Gold is a popular asset among investors wishing to hedge against risks such as inflation, market turbulence, and political unrest. Aside from buying gold bullion directly, another way to gain exposure to gold is by investing in exchange-traded funds (ETFs) that hold gold as their underlying asset or invest in gold futures contracts.
Some investors view ETFs as a relatively liquid and low-cost option for investing in gold compared to alternatives such as gold futures or shares of gold-mining companies. Still, the price of gold can see big swings, meaning the ETFs that track it can also be volatile.
Key Takeaways
- The price of gold has performed slightly better than the broader U.S. equity market over the past year.
- The exchange-traded funds (ETFs) with the best one-year trailing total returns are GLDM, SGOL, and IAUM.
- The sole holding of each of these ETFs is gold bullion.
There are 10 exclusively gold-focused ETFs that trade in the U.S., excluding leveraged and inverse funds as well as those with less than $50 million in assets under management (AUM). These funds invest directly in either gold bullion or gold futures contracts as opposed to companies that mine for the metal.
The price of gold, as measured by the benchmark S&P GSCI Gold Index, has a total return of -2.0% over the past year, slightly better than the S&P 500’s one-year total return of -3.0%, as of Aug. 16, 2022. There is a three-way tie for best-performing gold ETF based on performance over the past year: the SPDR Gold MiniShares Trust (GLDM) fund, the abrdn Physical Gold Shares ETF (SGOL), and the iShares Gold Trust Micro (IAUM) fund.
We examine the three best gold ETFs below. All numbers are as of Aug. 16, 2022. In order to focus on the funds’ investment strategy, the top holdings listed for each ETF exclude cash holdings and holdings purchased with securities lending proceeds except under unusual cases, such as when the cash portion is exceptionally large.
- Performance Over One Year: -0.8%
- Expense Ratio: 0.10%
- Annual Dividend Yield: N/A
- Three-Month Average Daily Volume: 1,701,814
- Assets Under Management: $5.2 billion
- Inception Date: June 25, 2018
- Issuer: World Gold Council
GLDM aims to reflect the performance of the price of gold minus fund expenses. The ETF is structured as a grantor trust, which may provide investors with a certain degree of tax protection. Like SGOL and IAUM on our list (see more below), GLDM also has a lower expense ratio than many other alternative gold commodity ETFs. GLDM tracks the London Bullion Market Association (LBMA) Gold Price as a benchmark. It provides a cost-effective and convenient way for investors to invest in gold. The sole holding of the fund is gold bullion.
- Performance Over One Year: -0.8%
- Expense Ratio: 0.17%
- Annual Dividend Yield: N/A
- Three-Month Average Daily Volume: 1,112,938
- Assets Under Management: $2.5 billion
- Inception Date: Sept. 9, 2009
- Issuer: Abrdn Plc
Like GLDM above, SGOL is structured as a grantor trust that seeks to track the performance of the price of gold bullion minus fund expenses. As mentioned, it also has lower expenses than many other gold ETFs, although it is not quite as inexpensive as SGOL. The sole holding of the fund is gold bullion, which is stored in vaults in London and Zurich.
- Performance Over One Year: -0.8%
- Expense Ratio: 0.15%
- Annual Dividend Yield: N/A
- Three-Month Average Daily Volume: 88,170
- Assets Under Management: $1.1 billion
- Inception Date: June 15, 2021
- Issuer: BlackRock Financial Management
Unlike the funds above, IAUM is structured as an ETF. It trades on the NYSE Arca and also utilizes the LBMA Gold Price as a benchmark. Like the other gold funds on our list, IAUM can be utilized as a way to diversify a portfolio of securities and to protect against inflation. The sole holding of IAUM is gold bullion.
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