Gold has served as a store of value since the dawn of civilization. Today, the precious diamond remains an important holding in the central bank vaults of many countries.
Although investors can purchase and store physical gold bars, this approach has several drawbacks. Namely, storage and insurance costs, as well as higher bid-ask spreads when buying and selling. The alternative is a gold exchange-traded fund, or ETF, which can offer exposure to gold through many brokerage platforms.
“A gold ETF is a type of investment fund that aims to track the price of gold and provide investors with exposure to the performance of the precious metal,” explains Joseph Cavatoni, chief market strategist for North America to the World Gold Council. “As the price of gold fluctuates in the market, the value of the ETF’s shares changes accordingly, providing a convenient and liquid way to invest in gold.”
Although a gold ETF does not directly grant an investor ownership of goldthis gives them the opportunity to participate in the risks and returns of the metal.
“Gold ETFs hold physical gold bars as the underlying asset, and the gold is held in secure vaults in the name of the fund,” Cavatoni explains. “The amount of gold held by the ETF is represented by shares or units.”
The main advantage of a gold ETF is accessibility and flexibility. Investors can easily access the asset through a brokerage accountwhich provides liquidity and economies of scale, resulting in reduced transaction and storage costs.
To help investors find the best gold ETFs on the market, our team evaluated a range of current offerings based on several criteria, including gold ETF type, assets under management, liquidity and expense ratio.
Best Gold ETFs
Compare the best gold ETFs
Why other funds were not retained
We began our ranking by selecting gold ETFs whose exposure to gold prices came from physically backed deposits. This meant eliminating ETFs that hold gold mining stocks and derivatives-based ETFs that hold gold futures. We have also excluded more exotic trading products such as leveraged or inverse gold ETFs.
While these ETFs have their uses, they tend to be too specific to suit a large, single gold portfolio. In particular, gold futures ETFs and gold miners do not always accurately track the spot price of gold. Leveraged and inverse gold ETFs are intended to be short-term trading tools and should not be used as a long-term investment.
“These products have a higher risk of tracking errors and tend to be more expensive for investors, which is why physically-backed gold ETFs have seen higher levels of adoption,” says Cavatoni.
We also excluded gold ETFs with assets under management of less than $800 million. This allowed us to focus on the most popular ETFs that attracted a large number of investor capital. Higher assets under management generally indicate greater investor confidence in an ETF and lower risk of closure.
To ensure sufficient liquidity, all gold ETFs selected for this list have a 12-month average trading volume of at least 400,000 shares and a bid-ask spread of 0.2% or less. This ensures that investors can buy and sell shares at the expected price.
Finally, we put a cap on fees, with no ETF on this list charging an expense ratio higher than 0.4%. All things being equal, higher ETF fees can impact long-term performance, so keeping costs to a minimum is paramount.
Methodology
Our rankings of the best gold ETFs were created by applying a review of several “must-have” metrics:
- Type: To qualify for this list, a gold ETF must be physically backed by gold bullion deposits. This means that it cannot be synthetically backed by gold derivatives like futures contracts or shares of gold mining companies, nor use leverage or offer inverse exposure, and not be a trust. fixed capital.
- Assets under management: All the gold ETFs on this list have accumulated at least $800 million in assets under management.
- Liquidity: All gold ETFs on this list have a 12-month average trading volume of at least 400,000 shares and a bid-ask spread of 0.2% or less.
- Expense ratios: To be eligible for inclusion, a gold ETF must have a net expense ratio of 0.4% or less.
An experienced ETF analyst has selected the funds above, but they may not be right for your portfolio. Before purchasing any of these funds, do plenty of research to make sure they fit your financial goals and risk tolerance.
Final verdict
For most investors, a gold ETF will provide accessible and affordable exposure to gold prices. Compared to purchasing and storing physical products gold ingotsA gold ETF offers lower transaction fees, better liquidity, and access to a brokerage account.
Our pick for the best gold ETF goes to the SPDR Gold MiniShares Trust (GLDM). While it doesn’t have the highest liquidity and assets under management, GLDM still excels with its track record and low expense ratio, making it a great all-around ETF for gold exposure.
How to buy gold ETFs
Purchasing a gold ETF involves the same steps as purchasing any other ETF. After researching the different gold ETFs available and selecting one, investors can head to their brokerage platform.
From there, go to the trade or buy section and enter the ticker symbol of the ETF you want. Next, select the number of shares you want to buy and choose the order type (for example, market order or limit order).
Always verify the accuracy of your order before confirming the purchase. Once confirmed and executed, the ETF shares will be added to your brokerage account and the cost will be deducted from your cash balance.
Keep in mind that depending on your brokerage, buying and selling gold ETFs may incur additional trading commissions and exchange fees.
Frequently Asked Questions (FAQ)
As of June 2023, Vanguard does not offer a gold ETF among its current lineup of 82 ETFs. The closest ETF with exposure to gold offered by Vanguard is the sector-specific Vanguard Materials ETF (VAW), which has a 3.8% allocation to gold mining companies.
Whether or not gold is a good investment depends on your goals, risk tolerance, and time horizon. Historically, gold has a reputation for adding diversification to a portfolio. This is mainly due to low correlation with other assets like stocks and bonds.
In times of economic and market crisis, gold has managed to maintain its value. On the other hand, gold has demonstrated high historical volatility. It also doesn’t pay dividends like stocks or interest income like bonds. Its price is subject to supply and demand shocks and can fluctuate wildly.
There are several alternative methods for investing in gold other than purchasing a gold ETF. These include the purchase of physical bullion in the form of bars and coins; invest in gold mining stocks; invest in gold mutual funds or closed-end trusts; trade gold futures and options; or buy gold certificates. Each has pros and cons, so be sure to do proper research before investing.
