Which Is The Best Gold ETF To Invest In?
Friday, September 13th 2024
As the saying goes, not everything that sparkles is gold – however for astute investors gold has long been considered one of the shining objects in financial affairs. Gold’s resilience against economic and geopolitical turmoil makes it a sought-after investment choice among experts and traders alike.
In this comprehensive analysis, we will tackle the question of which Gold Exchange-Traded Funds (ETFs,1) represent the optimal investments for 2023. We will offer an in-depth review of seven gold ETFs which have consistently delivered impressive returns, discuss their mechanics and outline evaluation processes before sharing insight into future trends of the gold market.
Gold ETFs Basics
Gold ETFs give investors exposure to gold’s performance without physically owning it, thanks to ETFs that track its price and trade on traditional stock exchanges. They’re popular because of their efficiency, lower risk compared to physically holding the metal themselves and 24-hour liquidity – meaning investors can buy or sell at any point during trading days.
Gold ETFs work by having an investment fund purchase and store gold for investors on their behalf, with each share representing one tenth of an ounce corresponding with price movements in gold prices – giving indirect yet relatively accurate exposure of its movements for each investor.
Evaluation of Gold ETFs
There are multiple considerations when selecting an investment grade gold ETF; understanding these will enable you to select an effective choice:
- Expense ratio: Paying close attention to the expense ratio can significantly boost long-term returns; lower expense ratios typically result in greater net returns over time.
- Liquidity: Look for ETFs with high trading volumes as these allow for easier entry and exit without drastically altering share prices.
- Tracking error: For optimal performance, an excellent gold ETF should have an extremely low tracking error – the difference between its performance and that of gold prices over time – and those of the ETF itself.
- Assets Under Management (AUM): Having more assets under management often signifies more widely accepted and secure funds.
- Trust: Make sure that the gold backing your ETF is being securely managed by an accredited entity.
SPDR Gold Shares (GLD)
Introduced in 2004, is one of the world’s most beloved gold ETFs with the highest liquidity and largest AUM. Aimed at reflecting gold bullion’s performance, its expense ratio may be slightly higher compared to others listed here, yet its superior liquidity and tracking error make this fund popular with investors.
iShares Gold Trust (IAU)
IShares Gold Trust is another key player in the gold ETF market. IAU offers similar exposure to gold as GLD but at an attractive cost-effectiveness; making it attractive to long-term investors; however, its lower liquidity restricts it for shorter term investing strategies.
Aberdeen Standard Physical Swiss Gold Shares ETF (SGOL)
SGOL stands out as an innovative ETF with an appealing strategy, storing gold in Switzerland to avoid political uncertainty affecting investments and providing reasonable liquidity through its expense’s ratio and trading volume.
GraniteShares Gold Trust (BAR)
GraniteShares Gold Trust (BAR) stands out for its exceptionally low expense ratio, making it one of the more cost-effective means of investing in gold. Although relatively new, its unique fee structure has quickly attracted attention; keep in mind, however, that trading volume may make transactions more arduous and inconvenient than with more established ETFs.
VanEck Merk Gold Trust (OUNZ)
VanEck Merk Gold Trust (OUNZ) stands out with an innovative feature allowing investors to take physical delivery of gold. While most investors likely won’t require this added layer of reassurance, this unique service does come at the price of higher expenses and liquidity being considerably less than some others on this list.
Invesco DB Gold Fund (DGL)
In contrast to many ETFs on this list, Invesco DB Gold Fund (DGL) uses futures contracts as its proxy in replicating gold’s performance. While this strategy can potentially produce higher returns under certain market circumstances, its complexity and risk require experienced investors who understand futures markets before proceeding with investing.
WisdomTree Physical Swiss Gold (SGGB)
WisdomTree Physical Swiss Gold (SGGB) ETF offers security to investors concerned with geopolitical risks by storing its gold in Switzerland with an affordable expense ratio and high levels of liquidity.
What Will Be the Future of Gold ETFs
Gold as a finite resource should maintain its intrinsic value over time, providing an effective hedge against inflation and economic uncertainties. Moving forward, market attention will likely remain focused on macroeconomic trends, geopolitical tensions, and central banks’ monetary policies – these usually determine demand for gold-related ETFs and will ultimately dictate their price movements.
As for Gold ETFs, technological advancements and the development of new financial products can create new forms of these funds; yet their core appeal should remain the same, which is to provide investors with the most efficient and cost effective, and secure method to get exposure to gold.
Conclusion
Finding the optimal gold ETF depends entirely upon your investment goals, risk tolerance, and understanding of the market. GLD and IAU offer liquidity with the highest AUM; both offer cost-effective investments through cost-cutting arrangements such as BAR’s cost-efficiency while OUNZ delivers physical delivery whereas DGL allows exposure through futures contracts.
As an investor, it’s vitally important that you evaluate each investment option carefully when it comes to gold ETFs, taking into account factors like expense ratio, liquidity, tracking error and AUM among others. Remember that investing in any ETF carries risk; to minimize risks it’s wiser not to rely solely on gold ETFs in your portfolio.
Gold ETFs offer an accessible and efficient means to own some of this timeless metal. Choose wisely, and your investment could shine as brightly as gold itself!
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2 Comments
Thank you Chris for putting them all together with a quick and simple explanation!
Hi Monica,
I’m glad this is helpful to you 🙂
Happy investing!