Gold exchange-traded funds (or exchange-traded commodities) are increasingly popular investments for individuals looking to diversify their portfolios with a valuable and historically stable commodity.
Traders generally consider these an excellent alternative to investing in precious metals as they provide a more cost-effective and convenient way to invest without storing, transporting, and buying physical gold.
Gold ETFs track and monitor the price of gold directly, and many ETFs allow investors to benefit from a range of exciting features, including leverage, options and even gold futures contracts.
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In this article, we’ll go over some of the top gold ETFs in more detail and provide a guide on how to invest in these funds.
| Service | Score | Register |
|---|---|---|
| 1. SPDR Gold Shares ETF (GLD) | ★★★★★ | Learn More |
| 2. iShares Gold Trust ETF (IAU) | ★★★★★ | Learn More |
| 3. Sprott Gold Miners ETF (SGDM) | ★★★★★ | Learn More |
| 4. Abrdn Standard Physical Gold Shares ETF (SGOL) | ★★★★★ | Learn More |
| 5. VanEck Vectors Gold Miners ETF (GDX) | ★★★★★ | Learn More |
| 6. Royal Mint Physical Gold (RMAU) | ★★★★★ | Learn More |
What Are Gold ETFs?
As briefly touched on, gold exchange-traded funds invest in physical gold bullion, which allows investors to benefit from movements in gold price without having to own the physical metal.
Everyone wants to get involved in trading precious metals and commodities, but not everyone has a Scrooge McDuck-sized room that stores gold bullion. Enter Gold ETFs.
ETFs are traded like stocks, meaning they can be bought and sold on many stock exchanges worldwide with ease. What makes them so powerful to investors is the ability to diversify their portfolios with gold while still having the flexibility to buy and sell at a moment's notice.
Another advantage of ETFs is that they are highly liquid assets. This benefit means that investors can buy or sell their investments quickly and without additional charges, making them attractive to investors with a low-risk tolerance.
Moreover, ETFs generally don’t incur additional storage costs, which helps to reduce overall costs.
How to Invest in Gold ETFs
Before you start investing in gold ETFs, it’s vital to research the different funds available in the market.
There are several reputable gold ETFs with different features, risks and rewards. Some ETFs track the price of gold directly, while others offer tools such as leverage, which uses borrowed funds to increase the size of your trading position.
It’s important to review each fund carefully before investing to ensure it meets your specific objectives.
Once you’ve researched, you’ll need to open a brokerage account. This action will enable you to buy and sell gold ETFs online instead of visiting a physical broker. Most brokers offer a range of commission-free ETF trades, so you can start with a relatively small initial investment.
You can then decide which ETFs to invest in and buy shares according to your risk tolerance and investment strategy. Here, you can also pick other ETFs, such as those that track the price of silver or other commodities.
How to Open an Account on a Trading Platform
First, you'll need to research stockbrokers and trading platforms to find one that offers access to gold ETFs.
Next up is to open an account; this should include providing personal details, such as your name, address, and proof of identity. Additionally, you'll need to decide which type of account you'd like to open. Depending on your goals and financial situation, you may want to open a taxable or non-taxable brokerage account.
Once you've opened the account, you typically need to fund it with cash or through a banking transfer or wire.
After this, simply select the ETFs you want to purchase — the trading platform or stockbroker will typically have ETF search tools to help you find the right ones.
When you've located the right ETFs, you need to place a buy order — this involves selecting the stock, the unit amount, and the price you're willing to pay. You can place a market order, which ensures that you buy the stock at the best available price, or you can place a limit order, which allows you to set a maximum purchase price. Finally, you must submit the order and wait for it to be executed.
Opening an account with a stockbroker or trading platform to purchase gold ETFs isn't as complicated as it may seem — with some research, you can easily understand the process.
Best Performing Gold ETFs
Now that you know how to invest in gold ETFs, let’s explore the top funds more deeply.
Below are some of the best gold ETFs available in the market today:
1. SPDR Gold Shares ETF (GLD)
SPDR Gold Shares ETF, commonly called GLD, are physical gold ETFs that allow investors to comfortably invest in the highly volatile gold market. GLD is designed for investors to gain exposure to gold prices without purchasing physical gold.
GLD is structured as a grantor-retained annuity trust, meaning that investors don’t have legal ownership of the gold held in the trust.
