Gold exchange-traded funds (ETFs) offer investors an easy way to gain exposure to the gold market without needing to directly hold physical gold bullion. Gold ETFs invest in gold mining stocks, hold bars and coins in vaults, or use financial instruments to track the gold price. With interest in gold investment increasing in 2024 amid economic uncertainty, this guide examines the top gold ETFs worth considering right now.
What is a Gold ETF?
A gold ETF, or exchange-traded fund, trades on stock exchanges and aims to closely track the gold spot price. Some best performing gold ETFs hold physical gold bullion, storing the bars and coins in secure vaults globally. Others invest in gold mining stocks, essentially offering a basket of equities related to exploring, extracting, and selling gold.
Investing in a gold ETF offers efficient exposure to the gold market in a regulated investment vehicle without needing to personally store physical gold. Gold ETF shares can be traded intraday on stock markets, making them highly liquid. The price of a gold ETF moves parallel with gold prices.
Why Invest in a Gold ETF? Benefits and Drawbacks
Benefits
- Convenience – No need to physically store gold coins and bars which requires insurance and security
- Liquidity – Gold ETF shares trade actively intraday like normal stocks for swift access to money
- Transparency – Holdings are published daily so investors know exactly what they own
- Flexibility – Invest any amount, unlike gold coins only available in fixed denominations
- Cost – Owning physical gold has higher insurance, storage, and transport costs
- Diversification – Gold often moves independently from other assets like stocks and bonds
Drawbacks
- No physical ownership – While some ETFs like AAAU allow delivery of gold, most do not give investors claim to physical metal
- Tracking error – ETF performance will not perfectly match gold prices due to fees and other factors
- Tax consideration – Gold ETFs are subject to capital gains tax, unlike physical gold coins in some cases
- Closure risk – Very low probability, but an ETF closing would force shares to be redeemed for cash
On balance, most mainstream economists argue if investing in gold, it is simpler, safer and more efficient for most individual investors to utilize gold ETFs rather than hold physical bars and coins directly. However, some staunch gold bugs disagree with ever owning gold exposure in anything other than directly held precious metals allocated to the individual.
Top 8 Gold ETFs to Buy in 2024
1. SPDR Gold Shares (GLD)
With $55 billion in assets under management, this ETF launched in 2004 is the world’s largest gold-backed fund. SPDR Gold Shares (GLD) stores physical gold bullion to closely track spot gold prices minus expenses. The ETF charges a low 0.40% expense ratio while offering unparalleled liquidity in an investment directly backed by gold bars and coins stored in secure vaults globally. GLD has closely tracked prevailing gold values over its 18-year operating history, backed by the integrity and transparency of State Street and World Gold Trust Services as its sponsor and trustee.
2. iShares Gold Trust (IAU)
With $31 billion in assets under management and competitive 0.25% expense ratio, iShares Gold Trust (IAU) offers efficient, low-cost gold exposure. This ETF launched in 2005 holds physical gold bullion in secure vaults, allowing shares to closely mimic spot gold’s price movements. IAU has closely tracked the gold price over time, gaining investor trust in its physical backing and price correlation. The ETF provides excellent liquidity with high daily trading volumes as the second largest physically-backed gold vehicle behind GLD.
3. Aberdeen Standard Physical Gold Shares (SGOL)
With $2 billion in assets under management, Aberdeen Standard Physical Gold Shares (SGOL) holds secure physical gold in vaults to provide direct exposure to bullion price changes. The ETF charges a competitive 0.17% management fee with gold stored in Zurich and London vaults, audited biannually. SGOL has closely tracked prevailing gold prices since launching in 2009, providing convenient exposure to physical gold without direct ownership hassles. With trusted institutional names like abrdn and Bank of New York Mellon involved, SGOL appeals as a mainstream, reputable choice backed by physical gold holdings.
4. GraniteShares Gold Trust (BAR)
This relative newcomer offers an inexpensive, convenient way to invest in gold. Launched in mid-2018, GraniteShares Gold Trust (BAR) holds securely vaulted gold coins and bars in a fully-backed, physically-allocated ETF structure with direct exposure to gold spot prices. BAR levies an ultralow 0.17% expense ratio while storing gold in vaults across London, New York, Singapore, and Zurich. With reputable institutional backing, BAR’s shares have closely followed prevailing gold values since inception. The ETF presents an easy, cost-effective choice for portfolio diversification with physical gold exposure.
