It's a good time to be an aficionado of gold and gold ETFs (exchange-traded funds). The cost of investing in gold through funds continues to trickle lower, and the variety of ways to get exposure to gold continues to grow.
Plus, gold prices are on the upswing at the moment amid expectations the Federal Reserve could start cutting interest rates as soon as September.
Additionally, a recent study conducted by State Street Global Advisors and the World Gold Council found that many financial advisers view gold as a "global asset with a multitude of both strategic and tactical drivers," with 35% of those surveyed saying their clients expressed a desire to invest in gold. This demand makes "a strong case" for gold in the year ahead, State Street says.
Why should I invest in gold?
Gold investors typically tout several virtues of the yellow metal: It hedges against inflation, they say, it's an uncorrelated asset that doesn't move with the stock market and it can grow in value when national or even global uncertainty is high. Those features help build the bull case, which you can leverage via gold ETFs.
What are the best gold ETFs?
We recommend that if you look to use these commodity ETFs to diversify your portfolio, you first learn the ins and outs of gold investing. For one, gold "has generated disappointing long-term returns compared to stocks," says Dan Burrows, senior investing writer at Kiplinger.com, in his article on 10 facts you need to know about investing in gold. Even then, make it a small portion (5%) of your portfolio.
And we recommend investing in ETFs for several reasons, including liquidity, low expenses and ease of use.
Using my professional experience as editor-in chief for WealthUp, as well as former senior investing editor at Kiplinger and managing editor at InvestorPlace, I looked for the best ETFs to buy that gave different degrees of exposure to gold.
With that in mind, here's an introduction to seven low-cost gold ETFs. This list includes the most ubiquitous gold ETFs on the market – funds you typically can read about in just about any daily commodity wrap-up – as well as a few that aren't as well-covered by the financial media but might be better investments than their high-asset brethren.
- Assets under management: $29.5 billion
- Expenses: 0.25%, or $25 annually for every $10,000 invested
The iShares Gold Trust (IAU, $45.76) is one of the biggest gold ETFs by assets, and it has long been a premier low-cost option for investors. IAU's cheap fees, as well as its relative longevity (inception was in early 2005), have helped it amass nearly $30 billion in assets under management.
The ETF's shares are meant to represent a fraction of an ounce of gold, and Gargi Chaudhuri, head of iShares Investment Strategy Americas at BlackRock, says that IAU "allows for a cost-effective way of accessing the gold market instead of owning the physical gold bullion."
While this is still one of the best gold ETFs out there, it isn't as liquid as the SPDR Gold Shares (GLD), which we'll get to momentarily, and its bid-ask spreads aren't as tight, so it's not ideal for short-term traders. However, its significantly lower cost than GLD makes it a better buy for long-term buy-and-holders.
Let's say you wanted to invest $10,000 for 30 years. And let's assume about 5% annual growth. IAU would end up saving you $1,770 in fees and opportunity cost vs GLD over the life of the investment. Not bad.
Learn more about IAU at the iShares provider site.
- Assets under management: $65.1 billion
- Expenses: 0.40%
The SPDR Gold Shares (GLD, $223.83) is the prototypical gold fund: It represents fractional interest in physical gold bullion stored in vaults. That allows investors to participate in the upside of gold prices without having to deal with the hassles of physically storing, protecting and insuring bullion or coins.
The SPDR Gold Shares debuted in November 2004, making it the oldest U.S.-traded gold ETF, albeit by just two months. But being first to market – especially in a major category like physical gold – has, historically speaking, been a massive advantage for fund providers.
To wit, GLD is also the largest U.S.-traded gold ETF by a country mile. IAU, the second-largest gold ETF, doesn't even boast half of GLD's more than $65 billion in assets – and yes, it's the very same fund that debuted two months after SPDR's gold ETF.
GLD has one glaring downside: a relatively high expense ratio. Several competitors successfully exploited that for some time, though SPDR finally addressed it. (More on that in a minute.)
However, the sheer size and popularity of one of Wall Street's best gold ETFs has several benefits for traders: The fund is extremely liquid and has tight bid-ask spreads, and its options market is more robust than any other traditional gold fund.
Learn more about GLD at the SPDR provider site.
- Assets under management: $71.1 million
- Expenses: 0.15%
ESG investing is found even among the best gold ETFs.
The Franklin Responsibly Sourced Gold ETF (FGDL, $32.34), like the aforementioned gold funds, represents the physical metal. How the Franklin Responsibly Sourced Gold ETF tries to differentiate itself is where its gold comes from. Per Franklin Templeton:
"Gold sourced from LBMA accredited refiners that are required to demonstrate their efforts to respect the environment and combat money laundering, terrorist financing and human rights abuses in accordance with the LBMA's Responsible Gold Guidance."
This potentially more eco- and human-friendly approach doesn't appear to weigh on performance, either. FGDL doesn't have much of a trading history – it launched in June 2022 – but so far, it's behaving just like its rivals.
This gold ETF isn't hard on the wallet, either, charging an extremely competitive 0.15% in annual fees.
Learn more about FGDL at the Franklin Templeton provider site.
- Assets under management: $1.3 billion
- Expenses: 0.09%
Gold ETFs have undergone a massive fee war over the past few years.
