What are the best gold ETFs to watch?
Investors have flocked to gold as the coronavirus crisis injects uncertainty and volatility into the markets. We explain how to get exposure through gold ETFs and outline the best ones to watch.
What is a gold ETF?
A gold exchange traded fund (ETF) or exchange traded commodity (ETC) is a fund that consists of just one asset: gold. ETFs and ETCs trade on a stock exchange just like a normal stock or equity but derives its value from holding ‘underlying assets’ that are centred on the precious metal.
Read more: What are ETFs and how do you trade them?
There are some important things to take into account when considering gold ETFs or ETCs:
- Underlying asset: Although they will all derive their value from gold, they can do this in different ways. Some are backed by physical gold, some have exposure to gold futures, while others are comprised of investments in the companies that mine the precious metal. The underlying asset is what dictates the value of the ETF or ETC and will therefore be the driving factor behind its performance.
- Size: The size of an ETF or ETC is significant because it can impact the efficiency and cost. Larger ETFs tend to have lower costs and are more liquid, which means you can trade them quicker and cheaper if you want to. Liquidity is also key in narrowing the spread on offer, so larger ones tend to offer a smaller difference between what you can buy and sell it for. The size is determined by the assets under management (AUM).
- Leverage: Some are leveraged, which means they use financial derivatives and/or debt to amplify the performance of the underlying asset. A non-leveraged ETF or ETC will try to track the performance of the underlying asset, such as the gold price or a specific index, as closely as possible, but a leveraged one tries to generate 2x, 3x or even greater returns of the underlying asset. Leverage adds to both risk and reward. This means leveraged ETFs or ETCs can offer better returns than non-leveraged ones when the value of the underlying asset moves in the right direction, but also greater losses when it doesn’t.
- Currency and listing: Where the ETF or ETC is traded on is important because it could affect the fees you pay and the regulatory environment that it trades in. The currency is important too. For example, most physical gold is priced in US dollars, so if an ETF or ETC operates in sterling then the USD/GBP rate will likely play a role a significant role in its performance.
How to find the best gold ETFs
The IG ETF screener is the perfect place to find an ETF to suit you. It allows you to filter through the thousands of ETFs available, including sorting the ones that are eligible for ISA accounts. You can also filter them to match a specific asset class – such as gold - or country. You can read more about how to pick the right ETF here.
You can access the IG ETF screener here.
Plus, if there’s an ETF you’d like to invest in that’s not currently available, simply email email@example.com to request a new product.
Read more: How to trade gold
How to trade gold ETFs
- Decide whether you want to trade or invest in gold ETFs
- Research the top gold ETFs below
- Open an account to get started
- Place your first trade
You can either trade or invest in the best gold ETFs with IG.
You would trade with leverage, meaning you only need a fraction of the capital required to buy the ETF. You can do this with spread betting, tax-free, or CFDs where you’re only required to pay capital gains tax (CGT).
If you invest, you own the ETF. You can do this from zero commission on US ETFs and £3 commission for UK ETFs with an IG share dealing account.
Top gold ETFs to watch
SPDR Gold Shares
SPDR Gold Shares is the biggest gold ETF available to trade with IG, with over $57 billion worth of AUM. The ETF is provided by SPDR State Street Global Advisors and holds gold bars with the aim of tracking the performance of gold bullion.
It has managed to consistently outperform its benchmark for the last four years and delivered a return of 32.3% over the past 12 months.
Invesco Physical Gold ETC
Similarly, the Invesco Physical Gold ETC also aims to track the daily price movements in gold but is listed in London. It tries to track the movements in the London Gold Market Fixing Ltd PM Fix Price in US dollars, underpinned by its holdings of gold bullion.
It too has managed to outperform its benchmark over the last four years and generated a return of 32.5% over the last 12 months.
Sprott Gold Miners
Rather than track the gold price, the Sprott Gold Miners ETF aims to replicate the performance of the Solactive Gold Miners Custom Factors Index, which in turn represents the performance of numerous gold mining companies that are listed on either the Toronto Stock Exchange, NYSE or NASDAQ.
