Gold can be seen as a good investment all-year round, whether the financial markets are in a bullish or bearish phase. This is because the metal tends to perform well even throughout global recessions, rarely losing its value. As the price of the metal increases, this is usually reflected in the price of gold stocks and exchange-traded funds (although not always, which we will explore later on). These can also help to protect against inflation when the price may start to increase.
For further detail, read our article on how to invest in gold and silver.
There are two different types of exchange-traded funds in the gold market:
Physical gold ETFs seek to replicate the performance and price of bullion. These can be calculated in different ways depending on the fund but differ from exchange-traded commodities (ETC).
Stock or company ETFs seek to replicate the performance of an index containing gold-related company stocks, whether these relate to mining, extraction, or production of the metal.
We explore some of the best-performing gold ETFs in the market right now below.
The following data is taken from ETF Database and is up to date as of January 2022. Please remember that past performance is not a reliable indicator of future results.
This product issued by Aberdeen Standard is one of the best-performing gold ETFs in the UK. It aims to reflect the performance of bullion bars, which are stored in secure vaults in both London and Zurich, Switzerland. Although it’s a UK-based exchange-traded fund, the base currency is in US dollars. According to Bloomberg, it has a ten-year correlation of 0.0110 for the benchmark vs the S&P 500 index, meaning that when the blue-chip index decreases in value, SGOL moves in the opposite direction and could be valuable for diversification and protection against stock market volatility.
5-year return: 54.80%
Expense ratio (percentage of fund’s assets used to cover fees and expenses): 0.17%
The iShares Gold Trust exchange-traded fund seeks to reflect the price of gold in general. The fund provides exposure to the daily movements of bullion prices, reflecting the price of the metal owned by the trust before any expenses or liabilities are taken. It has one of the lowest expense ratios for gold funds, which may be attractive to investors that are conscious of extra costs.
5-year return: 54.60%
Expense ratio: 0.25%
VanEck’s exchange-traded fund is a unique and highly liquid investment that provides investors with the option to take physical delivery of gold bullion in exchange for their shares. The allocated London Bars can be converted into coins or bullion however the investor desires with the purpose of making delivery easier, although this is not a taxable event. This ETF may be useful for those that want to own the physical asset but want a more convenient and cost-effective way of buying and holding.
5-year return: 53.82%
Expense ratio: 0.42%
SPDR Gold Shares is one of the largest and most popular physically backed fund in the world, and it can be traded on a number of stock exchanges. It seeks to reflect the performance of gold bullion’s price. The fund exists to initially track the price of a tenth of an ounce of gold, but this can be modified if the share price differs from the market price, in order to keep the fund roughly in line with the gold price.
5-year return: 53.57%
Expense ratio: 0.40%
The following data is taken from ETF Database and is up to date as of January 2022. Please remember that past performance is not a reliable indicator of future results.
This fund from iShares provides investors with exposure to 40 global stocks that earn their revenues primarily from mining activities. This includes companies from Australia, the US, and Canada, such as Newcrest Mining, Kirkland Lake Gold, and Kinross Gold. It has a considerably high daily volume of trades compared to other ETFs in the same category, making it one of the most popular mining ETFs among investors.
5-year return: 62.60%
Expense ratio: 0.39%
VanEck Vectors Gold Miners is an exchange-traded fund that invests in equities involved in the production of gold and silver and more specifically, the mining of the metal. These stocks typically have high market capitalisations and trading liquidity, including Newmont, Barrick Gold, and Franco-Nevada. This ETF has one of the highest ESG scores within the industry.
5-year return: 55.91%
Expense ratio: 0.53%
The Sprott Gold Miners fund aims to replicate the performance of its underlying index, the Solactive Gold Miners Custom Factors Index. This index tracks over 30 large-cap mining companies that are listed on major US and Canadian exchanges. The index includes constituents with the highest revenue growth, free cash flow yield and the lowest long-term debt to equity ratio, which is re-balanced on a quarterly basis to reflect updated statistics and performance.
5-year return: 46.49%
Expense ratio: 0.52%
Exposure to the physical asset without taking ownership.
Little or no transportation costs.
Lower commission and insurance fees compared to holding physical gold.
Helps to diversify your trading portfolio.
All of the funds listed above have high trading volume and liquidity, although there are many smaller and less liquid funds available to trade also.
The price of gold can see large swings in volatile periods, which is often reflected in stocks and exchange-traded funds.
Physical ETFs come with a relatively high capital gains tax rate.
Expense ratios and other fees can reduce return rates.
Decide whether you want to invest in physical bullion or companies that are part of the exploration, mining, and refining process.
Check the expense ratios. The higher the ratio, the more costs you will pay for the operation and management of the fund.
Assess the market and choose how many shares of the exchange-traded fund you want to purchase, based on financial stability and your risk aversion.
