In this article, we discuss the 10 best gold ETFs to invest in. If you want to skip our detailed introduction to the gold industry and just want to take a look at some more ETFs, go directly to the 5 Best Gold ETFs.
Gold stands as one of the most ancient investment assets known in history. While some investors hold unwavering faith in its worth, others hold a contrary opinion. That said, it’s hard to dispute the distinctive role the precious metal occupies in markets – serving as a store of value that sets it apart from nearly all other assets. Gold functions as a safe-haven metal that provides a hedge against various risks, including geopolitical upheavals, and financial turmoil. This occurs because investors seek a secure asset to safeguard their buying power and as a hedge against the erosion of the value of national currencies such as the US dollar. Similar to any commodity, the price of gold is subject to the forces of supply and demand. Gold serves multiple purposes beyond merely being a store of value or an investment. Substantial portions of gold demand are attributed to its use in jewelry and various industrial applications, including electronics and medical devices. Consequently, shifts in the growth or contraction of these industries will invariably impact the demand for gold.
Nonetheless, in recent months, numerous individuals have raised doubts about gold’s role as a hedge against inflation. The price of gold has exhibited significant volatility, mirroring the turbulent fluctuations of the markets due to shifts in interest rates, geopolitical challenges, and evolving market projections. During the past year alone, gold has surged, reaching a value exceeding $2,000 per ounce in early 2023.
In June, both the European Central Bank (ECB) and the Bank of England (BoE) opted to raise interest rates. In contrast, the US Federal Reserve (Fed) maintained its target rate unchanged, allowing the impacts of the tightening cycle to gradually permeate the real economy. While concerns about a recession have diminished somewhat, they are not completely eliminated. In such periods, the inherent value of gold becomes notably more appealing than alternative investments like stocks and bonds. While the appeal of other stocks and bonds wanes, there’s an expectation of strong performance from gold stocks due to the increasing demand for the precious metal. A report from Bloomberg referenced information provided by Invesco, revealing that global sovereign wealth funds and investors are accumulating gold. Invesco based its findings on a survey encompassing 85 sovereign wealth funds and 57 central banks, collectively overseeing approximately $21 trillion in assets. In relation to gold, the report stated, “A significant portion of central banks express apprehension about the precedent established by the US freezing of Russian reserves, with the majority (58%) concurring that this incident has heightened the attractiveness of gold.” The survey findings underscored that gold’s role as an inflation hedge persists, with a noteworthy portion of central banks planning to increase their gold holdings over the upcoming three years.
In its gold outlook report for March 2023, fund management company Wisdom Tree suggested that while gold may reach a nominal high this year, achieving a “real” high remains a distant prospect. The report indicated that, even in the most optimistic scenario, gold prices are expected to remain approximately 11% below the inflation-adjusted peaks witnessed during the 1980s. Wisdom Tree noted that if inflation were to decrease significantly (Siegal Case), and the Federal Reserve were to successfully control it earlier than anticipated, gold could see an increase in value. In addition, the report highlighted that gold faced challenges in 2022 due to a strong US dollar. However, in the current year, the precious metal has experienced a resurgence in response to the depreciation of the dollar’s value. Wisdom Tree also pointed out that the prevailing consensus suggests that inflation will continue its decline throughout 2023, and both the US dollar and bond yields are expected to decrease as well.
Furthermore, there is a notable sense of optimism surrounding the revenue and production prospects for H2 2023 among firms such as Newmont Corporation (NYSE:NEM). During the Q2 2023 earnings conference call, Tom Palmer, the CEO of Newmont Corporation (NYSE:NEM), expressed:
“As planned, higher gold production is expected in the second half of the year, and will be driven by higher grades and tonnes mined from both Subika Underground and open pit at Ahafo. Higher grades and tonnes mined Cerro Negro is the first wave of our district expansion which comes online in the third quarter. Higher tonnes mined and processed at Tanami, where we will mine the highest grades for the year in the fourth quarter.”
Our Methodology
We have curated a collection of ETFs that grant access to gold stocks spanning different market capitalizations, including large-, mid-, and small-cap firms. The goal of this compilation is to offer a comprehensive selection of well-regarded funds listed on US exchanges. Furthermore, we have highlighted the top holdings of these ETFs, wherever applicable, which include prominent companies such as Barrick Gold Corporation (NYSE:GOLD), Agnico Eagle Mines Limited (NYSE:AEM), Centerra Gold Inc. (NYSE:CGAU), and Newmont Corporation (NYSE:NEM), to provide deeper insights for potential investors. Lastly, these gold ETFs have demonstrated remarkable growth over the past five years. The list is organized in ascending order based on their five-year performance as of August 20, 2023.
