Gold is an accepted resource among investors who want to protect themselves from dangers like political turmoil, market volatility, and inflation. Apart from buying gold bullion openly, you can purchase gold through investing in gold Exchange-Traded Funds, also known as EFTs or gold futures contracts. When compared to substitutes, such as shares of gold-mining firms or gold futures, some investors see ETFs as a more liquid and low-cost way to invest in gold. Nevertheless, since the price of gold fluctuates constantly, ETFs that track it can be somewhat volatile. The Granite Shares Gold Trust (BAR) fund has been the best-performing gold ETF over the last year. Below, we look at the top 5 Gold ETFs.
What Are Gold Exchange-Traded Funds (ETFs)?
Gold ETFs are funds that allow investors to invest in gold without having to store, sell, or buy the precious metal directly. Most gold ETFs check the price of gold directly, while others invest in gold mining firms.
The issuing business, like other forms of ETFs, buys stock in gold-related companies or buys and keeps gold bullion. Investors purchase shares in the fund, which fluctuate in value according to the underlying gold price or the value of the company’s stock.
Basics of Gold ETFs
Gold is a financially significant metal that may be utilized as an investment due to its many uses and features. Some investors try to diversify their portfolios with gold or use it as a hedge against inflation. It is possible to invest in gold either directly or indirectly.
Gold exchange-traded funds have done exceptionally well recently, with the price of their benchmark precious metal rising roughly 13% in the previous year. In the short term, company stocks can boost portfolio gains, but long-term investment success relies on diversity across asset classes.
The Top 5 Gold ETFs
1. GraniteShares Gold Trust (BAR)
- Issuer: GraniteShares
- Inception Date: Aug. 31, 2017
- Assets Under Management: $923.0 million
- Three-Month Average Daily Volume: 267,377
- Annual Dividend Yield: N/A
- Expense Ratio: 0.17%
- Performance Over One-Year: -0.9%
BAR attempts to track the performance of gold bullion prices without fund fees. The ETF is set up as a grantor trust, which may give some tax benefits to investors. BAR is traded through a regular brokerage account and is listed on NYSE Arca. In comparison to many other gold ETFs, it is a very inexpensive option to profit from prospective price increases in gold. The fund’s sole asset is gold bullion, which is kept in London vaults.
BAR was introduced by GraniteShares to provide conservative precious-metals investors with an ETF that holds physical gold bars and is required to conduct physical checks of its vault twice a year to ensure that it has the appropriate amount of precious metal on hand. Its purpose is to more closely monitor gold’s performance. BAR is also one of the most cost-effective ETFs on the market, with an expense ratio of just 0.17 percent.
2. Aberdeen Standard Physical Gold Shares ETF (SGOL)
SGOL is also set up as a grantor trust, with the goal of tracking the performance of gold bullion prices minus fund expenditures. It has fewer fees than several other gold ETFs, like BAR. The fund’s only asset is gold bullion, which is kept in Zurich and London vaults. Inspectorate International, a major physical commodity auditor, inspects SGOL’s vaults twice a year.
The Aberdeen Standard Physical Gold Shares ETF (SGOL) is an exchange-traded fund that aims to track the price of gold in physical form. The fund invests in gold bullion bars that are stored in vaults in UK, London, Switzerland, and Zurich. The expense ratio of SGOL is the lowest on our list of gold funds, at 0.17 percent.
- Three-Month Average Daily Volume: 3.4 million
- Annual Dividend Yield: None
- Expense Ratio: 0.17%, or $17 annually for every $10,000 invested
- 1-year performance: -3.85
- As of date: January 31, 2022
For all of the periods examined, SGOL performed somewhat below the LBMA gold price and far behind the S&P 500 index. SGOL’s outperformance among gold-backed ETFs can be ascribed in part to its low expense ratio, which is the lowest among our featured gold ETFs.
As of January 31, 2022, a $10,000 investment in SGOL would have yielded the following results after one, three, five, and ten years:
- $9,616 a year ago
- $13,500 three years ago
- $14,619 five years ago
- $9,970 ten years ago
3. SPDR Gold MiniShares Trust (GLDM)
GLDM, like the other funds mentioned, strives to mirror the performance of the gold price minus fund expenses. In addition, the ETF is set up as a grantor trust. GLDM also has a lower expense ratio than many other alternative gold commodities ETFs, similar to the funds mentioned above. The London Bullion Market Association (LBMA) Gold Price is used as a benchmark by GLDM. It offers clients a cost-effective and convenient option to invest in gold. The fund’s only asset is gold bullion.
- Issuer: World Gold Council
- Three-Month Average Daily Volume: 9.3 million
- Annual Dividend Yield: None
- Expense Ratio: 0.18%, or $18 annually for every $10,000 invested
- 1-year performance: -3.85%
- As of date: January 31, 2022
SPDR Gold Minishares (GLDM) outperformed its gold price benchmark by a little margin, which is to be expected from a fund that tracks an index or commodity passively.
4. iShares Gold Trust (IAU)
The iShares Gold Trust (IAU) is an ETF that aims to mirror the price of actual gold. IAU is the market’s second-largest gold ETF by assets under management, holding gold bullion bars in vaults in New York and London.
- Average Daily Volume: 35.6 million
- Annual Dividend Yield: None
- Expense Ratio: 0.25%, or $25 annually for every $10,000 invested
- 1-year performance: -3.89
- As of date: January 31, 2022
For all of the periods examined, IAU fared somewhat below the LBMA gold price. This is to be expected from a fund that tracks an index or commodity in a passive manner. Gold has historically underperformed stocks, especially over lengthy periods of time.
As of January 31, 2022, a $10,000 investment in IAU would have yielded the following results after one, three, five, and ten years:
- $9,611 a year ago
- $13,474 three years ago
- $14,612 five years ago
- $10,040 ten years ago
5. Ultra Gold ProShares (UGL)
ProShares Ultra Gold is a leveraged gold fund that invests in futures contracts. A leveraged ETF, as opposed to a traditional ETF that tracks an underlying index or commodity, is an investment vehicle that employs debt to boost shareholder returns. UGL is a gold investment fund aspires to double the return of its benchmark in a single day. This leveraged ETF also features a daily reset option, which increases risk and necessitates daily monitoring of the position. Rather than being a long-term gold ETF investment, UGL may be better suited as a trading instrument.
Final Thoughts
Gold ETF is an exchange-traded fund that aims to track gold’s price, less fees. Gold exchange-traded funds (ETFs) allow indirect exposure to gold price changes without requiring physical possession of the underlying asset. Gold ETFs can monitor the price of gold bullion or invest in gold futures contracts to achieve this goal.
Gold is a valuable metal and a one-of-a-kind commodity with a wide range of applications, including jewelry, coinage, and industrial applications like memory chips and electronics. Gold is a unique commodity that has historically served as a solid store of value due to its global desire, durability, and versatility. As a result, some investors believe that gold has a reputation for being stable in turbulent times.