Instead, investment in GLD is more like an investment in the spot price of gold, as the fund does not pay out interest or dividends or create additional capital gains. Instead, when investors cash out of GLD, they gain the net asset value of their shares.
Since the fund is backed by physical gold and not derivatives, it can be an attractive option for risk-averse investors. This ETF also operates with a low-cost structure and low levels of volatility, making it a great choice for long-term investors who want to take advantage of movements in the gold market.
2. iShares Gold Trust ETF (IAU)
This option is another popular gold ETF that aims to monitor the price of gold and is traded in the form of stock. That’s a great benefit for those who don’t want to deal with the hassle of buying and selling physical gold.
If you have a stock trading account, it’s easy to purchase and sell shares of the iShares Gold Trust ETF like any other stock.
What’s more, it's incredibly liquid. This feature means that if you ever need to sell it, there will likely be plenty of buyers. As long as the price of gold is strong and stable, you won’t have any problems selling your shares.
Finally, the ETF has a low expense ratio. That means you won’t have to worry about paying too much yearly fees. This benefit is great because it helps keep more money in your pocket.
3. Sprott Gold Miners ETF (SGDM)
If you’re interested in an ETF that is relative to gold miners, check out the Sprott Gold Miner ETF. They track against the Solactive Gold Miners Custom Factors Index and have an outstanding annualized rate of return. They hold 30 different large-cap mining companies from US and Canadian exchanges.
They take into account factors such as cash flow, free cash flow yields, revenue growth, and debt-to-equity ratios. This helps them determine the best mining companies to invest in, and they balance the ETF accordingly. This is a closely monitored ETF that is rebalanced quarterly.
Because of the tight management, the expense ratio is slightly higher on this fund. It’s not awful, but it’s certainly ticking up there quite a bit at .52%. That being said, their 5-year return shows about 46%, which is pretty good.
4. Abrdn Standard Physical Gold Shares ETF (SGOL)
Some funds focus solely on holding physical gold, and this is one of them. It’s a top choice in the UK because it has a track record of high performance. This is one of the best-performing funds in the gold sector, sporting five-year returns of close to 55%.
They invest in physical gold and then store the bullions and other holdings in specific locations. It’s a UK-based fund, so the holdings are in secure sites in countries like London, Switzerland, and Zurich.
Interestingly enough, while this is a UK fund, it’s set up with US currency as the base currency, which pits it against the S&P 5https://www.marketwatch.com/investing/index/spx00. However, the expense ratio beats out all of the others you will find on this list, measuring in at only .17%. That’s pretty amazing as far as expenses go.
5. VanEck Vectors Gold Miners ETF (GDX)
This option is a type of ETF that seeks to offer investors exposure to a basket of global gold mining stocks.
The fund holds stocks in the gold mining industry and gold royalty companies based in countries worldwide, so investors don’t have to worry about committing to just one miner’s prospects.
A couple of things to remember when considering this ETF is that it's a single fund and, therefore, carries the risk of dependence on the performance of its components.
Additionally, the fund carries a higher expense ratio than some alternatives, so costs should be weighed when investing in GDX.
6. Royal Mint Physical Gold (RMAU)
The Royal Mint fund actually falls under ETC, which is an exchange-traded commodity. This fund operates under the same concepts, it just is part of the commodities tier. If you’re looking for something that is specific to the UK, it’s a pretty great choice. It’s one of the best in the area.
The unique details about the Royal Mint ETC are that it’s operated and backed through a European sovereign mint facility, so it looks just a little bit different in management and design.
It also may feel more relatable or realistic for some investors because of the Royal Mint ties.
The Royal Mint produces gold, and they comply with strict standards of the London Bullion Market Authority’s Responsible Gold Sourcing policy as they do so.
This is one of the most sustainable policies in the world, which offers some security to the investment in a way. It also could make this a potential fit for those looking for sustainable or ethical investing choices.
Best Gold ETF Investment Platforms — Reviews
We used three of the best gold ETF investment platforms and reviewed their features to trade some of these gold ETFs.
Check the list below to find the best platforms you may select to begin investing in gold ETFs.
1. Plus500
80% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you can afford to take the high risk of losing your money.
When we used Plus500, we could trade gold through a selection of ETFs. We had access to SPDR Gold Shares ETF options and could track the movements of the daily price of gold.
