increased when the value of the U.S. dollar has decreased, suggesting it to be an effective hedge against risk.

Early into 2023, volatility, higher interest rates, and the growing likelihood of a recession are continuing to challenge Canadian portfolios. Could the recent purchases of gold by global central banks signal that there could be more trouble on the horizon? Could there be a potential gold lining that could provide some relief and income for investors?

Horizons ETFs’ Portfolio Manager Nick Piquard joined the Generation ETFs podcast to discuss his outlook on gold for the year ahead, why geopolitical concerns could increase the use case for the precious metal, and how investors can potentially generate yield and earn income on their gold-focused investments.

Mark Noble: I think maybe the first place we should start is what is happening with gold right now. …It seems to me that a lot of the momentum we’ve seen coming out of the lows in November, where gold was at about $1,650 an ounce U.S., [gold is] now around $1,900 (as at February 7, 2023).

Nick Piquard: Yeah, it’s been a very volatile year in all asset classes, and gold is no exception. And what we saw at the end of November is really a topping out of this very strong U.S. dollar that we’d seen before that. Since then, the U.S. dollar’s come down over 10%, and that really helped the gold prices recover. And the backdrop of that, as well, is a lot of physical fundamental buying happening in the gold market. In the last half of 2022, central banks added more gold to their vaults than they have in the past 50 years. And so, you have a combination of a weaker U.S. dollar and strong buying, that really helped the price of gold.

The Price of Gold vs. the U.S. Dollar

(Source: Bloomberg, as at February 28, 2023)

Mark Noble: So why are central banks backing the truck up on gold? It does seem a little bit startling that after 50 years you’ve got this frenzy for gold buying.

Nick Piquard: There are a few theories related to that, but one of [them is the] diversification of reserves for central banks. Central banks have mostly been using [the] U.S. dollar as reserves for the past 50 years or so. And what’s happening now is because we had the conflict in Russia, and potentially cold relationships with China, they may want to diversify away from holding the U.S. dollar as a reserve asset. In other countries, we’re noticing as well. And so, I think many countries are looking at the situation today in the world and saying, “Maybe it’s better for us to have a little bit of gold.”

The Price of Gold vs. Gold Purchases by the Central Bank of China

(Source: Bloomberg, as at February 28, 2023)

Mark Noble: I was surprised, though, in 2022 that gold didn’t do more, especially on the front end of the year, because you generally view it as a store of value. And what we saw was, for example, cryptocurrencies taking off in early 2022, well, they started the tail off, but especially in 2021 and then moving into 2022. And it’s an inflationary environment, so you would expect that gold would offer some value there, but it really hasn’t. Any thoughts on why we’re seeing this movement now but weren’t last year?

Nick Piquard:  Yeah, and I think that’s a fair point. I think there are two things that really drive the price of gold. Inflation is one of them; but, real yields are another aspect because gold doesn’t earn any interest. So, when you’re looking at the Federal Reserve hiking interest rates as aggressively as they did, some investors wonder, “is it better to own U.S. dollar cash where I’m actually getting an interest return on that? Or is it better to own gold?” And I think that did not help the price of gold.

Despite that, gold outside of just owning U.S. dollar cash, gold was one of the best asset classes to own in 2022, relative to bonds or stocks.

The Price of Gold vs. the Price of Bitcoin

(Source: Bloomberg, as at February 28, 2023)

Mark Noble: So, this is going to bring us to the question that’s probably the top end of getting exposure to gold, which is: do you buy the equities or do you buy the bullion? And, I know there’s no right answer here, but I’m hoping you can give listeners a bit of a sense of where the benefit of buying the gold miners is and where the benefit of buying gold bullion is.

Ways to Own Gold

Physical Gold

Investors can buy and store physical gold bars, coins, or even jewelry

Gold-Focused Funds

Investors can purchase ETFs or mutual funds that offer gold exposure

Mining Companies

Investors can gain exposure by acquiring equity in companies that mine gold through individual stocks or within funds

Physically-Based Gold Funds Futures-Based Gold Funds


Nick Piquard: I think that’s a great question. If you look at 25 years ago or so, when I started in the business, there weren’t that many options if you wanted gold exposure. Gold ETFs didn’t really exist; ETFs were just beginning. And so, if you wanted exposure to gold, a lot of investors would go to gold miners. Now, gold miners have some advantages and disadvantages. The advantage is they tend to be leveraged to the price of gold. So, in a gold bull market, they tend to outperform owning gold outright. The problem with the miners is that there are a lot of operational risks associated with them as well, in terms of jurisdiction risk, labor issues, and energy costs, and that can affect margins. We saw a little bit of that last year with energy costs going up as much as they did and labor interruptions, that can impact the profitability of gold miners. Despite that, if you look at the big gold miners, or a basket of big gold mining companies, such as the ones that we own in our covered call ETF, the Horizons Gold Producer Equity Covered Call ETF (GLCC), which has a dividend yield of 2.5% from the underlying stocks, these companies are making money.

