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There are various ways to invest in gold, ranging from buying physical gold bullion to owning shares in gold mining companies. Some funds directly invest in the physical metal, while others focus on a portfolio of gold-related stocks.
For retail investors looking to participate in the gold market, exchange-traded funds (ETFs) that have gold as their underlying asset offer a convenient and cost-effective option. Here are some of the most popular gold ETFs:
Top gold ETFs
Our selection criteria for top funds include:
- U.S. funds listed in ETF.com’s screener for gold or materials ETFs
- Assets under management of at least $800 million
- Expense ratios below 0.60 percent
(ETF performance data mentioned below is accurate as of July 18, 2024.)
SPDR Gold Shares (GLD)
GLD is a popular ETF that invests in physical gold, closely tracking gold spot prices.
- 2024 YTD performance: 19.4 percent
- Five-year annual return: 10.1 percent
- Expense ratio: 0.40 percent
iShares Gold Trust (IAU)
This fund also tracks the spot price of gold by investing in gold bars held in vaults globally, with a lower expense ratio compared to GLD.
- 2024 YTD performance: 19.5 percent
- Five-year annual return: 10.3 percent
- Expense ratio: 0.25 percent
VanEck Gold Miners ETF (GDX)
GDX is a popular ETF in the global mining sector, holding major mining companies that mine for metals like gold, silver, and copper.
- 2024 YTD performance: 24.0 percent
- Five-year annual return: 8.6 percent
- Expense ratio: 0.51 percent
VanEck Junior Gold Miners ETF (GDXJ)
This fund focuses on foreign small-cap mining companies that generate at least half of their revenues from gold and silver, with a significant portion based in Canada.
- 2024 YTD performance: 11.1 percent
- Five-year annual return: 4.9 percent
- Expense ratio: 0.52 percent
GraniteShares Gold Trust (BAR)
This ETF directly invests in gold stored in a London vault overseen by ICBC Standard Bank, closely mirroring the spot price of gold.
- 2024 YTD performance: 19.0 percent
- Five-year annual return: 11.1 percent
- Expense ratio: 0.175 percent
Why invest in gold
Investors may find gold to be an attractive investment for various reasons:
- Diversification: Gold ETFs provide diversification, reducing the risk of overexposure to a single asset.
- Lower correlation to the stock market: Gold historically has a low correlation to the stock market, smoothing portfolio returns during market volatility.
- Hedge against inflation: Gold can act as a hedge against inflation, historically performing well in periods of high inflation.
- Safe haven asset and store of value: In times of uncertainty, gold is often seen as a safe haven asset, offering stability in turbulent times.
Gold has proven to be an effective portfolio diversifier and a defensive store of value.
The disadvantages of buying gold
However, gold also has its drawbacks as an investment, including:
- Volatile price in the short term: Gold prices can be volatile in the short term, reacting to market conditions and investor sentiment.
- Hard to estimate the value of gold: Valuing gold can be challenging as it lacks traditional financial metrics like earnings.
- Gold doesn’t offer cash flow: Unlike stocks, gold does not provide investors with cash flow in the form of dividends.
- Tax implications: Profits from selling gold ETFs may be taxed as collectibles, potentially at a higher rate than traditional investments.
- Potentially better returns elsewhere: While gold can perform well, other investments like stocks may offer better long-term returns.
How to buy gold ETFs
When investing in gold ETFs, consider whether you prefer exposure to physical gold or gold mining companies for different risk profiles.
Here are four steps to guide your investment strategy:
- Determine your financial goals: Align your investments with your financial objectives.
- Research gold funds: Evaluate key factors like performance, expense ratios, and holdings before investing.
- Outline your asset mix: Maintain a diversified portfolio based on your overall asset allocation.
- Know what you own: Stay informed about your investments and make adjustments as needed.
You can purchase gold ETFs through various online brokers offering stock trading services.
Bottom line
Gold remains a sought-after asset for investors, serving as a hedge against market volatility and geopolitical risks.
Disclaimer: Investors should conduct their own research before making investment decisions. Past performance is not indicative of future results.