Which is the Best Gold ETF?

Which is the best performing gold ETF

Gold can serve as an inflationary hedge and diversify portfolios. When selecting an ETF containing gold, investors should take note of expenses ratios, top holdings and any personal financial goals they may have.

The GraniteShares Gold Trust provides an accessible way to invest in physical gold. This fund stores gold bullion in London vaults and trades on the NYSE Arca exchange.

1. GLD

GLD has long been a trusted way for investors looking to diversify their portfolio with gold bullion. Unlike futures-based strategies, this ETF holds actual gold bullion stored at the HSBC vault in London.

GLD shares are fractional ownerships of 839 tonnes of physical gold in GLD’s holdings, offering investors exposure to gold prices without premiums and storage fees associated with owning physical metal.

Like with any investment vehicle, investors should remain mindful of any associated overhead costs such as an expense ratio and commission which can eat into returns over time.

2. GLDM

For investors with long-term investment goals, GLDM may be an attractive ETF to track gold. Recently launched by World Gold Council (GLD’s parent company), this fund boasts one of the lowest cost ETFs to do just that.

Physical gold may seem attractive because it cannot be stolen or lost, yet its storage costs and transaction fees can be significant. Furthermore, investing directly requires incurring an expense ratio and bid-ask spread that ETF investors don’t face; to address these concerns GLDM tracks the London Bullion Market Association Gold Price PM index.

3. IAU

Gold ETFs provide investors with an economical means of diversifying their exposure to yellow metal than buying, storing, and insuring physical gold bars or coins themselves. Investors should however be wary of potential tax ramifications related to selling shares that create capital gains or losses upon sale.

SGOL is another physically-backed gold ETF offering exposure to price movements of this precious metal, but at an even more competitive price point. This fund boasts an excellent track record and high level of transparency with its own list of held bars being made public on its website.

4. GDX

VanEck Gold Miners ETF is an easy and popular way for investors to gain exposure to some of the top gold mining companies globally, while at the same time providing diversification. However, its high portfolio turnover may cause expenses to increase significantly and decrease after-tax returns significantly.

Another drawback of GDX is its 39 component companies having only a combined market capitalization of around $154 billion. This figure compares poorly to stock markets and means major gold miners dominate both GDX and the HUI benchmark, which can be disheartening for bulls.

5. GDXJ

GDXJ has been one of the best ETFs for gold stock bulls over the last several years, as it uses gold mining profits to amp up underlying gold moves and outperform its much larger rival GDX in every upleg and correction. Unfortunately, its performance has been hindered by outdated Canadian securities laws that prohibit holding stakes of 20% or greater in junior gold miners.

The GDXJ index has become overloaded with gold miners with declining production and rising costs, leaving investors and speculators little choice but to avoid these underperformers and focus on those mid-tier gold mining companies with excellent fundamentals such as growing production and lower costs.

6. GDXJ

GDXJ tracks mid-tier gold miners that are expanding production while maintaining strong fundamentals, with much smaller market caps than their larger peers that dominate GDX.

This ETF has outshone GDX throughout all of the young gold-stock bull’s uplegs, which demonstrates the superior upside available from mid-tier gold stocks compared to any potential downside in corrections.

However, GDXJ is also negatively impacted by underperforming stocks. For example, its holding of Alamos Gold (AGI), which may trigger a mandatory share tender under Canadian law.

7. GDX

GDX has taken over as the go-to gold stock index, overthrowing HUI. But this new ruler of gold stocks comes with drawbacks: its composition contains too many component stocks; past experience and academic research indicate that beyond 20 components, any diversification benefits diminish rapidly.

Another issue related to GDX’s weighting methodology is how its custodians distribute capital based on market cap for each component of its index, subverting free-market bidding results in favor of their own biases imposed through capital management decisions that deny investors significant returns on their investments. This robs investors of gains they should otherwise realize.


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