5. Sprott Physical Gold Trust (PHYS)
Offering redemptions for physical gold delivery in certain circumstances, this closed-end trust launched in 2010 provides convenient bullion investment not legally deemed a mutual fund. Sprott Physical Gold Trust (PHYS) stores London Good Delivery gold bars in secure Canadian vaults on an allocated, fully-backed basis with regular audits and publication of bar serial numbers for investor transparency. PHYS allows tax-efficient rollovers from other gold investments into physical redemptions while eliminating holding costs and hassles. With a reputable backing institution and governance assurances, PHYS presents a trusted option for convenient physical gold exposure eligible for ownership transfers to investors meeting redemption requirements.
6. VanEck Merk Gold Trust (OUNZ)
This ETF invests directly in physical gold bullion stored in vaults in London, New York, and other locations. Launched in 2014, VanEck Merk Gold Trust (OUNZ) holds a fixed amount of gold, allowing shares to closely track bullion values. While GLD and IAU dwarf its smaller $250 million asset size, OUNZ offers unique tax handling potentially exempt from capital gains – making it suitable for certain retirement accounts holding gold exposure. Its sponsor Merk Hard Currency Fund and vaulting relationships with ICBC Standard Bank and other institutions add trust and transparency around OUNZ’s physical gold backing accessible to investors at spot prices via an ETF share conversion.
7. iShares MSCI Global Gold Miners ETF (RING)
iShares MSCI Global Gold Miners ETF (RING) offers investors exposure to the worldwide gold mining sector through an index-tracking fund owning major industry players. RING invests across equity in around 40 leading publicly-traded gold mining companies, essentially offering a prepacked basket of stocks leveraged to gold prices spanning explorers to producers based globally. Holdings include Barrick Gold, Newmont Corp, Kirkland Lake, and Wheaton Precious Metals. Investors in RING gain diversified exposure to gold miners’ upside linked to bullion values without research hassles assembling their own selections.
8. VanEck Vectors Gold Miners ETF (GDX)
VanEck Vectors Gold Miners ETF (GDX) focuses on the largest gold miners dominating the industry. GDX invests over 80% of its $12 billion asset base within its underlying index benchmark – the NYSE Arca Gold Miners Index – spanning major gold producers around the world. Buying GDX shares offers exposure to prevailing gold prices through the stock performance of the world’s top gold mining stocks like Newmont, Barrick Gold, Franco-Nevada, and more. While marginally lagging bullion, GDX tends to amplify its upside and downside through its concentration in the majors of the gold mining sector.
READ ALSO: Investing in Gold ETFs: Top-Performing Funds to Consider
Beginning Your Due Diligence on Gold ETFs
Conducting thorough due diligence when choosing a gold ETF involves:
- Researching the ETF provider’s reputation and credentials
- Reviewing the prospectus to understand the exact composition and structure
- Checking whether the ETF directly owns physical gold or invests in mining equities
- Comparing historical price correlation to spot gold values
- Assessing management fees relative to alternatives
- Evaluating average trading volumes for an indication of liquidity
- Checking vaulting and auditing procedures for physically-backed offerings
- Reading latest company announcements and filings for transparency
- Browsing expert analysis and feedback across gold forums
Gold ETF Investing Strategies
Those investing in gold ETFs generally utilize a buy-and-hold approach, expecting long-term returns to mirror inflation with periodic ups and downs. However, active trading strategies can also capitalize on gold and mining stocks’ occasional volatility for profit potential.
Common gold ETF investing strategies include:
Core Strategic Holding – Buying shares across diversified gold ETFs for long-term portfolio exposure matching inflation
Tactical Tilting – Temporarily increasing gold ETF allocation to hedge perceived market risks then reducing when threats fade
Sentiment Trading – Following gold investor sentiment indicators like futures positioning for clues on overbought/oversold turning points
Technical Analysis – Identifying chart patterns around support, resistance, moving averages to time entries and exits
News/Event Trading – Buying on the dips caused by gold thrives on fear – using volatility around political/economic events to accumulate positions
Option Strategies – Selling covered calls/cash-secured puts on gold ETF shares to generate income from rich optionality premia
Gold ETF Investing Tips
Consider Blending Physically-Backed and Miner ETFs
For full spectrum exposure, allocate to both physical gold ETFs tracking bullion and mining stock ETFs providing operational leverage tied to company fundamentals influencing share prices. Blend these dual drivers of potential returns for a balanced gold investment.