We could also follow spot prices of gold bullion with ETFs, Physical Gold options, plus coins in vaults.
We also had access to VanEck Vectors Gold Miners ETF options and found tracking the share price movement each day easy. The spreads in spot gold were 36 pips, and the leverage available for spot gold was 1:20.
Various features made Plus500 easy to use. It offers alerts and a watchlist, handy charting (with 13 different types of charts), and its built-in analysis made tracking markets easy. When we used the Plus500 app to invest in gold and trade these ETFs, we could access our account with two-factor authentication for better security.
Other metals, including platinum and silver, were available to trade via this platform. However, for our main trades, we focused on gold ETFs and instruments, including gold-related shares in the mining company Royal Gold.
2. Interactive Investor
Investment value can go up or down and you could get back less than you invest. If you're in any doubt about the suitability of a Stocks & Shares ISA, you should seek independent financial advice. The tax treatment of this product depends on your individual circumstances and may change in future. If you are uncertain about the tax treatment of the product you should contact HMRC or seek independent tax advice.
Interactive Investor offers a range of gold ETF options, including options in iShares Gold Producers, WisdomTree Physical gold, VanEck Gold Miners ETFs and Invesco Physical Gold. We liked the opportunity to gain real-time news about specific ETFs, such as the iShares Gold Producers ETF.
We could track the fluctuations of this ETF price over the years and view the sell and buy price on the clear user interface. The charts were customisable, so we could set the timeframe to one day or five years.
Using Interactive Investor, we could invest and trade with leverage and complete spread trading with various gold ETFs. If we needed to trade with more trading power, we could try to amplify our returns with the leverage feature. We were able to do this as experienced investors.
We found it easy to open an Interactive Investor account to invest in ETFs and could access additional tools, such as expert insights, to increase our trading knowledge. We could also trade gold ETFs on the iOS and Android apps with Interactive Investor.
To trade, we had to pay £4.99 per month, more than some platforms but less than others.
3. Freetrade
When you invest, your capital is at risk. The value of your portfolio can go down as well as up and you may get back less than you invest. Past performance is not a reliable indicator of future results.
More than 6,000 stocks and ETFs are available on the standard plan Freetrade offers, including gold ETFs and ETCs.
Using the platform, we could begin investing and trading gold ETFs and ETCs easily, and gain access to the VanEck Junior Gold Miners ETF index, which helped us diversify our portfolio. Another option we had was to access iShares Physical Gold ETC options.
We were also able to track gold price options in an index of the iShares Gold Producers.
We could invest, trade and pause trading without paying inactivity fees with Freetrade. We could also access real-time market analysis and news related to the gold market.
What we liked about Freetrade is that the platform enabled us to invest in ETFs without paying the platform a commission.
Freetrade also enabled us to trade gold ETFs using leverage. This feature meant we could amplify our buying power to increase the chances of making greater returns. While this came with greater risk, we liked the option to use this as experienced investors to potentially gain better returns on our investment.
Things to Consider Before Investing
Although gold ETFs are generally perceived as safe investments, there are some risks to consider and be aware of.
Volatility Risk
The prices of gold ETFs, like all assets, can be wildly volatile. A peak or trough in the price of gold will, by default, result in a drop or rise of the gold ETF. This factor means if your portfolio is heavily weighted towards gold ETFs, it can create a level of risk that investors need to know about.
Counterparty Risk
Counterparty risk is associated with the gold being held in trust by the ETF sponsor. Although most ETF sponsors are reputable and trustworthy, there is always the potential of the trust not being able to deliver the gold if needed.
As with all investments, doing your due diligence on the ETF sponsor is important.
Investment Fraud Risk
Unfortunately, there are unscrupulous actors out there who prey on unsuspecting investors. Before investing in a gold ETF, it is essential to do your due diligence and make sure the fund is legitimate.
Tax Risk
ETFs may also be subject to taxes when sold. In the UK, investors may be subject to a 20-28% capital gains tax when selling their ETF. Again, it is important to understand the applicable taxes before investing.
Best Gold ETFs: The Verdict
Investing in physical gold metal or gold bullion can be an inconvenient option that is not cost-effective. The best gold ETFs can help you invest without the inconvenience of investing in a physical commodity.
Invest in the best gold ETFs through reliable investment and trading platforms. Ensure you complete the right research into a broad selection of these exchange-traded funds to invest confidently.
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