The gold trade has historically been a good hedge against a weak dollar, but not usually a great investment when the greenback is going up. On Monday, State Street Global Advisors and the World Gold Council launched an ETF to figure out a way around that market friction point.
The SPDR Long Dollar Gold Trust ETF gains when gold priced in U.S. dollars rises or when the value of the U.S. dollar increases. It takes a long position on physical gold in U.S. dollars and shorts a group of major global currencies that include the euro, Japanese yen, British pound sterling, Canadian dollar, Swedish krona and Swiss franc.
"There's nothing other than gold bars backing the product, and you're going to get the benefits of owning gold and owning gold in a strong-dollar environment," Joe Cavatoni, the World Gold Council's managing director of ETFs, told CNBC's Squawk Box.
However, the new ETF will lose money when gold prices fall more than the value of the dollar rises.
More from ETF Strategist:
The two dangerous times during market day when investors should never trade
The Dogs of the World strategy: How to buy beaten-up global markets
'This is the greatest deal in financial history' if you want to invest wisely
The dollar has been one of the market's strongest trades in recent years, but the ETF already has its detractors. "Currency hedging is not a free lunch," said Ben Johnson, global director of ETF research at Morningstar. "By protecting your gold position against a strong dollar, you are also sacrificing the potential upside associated with a weak dollar."
The dollar-hedged gold fund charges 50 basis points (0.5 percent). That's more than the 40 basis points levied by SPDR Gold Trust, the largest U.S. gold ETF with $30.7 billion in assets under management, and 25 basis points by the iShares Gold Trust.
Johnson prefers the unhedged iShares Gold Trust to SPDR Gold and its new dollar-hedged cousin, because it has a lower expense ratio (0.25 percent) and it's easier for investors to understand.
"Generally speaking, we look favorably upon the simplest, most diversified and least expensive means of achieving exposure to any given market segment," he said.
(Correction: This story has been revised to show the correct expense ratio for the SPDR Long Dollar Gold Trust and the SPDR Gold Trust.)