Finding the Right Gold ETF

Mark Noble: What we’re really well-known for at Horizons ETFs is our covered call gold ETF strategies. Going back to what you were talking about earlier where last year one of the challenges with gold investing was how you value this asset class when a lot of the drive [for investing] was looking at the interest that could be earned on the U.S. dollar or the appreciation of assets that pay an income, [when] gold doesn’t pay an income.

But I think one of the things we’ve been having a lot of success with over the last 10 years is we have two ETFs, as you highlighted, the Horizons Gold Producer Equity Covered Call ETF (GLCC), as well as the Horizons Gold Yield ETF (HGY), which writes call options on bullion. Those two ETFs have been around for more than 10 years, and they’re actually able to benefit from these macroeconomic moves by generating a monthly income. But I’m curious how that’s done.

Nick Piquard: I really like those two ETFs because if you look at your average investment portfolio for someone who is trying to generate some income, gold has always been a great diversifier, but one of the problems with gold, of course, is that it doesn’t earn a yield for the portfolio; adding it to the portfolio reduces the overall yield. A lot of investors might think, “well, this is not a good idea,” even though it has those diversifying benefits. What we like about HGY and GLCC is the fact that you can earn a yield while still getting exposure to the underlying asset. So how do we do that? Well, let’s take HGY for example. We own underlying gold ETFs and we then write call options on those ETFs. What that allows us to do is collect an option premium for the call that we sell that generates a premium that we can pay out as yield to the investors. Now, that does limit some of the upsides [potential] because when you write a call option, you’re selling some of the upsides on the underlying asset, but we only do it on a portion of the portfolio. In the case of HGY, for example, we only write on 33% of the gold ETF that we own so you’re still getting at least two-thirds of that upside.

Ticker Fund Features

“Exposure to diversified North American-listed gold producers using a covered call strategy to potentially generate additional income on the underlying portfolio.”

Yield: 11.66% (as at February 28, 2023)

Strategy: Covered Call

Index: Solactive North American Listed Gold Producers Index

Distributions: Monthly


“Exposure to the price of gold bullion, hedged to the Canadian dollar while providing monthly, tax-efficient distributions.”

Yield: 6.42% (as at February 28, 2023)

Strategy: Covered Call

Represented by: SPDR® Gold Shares

Distributions: Monthly

(Source: Horizons ETFs, as at February 28, 2023)

Mark Noble: So, you’re getting basically two-thirds the upside to the exposure to gold bullion, and then you’re writing at the money, which means you’re just selling away the upside on the other third. What sort of yield do you generate through that strategy?

Nick Piquard: One of the nice things about the past couple of years is that we’ve seen more elevated levels of volatility, both in gold and outside of gold, in all asset classes really. For HGY right now, we’re able to yield around 6% in terms of an annualized yield, which is paid monthly because we write those options every month.

Mark Noble: So right now, 6% annualized yield plus getting about two-thirds at a minimum of the upside of gold?

Nick Piquard: That’s correct. Which is a nice benefit for somebody who owns an income portfolio or is trying to generate income but wants that diversifying benefit of owning gold.

Mark Noble: For income investors, gold has somewhat been, I don’t want to call it dead weight because there’s a diversifying benefit to it as a store of value, but it’s not going to work with the rest of your portfolio to generate that cash flow. So HGY is clearly a way for you to do that. Now, let’s pivot to GLCC. GLCC, you’re now writing covered calls on the equities. How is that structured?

Nick Piquard: GLCC is one of my favorite covered call ETFs because I think that if we see another leg up in the gold prices, as I expect, I would say that the miners are very well-positioned to take advantage of that. In that portfolio, we track an index, which [includes] the largest North American-listed gold producers. Companies like Barrick or Newmont, and Agnico Eagle, they’re among the larger companies that we own. And then we write call options on the individual names. Now, the nice thing about doing a covered call strategy on the miners is because they’re more volatile, you tend to get a higher yield. So, we’re already getting about a 2.5% dividend yield on the underlying portfolio, then we’re adding another 8%, or so, in options yield. [Combined] you’re looking at over 10% yield using GLCC as a way to gain exposure to miners. One of the reasons I really like the miners here is that we’re starting to see consolidation in this space. This is something that probably started a few years ago, but it has really been kickstarted now in the past couple of years. Most recently, with a Newmont trying to buy Newcrest.

When we see this M&A (mergers and acquisitions) activity, it usually gets followed by more M&A activity, which means, A, that the stocks are not that expensive because why would you be acquiring stocks if you didn’t think they offered value? And it means, to me, more potential upside ahead.  

Mark Noble

Executive Vice-President, ETF Strategy, Horizons ETFs

Mark Noble is Executive Vice-President, ETF Strategy for Horizons ETFs. Mr. Noble has been with Horizons ETFs since 2010 and is responsible for the communication of its sales strategy. Mr. Noble works with Horizons ETFs’ sales and marketing teams to build out client education tools and initiatives that help Canadians become better ETF investors. Prior to working at Horizons ETFs, Mr. Noble was a personal finance journalist at the Advisor Group, a leading financial services publication that serves the Canadian financial advisor market.