Use Gold for Portfolio Diversification
Study after study shows adding a gold allocation to an investment portfolio – typically 5-10% – can increase risk-adjusted returns. Gold often zags when stocks zig, smoothing out drawdowns during times of equity volatility.
Employ Dollar-Cost Averaging
By making equal-dollar gold ETF purchases at regular intervals, buying more shares when prices are lower, you benefit from dollar-cost averaging compared to timing lump-sum attempts.
Maintain Long-Term Holding Outlook
Trying to trade short-term wiggles in the gold market is enormously difficult, while most gains come in sharp bursts. Maintain a multi-year horizon, allowing fundamentals like inflation and real rates to drive secular uptrends.
To Recap: Our Top Pick Gold ETFs for 2024
In today’s turbulent markets where stocks and bonds both face headwinds, adding exposure to gold makes more sense than ever to balance a diversified portfolio. Gold ETFs offer an efficient means to deploy capital towards gold’s unique attributes as an investment safe haven holding its purchasing power over time.
While minor tracking error and expense ratios vary, the largest physically-backed gold ETFs like SPDR Gold Shares (GLD) provide unmatched liquidity with institutional transparency over billions in sovereign-backed bullion stored globally. This makes GLD our top pick for core strategic holding aligned to gold spot prices.
Beyond the physical gold allocation, blending in some equity exposure via VanEck Vectors Gold Miners ETF (GDX) rounds out our model portfolio approach with majors like Barrick and Newmont operating as “leveraged call options” on bullion. The GDX diversification carries more volatility but participation in the profit windfalls when gold miners thrive in a high-price environment.
In today’s turbulent markets where stocks and bonds both face headwinds, adding exposure to gold makes more sense than ever to balance a diversified portfolio. Gold ETFs offer an efficient means to deploy capital towards gold’s unique attributes as an investment safe haven holding its purchasing power over time.
While minor tracking error and expense ratios vary, the largest physically-backed gold ETFs like SPDR Gold Shares (GLD) provide unmatched liquidity with institutional transparency over billions in sovereign-backed bullion stored globally. This makes GLD our top pick for core strategic holding aligned to gold spot prices.
Beyond the physical gold allocation, blending in some equity exposure via VanEck Vectors Gold Miners ETF (GDX) rounds out our model portfolio approach with majors like Barrick and Newmont operating as “leveraged call options” on bullion. The GDX diversification carries more volatility but participation in the profit windfalls when gold miners thrive in a high-price environment.
Frequently Asked Questions on Investing in Gold ETFs
What percentage of my portfolio should I allocate to gold ETFs?
Most mainstream financial advisors suggest keeping a 5-10% strategic allocation to gold in a diversified portfolio. This balances gold’s portfolio volatility reduction attributes while limiting exposure to its potential underperformance during economic expansions favoring stocks and bonds.
How do gold ETFs make money?
The gold ETF itself earns nothing – it simply acts as a conduit reflecting value changes in its underlying holdings. Profitability solely depends on the price appreciation of its gold bullion reserves or portfolio of gold mining stocks. Revenue comes indirectly from rising mining output sold at higher prevailing gold prices in a commodity supercycle.
Are gold ETFs safe?
Buying shares in major gold ETFs sponsored by leading financial institutions that hold secure physical bullion and trade on regulated exchanges are generally as safe as investing gets. Still, it is prudent to research prospectus terms around redemption ability and storage methods for physically-backed offerings.
Should I choose a physical gold ETF or a miner ETF?
For purest exposure to gold prices alone, physical gold ETFs like GLD directly mirror the spot price by holding bars in vaults globally. Miner ETFs like GDX carry additional risks from company fundamentals but tend to amplify market gold ups and downs. Blending both categories provides a good balance.
How are gold ETFs taxed?
In most jurisdictions, redemption of ETF shares for cash or rolled into other securities triggers capital gains tax similar to selling stock shares. However, certain physical gold offerings allow tax deferral benefits when exchanging into coins eligible for tax-free retirement account inclusion.
In another related article, Top Gold Stocks Set to Take Off in 2024