10. iShares Gold Strategy ETF (BATS:IAUF)
5-Year Performance as of August 20: 23.30%
The primary objective of the iShares Gold Strategy ETF (BATS:IAUF) is to mirror the investment outcomes of a foundational index which consists of exchange-traded contracts for gold futures and one or multiple ETPs supported by or connected to tangible gold. The investment fund allocates resources to a blend of exchange-traded gold futures contracts and additional exchange-traded or over-the-counter derivatives. These derivatives correlate with the performance of physical gold, determined by the hypothetical value of said derivative tools and ETPs tied to physical gold. As an example, this could encompass entities like the iShares Gold Trust. As of August 18, the fund’s Expense Ratio stood at 0.34%.
9. VanEck Gold Miners ETF (NYSE:GDX)
5-Year Performance as of August 20: 44.85%
The VanEck Gold Miners ETF (NYSE:GDX) aims to closely mimic, prior to deducting fees and expenses, the price and yield progress of the NYSE Arca Gold Miners Index (GDMNTR). This index is designed to monitor the comprehensive performance of businesses engaged in the gold mining sector. Although not directly tied to physical gold, this investment avenue provides investors with diversified access to major publicly traded gold mining enterprises.
The portfolio encompasses 51 mining companies, featuring notable names such as Newmont Corporation (NYSE:NEM), a prominent mining firm with a primary emphasis on gold. The company is also engaged in the extraction of copper, silver, zinc, and lead. Its gold mining operations are distributed across various countries including the United States, Canada, Mexico, Argentina, Peru, Australia, Ghana, the Dominican Republic, and the Republic of Suriname.
In the second quarter of 2023, Newmont Corporation (NYSE:NEM) was a part of the portfolios of 49 hedge funds, with a collective valuation of $652.58 million. Leading the pack for the second quarter was First Eagle Investment Management, holding the most substantial stake with more than 18.45 million shares.
Similar to Barrick Gold Corporation (NYSE:GOLD), Agnico Eagle Mines Limited (NYSE:AEM), and Centerra Gold Inc. (NYSE:CGAU), Newmont Corporation (NYSE:NEM) is a gold stock that investors should look out for.
8. abrdn Physical Precious Metals Basket Shares ETF (NYSE:GLTR)
5-Year Performance as of August 20: 47.28%
The abrdn Physical Precious Metals Basket Shares ETF (NYSE:GLTR) is an exchange-traded fund incorporated in the USA. The objective of the Shares is to provide investors with a chance to engage in the gold, silver, platinum, and palladium markets by investing in securities. These Shares are designed to present both institutional and retail investors with a straightforward and cost-effective method, featuring low credit risk. This approach allows investors to attain investment advantages akin to possessing physical Bullion metals in the same proportions as held by the abrdn Precious Metals Basket ETF Trust. Launched in October 2010, the fund’s Total Expense Ratio stood at 0.6% as of August 18.
7. SPDR Gold Shares (NYSE:GLD)
5-Year Performance as of August 20: 53.58%
The SPDR Gold Shares (NYSE:GLD) is an exchange-traded fund ETF that aims to track the performance of gold bullion. Created by State Street Global Advisors, GLD provides investors with a way to gain exposure to the price movements of gold without physically owning and storing the precious metal. Each share of GLD is designed to represent a fractional ownership in actual gold bullion stored in secure vaults. For a few years, the fund held the position of the world’s second-largest exchange-traded fund, even briefly achieving the distinction of being the largest.
6. VanEck Merk Gold Trust (NYSE:OUNZ)
5-Year Performance as of August 20: 54.56%
The VanEck Merk Gold Trust (NYSE:OUNZ) introduces a unique dimension to physical gold investment. It permits investors to redeem their funds and subsequently receive physical gold, corresponding to their ETF holdings. The minimum delivery size is 1 ounce, and there are associated fees for converting shares to physical gold. Nonetheless, the inclusion of an option for on-demand physical delivery enhances the appeal of this fund for certain investors. Formed in May of 2014, the fund’s Expense Ratio stood at 0.25% as of August 18.
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Disclosure. None. 10 Best Gold ETFs is originally published on Insider Monkey.