For a while, a couple of smaller players – including the GraniteShares Gold Trust (BAR) and abrdn Physical Gold Shares ETF (SGOL) – undercut both GLD and IAU with sub-0.20% annual expenses.
Fast-forward to 2018, and SPDR launched the SPDR Gold MiniShares Trust (GLDM) – similar to IAU in that each share represents 1/100th of an ounce of gold rather than 1/10th – at a 0.18% annual fee, giving SPDR a much more price-competitive fund to pit against BAR and SGOL.
That gave SPDR a total threat in the gold space, offering both a dirt-cheap product (GLDM) for buy-and-hold retail investors, as well as a high-volume trading product (GLD) for institutional and other accounts.
However, iShares fired back in summer 2021 with the iShares Gold Trust Micro (IAUM, $24.16) at 0.15%, making it the low-cost leader among gold ETFs. Then in spring 2022, SPDR punched back by lowering GLDM to just 0.10 %. But – as of now – iShares is enjoying the last laugh, having dipped just underneath GLDM again with a mere 9-basis-point fee.
IAUM has one other noteworthy trait: Shares cost around $25 at present. That's an even more digestible number than the nearly $50 per-share cost of both sister fund IAU and rival GLDM, making it one of the best ETFs for beginners working with smaller dollar amounts.
Learn more about IAUM at the iShares provider site.
- Assets under management: $14.6 billion
- Expenses: 0.51%
Gold ETFs that represent physical holdings are the most direct way to invest in gold via the stock market. But you can also play gold via mining stocks.
The very short explanation: Gold miners extract gold ore from a mine and then process it into gold. And they try to do that at a cost that's less than the price they sell the gold for, generating a profit. The ideal situation: Holding gold miners that have low costs of production while gold prices are both increasing and higher than those companies' costs to produce the gold.
One popular way to play this industry is the VanEck Gold Miners ETF (GDX, $37.95) – a collection of roughly 60 companies in the gold mining industry.
The fund is weighted by market cap, which means the bigger the stock, the greater the percentage of assets GDX invests in it. The ETF is heavily weighted, then, in bigger miners such as Newmont (NEM, 14% of assets), Agnico Eagle Mines (AEM, 9.6%) and Barrick Gold (GOLD, 8.3%). In fact, roughly two-thirds of the fund's assets are concentrated in just the top 10 holdings.
That'd be more of a concern in a broad-market ETF where the supposed goal is wide sector/industry diversification. But, like how some energy ETFs are effectively an indirect play on oil prices, GDX is an indirect play on gold prices – all of its holdings will move somewhat similarly based on the underlying commodity, so the lopsided exposure isn't as worrisome.
But you should note that gold stocks tend to be more reactive to the price of gold than gold ETFs that actually hold the metal. In other words, when GLD improves, GDX tends to improve more (and vice versa). That's great in boom times and good for shorter-term trades. But it can also mean more pain in bust times and less stability over the long term.
Learn more about GDX at the VanEck provider site.
- Assets under management: $5.5 billion
- Expenses: 0.52%*
Another way to leverage gold that's even riskier than traditional miners but also has more "pop" potential: junior miners.
When you think of mining companies, you tend to think of the companies in GDX – they operate mines, process the ore and sell the gold. But there's a lot that goes on first, and that's where junior gold miners come in. These firms employ engineers and geologists to help discover new gold deposits, determine how big their resources are and even help start mines up.
These are highly risky companies given the nature of their work. A seemingly promising project could turn south overnight, decimating the value of the stock. These small companies typically aren't flush with cash, either, so there's not much of a backstop should disaster strike. The flip side? Success can send these stocks flying quickly.
Holding one or two of these stocks can be extremely risky. If you want exposure to this type of gold play, the VanEck Vectors Junior Gold Miners ETF (GDXJ, $47.33) spreads the risk across nearly 100 such companies – names such as Kinross Gold (KGC, 7.6% weight), Alamos Gold (AGI, 6.4%) and Pan American Silver (PAAS, 6.1%).
Interestingly, despite the fact that this index fund has more holdings and is less top-heavy than GDX – top-10 holdings account for just 43% of the fund's assets – the riskier nature of junior miners results in slightly more volatile performance, for better or worse.
* 0.50% in management fees and 0.02% in other expenses
Learn more about GDXJ at the VanEck provider site.
- Assets under management: $103.2 million
- Expenses: 0.60%
One last option puts you in touch with miners of not just gold, but other precious metals.
The U.S. Global GO GOLD and Precious Metal Miners ETF (GOAU, $20.79) is another tight portfolio, this time of fewer than 30 companies that are engaged in the production of gold or other precious metals, whether that's actively (say, mining) or passively (owning royalties or production streams).
That's not a bad deal considering that many of the same factors that can drive gold higher, such as a sliding U.S. dollar, can also lift other precious metals and the companies that dig for them.
Top holdings at present include the likes of Royal Gold (RGLD, 10.3%), which deals in streaming agreements tethered to gold, silver and other precious metals, as well as Wheaton Precious Metals (WPM, 10.3%) and Franco-Nevada (FNV, 9.9%), which are similar royalty-and-streaming companies.
Learn more about GOAU at the U.S. Global Investors provider site.
