Gold is a globally popular and accepted asset, and in August 2020 it hit record highs in both tonnage and value. This rapid growth can partly be explained by the economic uncertainty generated by the Covid-19 pandemic since gold is seen as a safe store of value.
Gold ETFs are a popular doorway into the gold market if you don’t want to — or can’t — buy gold bars, coins, or leveraged derivative financial instruments such as contracts for difference (CFDs).
Where Can I Trade Gold ETFs?
If you want to start trading gold ETFs you will need a broker. A broker is an intermediary between you
and the security exchange. There are many brokers on the market that have different commissions, fees, regulations, payment methods, customer support, trading platforms, and more. A good broker is transparent on all its terms and conditions, but your choice will mostly depend on your needs and priorities. Check out the educational section and customer support to see how you will be assisted if you want to learn more or if the trading platform doesn’t perform exactly as you would hope.
To save you some time, we have identified what we believe to be some of the best brokers.
What is a Gold ETF?
An exchange-traded fund (ETF) is a bundle of assets available for investors to trade (buy and sell) as a single unit, which distinguishes them from mutual funds. While ETFs are seen as less risky than individual stocks, the degree of risk depends on the sector that the ETF invests in. Gold ETFs invest in the gold sector.
Invest in Gold ETFs in 3 Steps
Open a Trading Account
Find the right broker for you by reviewing the commissions, fees, and features of each broker. Then, sign up for an account in minutes by entering your name, address, email address, and any other required information (e.g., to prove your identity). You can usually add funds to your account by bank transfer, debit card, and sometimes even PayPal.
Choose Gold ETFs
Using our list as inspiration, but backed by your own research, decide which gold ETF(s) you wish to buy. Your broker’s online trading platform will list the ones that are available for trading, and you should be able to click each one to see more information including a price chart.
Place Your Trade
Once you’ve decided which ETF(s) you want to buy, you just need to enter your investment size (as a monetary amount or the number of ETF shares) and press the “buy” button. Because ETFs are traded like stocks, you can apply a protective stop order to your trade, which will close your position automatically if the price goes against you.
Best Gold ETFs to Buy Now
Here is a list of gold ETFs we have found that have a strong team behind them and a good track record:
- SPDR Gold MiniShares Trust (GLDM)
- GraniteShares Gold Trust (BAR)
- Aberdeen Standard Physical Gold Shares ETF (SGOL)
- SPDR Gold Shares (GLD)
- iShares Gold Trust (IAU)
- VanEck Vectors Gold Miners (GDX)
- Perth Mint Physical Gold (AAAU)
- VanEck Merk Gold Trust (OUNZ)
- ProShares Ultra Gold (UGL)
- Invesco DB Gold Fund (DGL)
1. SPDR Gold MiniShares Trust (GLDM)
Our first choice is GLDM. This ETF holds physical bullion and tracks the gold spot price using gold bars held in London vaults. They also record liabilities. In 2020, this ETF grew by a total of 25.10%. In 2021, the price fell initially but then recovered by May, in line with the price of gold itself.
2. GraniteShares Gold Trust (BAR)
GraniteShares Gold Trust invests directly in physical bullion, specifically in a London vault that is under ICBC Standard Bank’s custody. It has a daily average volume of $7.08 million. Just like the GLDM ETF and gold itself, this ETF’s price peaked in August 2020 before falling back and then rising again by May 2021.
3. Aberdeen Standard Physical Gold Shares (SGOL)
As well as the previous two gold ETFs, SGOL’s exposure type is physically held. Its average spread is $0.01 and it has an average trading volume of $27.19 million. Its share price has followed the same path as the previous two, but not exactly because no two ETFs are exactly the same.
4. SPDR Gold Shares (GLD)
Created in 2004, This ETF physically holds gold in London vaults. It has a daily trading volume of $1.62 billion and $69.00 billion worth of assets under management at the time of writing. The share price almost doubled in the two years between August 2018 and August 2020 before falling back into 2021 and starting to recover again by May 2021.
5. iShares Gold Trust (IAU)
Incepted in 2005, this ETF tracks the gold price by having gold bars scattered around the world. Its legal structure is a grantor trust, which means you can forget the complexities of transporting gold coins or bars. This ETF has an average spread of $0.01 and — as expected — its share price trajectory has been similar to but not the same as the other gold ETFs.
Expert Tip on Investing in Gold ETFs“ Gold has traditionally been seen as a safe haven asset, so it’s no surprise that it performed well (after an initial wobble) during the coronavirus pandemic. It is also seen as a hedge against inflation, so it could be a good investment going forward since the rate of inflation seems to be increasing in the second half of 2021. ”- Mauricio Carillo
Why Trade ETFs?
Compared with mutual funds, ETFs keep commissions as low as possible by generally following indices rather than being actively managed. Also unlike mutual funds, ETFs can be traded just like stocks at any time during market hours, and you can trade using the same kinds of orders such as stop orders and limit orders. What ETFs do have in common with mutual funds is diversity, so they should be less risky than trading a single stock that could wipe you out if it goes bust.
Frequently Asked Questions
Although we have identified a number one gold ETF in this guide, they are actually quite similar in terms of how they track the underlying price of gold. In this respect, it’s more important that you invest in a gold ETF at all rather than worrying too much about the particular one you pick.
Gold is often seen as a hedge against inflation, which weakens the value of fiat currencies such as the US dollar. Since inflation appears to be increasing in the second half of 2021, gold could be a good investment.
Gold ETFs allow investors to indirectly invest in gold via a stockbroker without having to buy physical gold or resort to leveraged derivatives such as spread bets or contracts for difference (CFDs).
A share is a unit of a single stock whereas an ETF is a basket of such stocks that can be bought and sold together as though they’re a single stock.
Gold ETFs are more suitable for beginners than leveraged derivatives (spread bets and CFDs) are. They are as intuitive to trade as single stocks are, but they’re less risky by being more diversified.
According to etf.com, “with 31 ETFs traded on the U.S. markets, Gold ETFs have total assets under management of $134.32B.”