Nicolas Piquard

Vice-President, Portfolio Manager and Options Strategist, Horizons ETFs

Nicolas Piquard is Vice-President, Portfolio Manager and Options Strategist as Horizons ETFs. He co-manages the Horizons ETFs’ global line-up of covered call ETFs. Prior to joining Horizons ETFs, Nick spent nearly 15 years as an institutional derivatives trader with Canadian and international brokerage firms. He specializes in quantitative strategies trading options volatility and relative value. Nick graduated from the University of Waterloo with a Bachelor of Mathematics and holds the Chartered Financial Analyst (CFA®) designation.

Commissions, management fees and expenses all may be associated with an investment in exchange traded products (the “Horizons Exchange Traded Products”) managed by Horizons ETFs Management (Canada) Inc. The Horizons Exchange Traded Products are not guaranteed, their values change frequently and past performance may not be repeated. The prospectus contains important detailed information about the Horizons Exchange Traded Products. Please read the relevant prospectus before investing.

Effective June 24, 2022, the investment objectives and strategies of the Horizons Canadian Large Cap Equity Covered Call ETF (“CNCC”) (formerly Horizons Enhanced Income Equity ETF (“HEX”)), Horizons Canadian Oil and Gas Equity Covered Call ETF (“ENCC”) (formerly Horizons Enhanced Income Energy ETF (“HEE”)), Horizons Equal Weight Canadian Bank Covered Call ETF (“BKCC”) (formerly Horizons Enhanced Income Financials ETF (“HEF”)), Horizons US Large Cap Equity Covered Call ETF (“USCC.U, USCC”) (formerly Horizons Enhanced Income US Equity (USD) ETF (“HEA.U, HEA”)), Horizons NASDAQ-100 Covered Call ETF (“QQCC”) (formerly Horizons Enhanced Income International Equity ETF (“HEJ”)), and the Horizons Gold Producer Equity Covered Call ETF (“GLCC”) (formerly Horizons Enhanced Income Gold Producers ETF (“HEP”)), were changed following receipt of the required unitholder and regulatory approvals, to seek to provide exposure to the ETFs’ underlying equity portfolios and to employ a dynamic covered call option writing program.  Previously, the ETFs sought to provide exposure to an underlying equal-weight equity portfolio and to generally write covered call options on 100% of portfolio securities. The new tickers began trading on the TSX on June 27, 2022. For more information, please refer to the disclosure documents of the ETFs on

Certain statements may constitute a forward-looking statement, including those identified by the expression “expect” and similar expressions (including grammatical variations thereof). The forward-looking statements are not historical facts but reflect the author’s current expectations regarding future results or events. These forward-looking statements are subject to a number of risks and uncertainties that could cause actual results or events to differ materially from current expectations. These and other factors should be considered carefully and readers should not place undue reliance on such forward-looking statements. These forward-looking statements are made as of the date hereof and the authors do not undertake to update any forward-looking statement that is contained herein, whether as a result of new information, future events or otherwise, unless required by applicable law.

The financial instrument is not sponsored, promoted, sold, or supported in any other manner by Solactive AG nor does Solactive AG offer any express or implicit guarantee or assurance either with regard to the results of using the Index and/or Index trade name or the Index Price at any time or in any other respect. The Index is calculated and published by Solactive AG.  Solactive AG uses its best efforts to ensure that the Index is calculated correctly. Irrespective of its obligations towards the Issuer, Solactive AG has no obligation to point out errors in the Index to third parties including but not limited to investors and/or financial intermediaries of the financial instrument. Neither publication of the Index by Solactive AG nor the licensing of the Index or Index trade name for the purpose of use in connection with the financial instrument constitutes a recommendation by Solactive AG to invest capital in said financial instrument nor does it in any way represent an assurance or opinion of Solactive AG with regard to any investment in this financial instrument.

Nasdaq®, Nasdaq-100®, and Nasdaq-100® Index, are trademarks of The NASDAQ OMX Group, Inc. (which with its affiliates is referred to as the “Corporations”) and are licensed for use by Horizons ETFs Management (Canada) Inc. The Fund(s)have not been passed on by the Corporations as to their legality or suitability. The Fund(s) are not issued, endorsed, sold, or promoted by the Corporations. THE CORPORATIONS MAKE NO WARRANTIES AND BEAR NO LIABILITY WITH RESPECT TO THE FUND(S) or PRODUCT(S).

This communication is intended for informational purposes only and does not constitute an offer to sell or the solicitation of an offer to purchase exchange traded products (the “Horizons Exchange Traded Products”) managed by Horizons ETFs Management (Canada) Inc. and is not, and should not be construed as, investment, tax, legal or accounting advice, and should not be relied upon in that regard. Individuals should seek the advice of professionals, as appropriate, regarding any particular investment. Investors should consult their professional advisors prior to implementing any changes to their investment strategies. These investments may not be suitable to the circumstances of an investor.

The views/opinions expressed herein are solely those of the author(s) and may not necessarily be the views of Horizons ETFs Management (Canada) Inc. All comments, opinions and views expressed are generally based on information available as of the date of publication and should not be considered as advice to purchase or to sell mentioned securities. Before making any investment decision, please consult your investment advisor or advisors.

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