Gold exchange-traded funds (ETFs) are funds that hold physical gold or gold mining stocks. They are one of many ways to invest in gold. Gold ETFs are an easy way to gain instant exposure to the gold market, making them ideal for anyone seeking to invest in gold.
Gold ETFs fall into two basic categories:
- Those that own physical gold.
- Those that own gold mining stocks.
Here's a closer look at the top gold ETF options.
What to look for in the best gold ETFs
Investors considering an ETF focused on gold should look for the following characteristics:
- Large size: The ETF should have at least $200 million of assets under management (AUM). A larger size makes the ETF less likely to fall prey to market manipulation or trade at a significant premium to its net asset value.
- Reasonable expense ratio: Look for an expense ratio of less than 1%. Any expense ratio of more than 1.5% is considered excessive.
- Non-leveraged ETFs: A leveraged ETF borrows money or uses derivatives, such as options and futures contracts, to magnify its returns. These carry much higher risk, and leverage in a down market can magnify losses.
Assets Under Management (AUM)
With those criteria in mind, here are some of the best gold ETFs.
Top gold ETFs
The best gold ETFs are:
Here's a closer look at each of these top gold ETFs.
1. SPDR Gold Trust
NYSEMKT: GLD
Key Data Points
SPDR Gold Trust is the largest and most liquid gold ETF. It's the gold standard for investors seeking direct exposure to the price of the yellow metal. The ETF's sole asset is gold bullion, which it stores in secure vaults.
Investors pay a premium for this leading gold ETF. It has a higher expense ratio than other ETFs that own physical gold bullion at 0.4%.
However, it's still relatively cheaper than shipping, insuring, and storing gold bars and coins, especially when you factor in its liquidity. Its large size makes it a favorite of institutional investors, such as pension funds that use it to hedge against inflation and other risk factors.
2. iShares Gold Trust
NYSEMKT: IAU
Key Data Points
iShares Gold Trust is almost identical to SPDR Gold Shares, making it another great means of investing directly in gold. It boasts a lower expense ratio than its larger rival (0.25%), making it an even lower-cost way to gain upside exposure to the price of gold.
Owning shares in this ETF is a great proxy for owning physical gold without the hassle and expense of storing or insuring bars and coins. The ETF handles these items, storing its bullion in the London branch of JPMorgan Chase (JPM -1.08%). Overall, this gold ETF has done an excellent job of tracking the price of gold, with only a minor underperformance due to its expense ratio.
3. VanEck Vectors Gold Miners ETF
NYSEMKT: GDX
Key Data Points
VanEck Vectors Junior Gold Miners ETF offers the most upside potential because it focuses on smaller mining companies, known as junior gold miners, some of which are still exploration-stage companies. These smaller miners could expand production faster and deliver higher returns than their larger rivals.
5. Franklin Responsibly Sourced Gold ETF
NYSEMKT: FGDL
Key Data Points
This ETF holds physical gold. It only holds gold sourced from accredited refiners that demonstrate their efforts to respect the environment and combat money laundering, terrorist financing, and human rights abuses. This responsibly sourced gold ETF has a low expense ratio of 0.15%.
6. Goldman Sachs Physical Gold ETF
NYSEMKT: AAAU
Key Data Points
The Goldman Sachs Physical Gold ETF is another ETF that holds physical gold. Like iShares Gold Trust, this fund holds gold bullion in the London branch of JPMorgan Chase. It has a lower ETF expense ratio than its larger rivals at 0.18%.
7. abrdn Physical Gold Shares ETF
NYSEMKT: SGOL
Key Data Points
abrdn Physical Gold Shares ETF also holds physical gold. However, it seeks to only hold London Good Delivery gold bullion bars refined on or after Jan. 1, 2012. All gold refined on or after that date has been refined in accordance with the London Bullion Market Association's Responsible Gold Guidance.
In addition to holding responsibly sourced gold, this ETF has a low expense ratio of 0.17%.
Related investing topics
Finding the best gold ETF for your portfolio
Gold ETFs allow investors to speculate on gold prices without buying physical gold. The benefit of owning a gold mining company ETF over a gold price ETF is that it can generate higher returns.
Gold miners can use the cash flow they earn from producing gold to expand production, repay debt, make dividend payments, and repurchase shares. Those investments and shareholder returns position gold mining companies to potentially deliver higher total returns than the price gains of gold over the long term.
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