This means it tracks a pool of equities that are diverse in terms of geography and size. It has struggled to keep up with its benchmark since 2017 but it has still delivered a return of 58.7%, making it one of the best performing non-leveraged ETFs over the last year.
iShares MSCI Global Gold Miners ETF
The iShares MSCI Global Gold Miners ETF also tracks the performance of a basket of mining companies but has a broader focus in terms of geography. It aims to track the performance of the MSCI ACWI Select Gold Miners Investable Market Index, which is comprised of mining stocks from around the world.
Newmont Gold and Barrick Gold account for over 43% of the index’s weighting alone, and the next largest weighting is just 5.6%. This means over half the index is weighted toward Canada, 23% to the US, with the rest from South Africa, Australia and Russia. It has delivered a return of 69.7% over the last year.
iShares Gold Producers UCITS ETF USD
For London investors seeking an ETF tracking gold mining equities, the iShares Gold Producers UCITS ETF USD may be suitable. It aims to track the S&P Commodity Producers Gold Index, which follows the largest publicly-listed gold companies from around the world.
Its top ten investments account for two-thirds of its portfolio and is led by recognisable firms such as Newmont, Barrick Gold and Franco-Nevada. The ETF has delivered a return of 59.4% in the last 12 months.
VanEck Vectors Junior Gold Miners ETF
The VanEck Vectors Junior Gold Miners ETF tracks gold mining stocks but is different because its benchmark, the MVIS Global Junior Gold Miners Index, is comprised of micro and small-cap gold and silver miners. Junior gold miners are either smaller stocks that produce gold or even those not yet in production and either exploring for gold or developing a project.
These types of stocks are exposed to different risks than large producers, such as project delays or poor exploration results, meaning their share prices are driven by different variables. The ETF has generated a return of 39.4% in the last 12 months.
SG Gold X5 Daily Long GBP
The SG Gold X5 Daily Long GBP has been the best performing gold ETF available to trade with IG over the past 12 months, delivering a return of 166.6% in the last year. However, it has less than $1 million in AUM, making it the smallest one on this list.
Its high leverage, targeting 5x the performance of gold futures, is why it has managed to deliver such a large return as the price of gold has risen. This London-listed ETF follows the Gold Futures X5 Long Leveraged Index. There are other similar leveraged gold ETFs on offer from Societe Generale that allow you to also short the price.
Largest Gold ETFs
Below is a list of the largest gold ETFs available to trade with IG:
|Symbol||Exchange||Currency||Net Assets (USD)||Return (12 months to 18/05/2020)|
|SPDR Gold Shares||GLD||NYSE Arca||USD||$57.8 billion||32.30%|
|iShares Gold Trust||IAU||NYSE Arca||USD||$23.1 billion||32.50%|
|VanEck Vectors Gold Miners ETF||GDX||NYSE Arca||USD||$13.3 billion||56.30%|
|Xetra-Gold||4GLD||Deutsche Boerse||EUR||$11.7 billion||32.90%|
|iShares Physical Gold ETC||IGLN||London Stock Exchange||USD||$11.1 billion||32.50%|
|Invesco Physical Gold ETC||SGLD||London Stock Exchange||USD||$10.9 billion||32.50%|
|ZKB Gold ETFs*||*||Swiss Exchange||*||$9.2 billion||*|
|WisdomTree Physical Gold||PHAU||London Stock Exchange||USD||$8 billion||32.30%|
|VanEck Vectors Junior Gold Miners ETF||GDXJ||NYSE Arca||USD||$4.4 billion||39.40%|
|Gold Bullion Securities||GBS||London Stock Exchange||USD||$3.8 billion||32.30%|
(*There are several ZKB Gold ETFs to trade in the following currencies and symbols: EUR (ZGLDEU), GBP (ZGLDGB), CHF (ZGLDHC), and USD (ZGLDUS), all of which have generated different returns over the last 12 months – use the IG ETF Screener for more details)
This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.
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