Company / Analytics

Analytics, 18 February 2022

Best gold ETFs to hedge against market uncertainty

Gold exchange-traded funds (ETFs) have performed well over the last two years. In fact, gold prices climbed nearly 27% in 2021, which represents its biggest annual gain since a roughly 32% gain in 2017.

For years, humans have looked to gold as an investment and as a store of value, especially in times of crises. During periods of market volatility, investors often turn to gold, or ask whether they should invest in gold. Gold is well known as both a portfolio diversifier and a hedge against rising prices.

If you are considering investing in gold, whether as a long term or short-term strategy, here a few gold ETFs that track gold differently and that would allow you to invest in gold in a simple, cost-effective manner.

SPDR Gold Shares (ticker: GLD)

SPDR Gold Shares is the go-to for investors looking to play precious metals, with nearly $70 billion in assets under management. Since its launch in 2004, the fund has allowed investors to purchase gold via their brokerage account or individual retirement account. The fund is benchmarked to gold bullion, giving investors an easy way to get exposure to gold prices without physically owning the precious metal. The 0.4% annual expense ratio, or $40 for every $10,000 invested, is also quite cost-effective when you consider the costs necessary for shipping, insuring and storing gold bars or coins in a safe.

iShares Gold Trust (IAU)

Closely related to GLD is the iShares Gold Trust, a similar fund that offers direct exposure to the day-to-day movement of the price of gold bullion. It’s smaller, at $31 billion in total assets, and it’s a bit younger with an inception date of 2005, but it’s very close to a mirror image of the SPDR fund. In fact, if you chart the two funds next to each other in your favorite screening tool, you’re likely to see them move exactly the same way year after year. One advantage IAU does have, however, is a lower cost – at just 0.25% in annual expenses. That saves investors about $15 annually on every $10,000 invested.

SPDR Gold MiniShares Trust (GLDM)

Of course, you had to know that SPDR wouldn’t be undercut on prices and risk losing market share. That’s why, in 2018, it launched yet another gold bullion ETF via this “MiniShares” offering. As with GLD and IAU, it’s designed to reflect the performance of the price of gold bullion (less expenses) and has moved in lockstep with those other gold ETFs since it entered the market – but GLDM charges only 0.18% in expenses. You may wonder why the investment managers at State Street Global Advisors would launch a new, cheaper fund rather than just reduce the cost of their established GLD fund. The answer is that with such massive liquidity, GLD is a favorite among institutional investors. So rather than mess with that lucrative product, it launched this MiniShares fund for retail investors looking to get cheaper exposure in their personal portfolios.

Aberdeen Standard Physical Gold Shares ETF (SGOL)

Some critics say the SPDR gold ETFs aren’t really an investment in gold since they are structured in a trust that tracks the market price of bullion. For investors who are serious about hard assets, this differentiation between “paper” gold and physical gold is a real concern. That’s where SGOL comes in, purchasing and redeeming physical gold in kind with its assets under management and keeping actual gold in a vault in Switzerland instead of on a ledger. First listed in 2009 and now managing nearly $3 billion in assets, this is no small fund. And with an expense ratio of just 0.17%, SGOL is significantly cheaper than some of the other gold funds on this list

VanEck Merk Gold Trust (OUNZ)

Gold in a vault is obviously preferable to some investors. So OUNZ takes this desire for physical gold to another level by allowing investors to redeem their funds as a deposit back to their investment account or actually shipping the gold to their door. With around $450 million or so under management, this fund is the smallest on this list but clearly has found a niche. Delivery comes with an added fee when you opt in, but the minimum shipment size is just 1 ounce and the base expense ratio is 0.25% annually, so it’s on par or less than many other gold funds. That means you can invest in this gold ETF at a competitive price and simply retain the option for physical delivery if and when you want it.

VanEck Vectors Gold Miners ETF (GDX)

An investor interested in the big stocks in the gold sector can invest in the most popular names on Wall Street through this roughly $15 billion gold ETF. Composed of roughly 50 major mining stocks including at present Newmont Corp. (NEM) and Barrick Gold Corp. (GOLD), this fund is an easy way to play gold via equity investments. The fund is a bit top-heavy with these top two positions representing more than 20% of the portfolio, but it’s still a much more diversified way to invest in miners than owning two or three individual stocks.

VanEck Vectors Junior Gold Miners ETF (GDXJ)

One flaw with GDX is many of the mining companies are diversified operations that extract more than gold. Consider that Newmont’s operations also include a significant amount of copper and silver. That’s simply the nature of a large miner since it has the land and the equipment to operate in this manner. Still, some investors prefer to steer away from the big guys and invest in smaller companies that are more focused on gold. Researching small-cap miners is difficult, however, so many investors have turned to GDXJ as a way to get a more direct play on gold miners. The fund currently invests in about 90 junior gold stocks with an average market capitalization of less than $4 billion.

GraniteShares Gold Trust (BAR)

If you’re a goldbug who doesn’t trust ETFs or stocks, however, it’s hard to get excited about any of these vehicles. Understanding that some of these very cautious investors exist, GraniteShares has gone the extra mile with BAR to create both an ETF that holds physical gold bars but also one that is mandated to do physical audits of its vault twice a year to ensure it indeed has the proper amount of precious metal on hand. Its goal is to track the performance of gold more faithfully, and with an expense ratio of just 0.175%, BAR does that in a cost-effective way.

Sprott Physical Gold and Silver Trust (CEF)

For gold investors who are also interested in other hard assets, Sprott’s CEF fund combines two of the most popular precious metals in one holding. With an allocation of roughly 64% gold bullion and 36% silver bullion, this is clearly a gold fund and not just a grab bag of other metals. Adding to the appeal, the fund is fully invested in physical metal held at the Royal Canadian Mint. CEF investors may take actual delivery of their silver and gold investments. The ETF boasts roughly $4 billion in assets, but its annual expense ratio of 0.53% makes it costlier than other funds and there are delivery fees to consider, too.

Choose one or several trading platforms and achieve your goals with Investors Europe

Investors Europe (Mauritius) Limited is authorised and regulated by the FSC Mauritius, license C112011088. Registered address: 3rd Floor Ebene House, Hotel Avenue,33 Cybercity, Ebene 72201, Republic of Mauritius. Registered Number: 113933.

Any information contained on this website is provided to you for informational purposes only and should not be regarded as an offer or solicitation of an offer to buy or sell any investments or related services that may be referenced here. Investing in certain instruments, including stocks, options, futures, foreign currencies, and bonds involve a high level of risk. Trading on margin comes with substantial risk as well. You must be aware of these risks before opening an account to trade. The income you may get from online investing may go down as well as up.