This article will explore the top gold ETFs to watch in 2024
Gold has long been considered a safe haven for investors, especially during times of economic uncertainty. With inflation concerns, geopolitical tensions, and market volatility continuing to affect global financial markets, gold remains an attractive option for diversifying portfolios. For investors looking to gain exposure to gold without directly purchasing physical bullion, Exchange-Traded Funds (ETFs) provide an efficient and liquid alternative. This article will explore the top gold ETFs to watch in 2024, highlighting their unique features, benefits, and potential risks.
Understanding Gold ETFs
Before diving into the specifics of the top gold ETFs for 2024, it’s important to understand what gold ETFs are and how they work. A gold ETF is a type of exchange-traded fund that aims to track the price of gold. These ETFs can either hold physical gold bullion or invest in gold futures contracts and other gold-related financial instruments. By purchasing shares of a gold ETF, investors gain exposure to the price movements of gold without the need to store or insure physical gold.
Gold ETFs offer several advantages, including liquidity, lower costs compared to buying physical gold, and the ability to easily trade shares on major stock exchanges. Additionally, gold ETFs are often structured to reflect the performance of gold prices closely, making them an effective way to hedge against inflation or diversify an investment portfolio.
Why Invest in Gold ETFs in 2024?
The year 2024 presents a compelling case for investing in gold ETFs, driven by several macroeconomic factors. First, global inflationary pressures are expected to remain elevated, prompting investors to seek assets that can preserve purchasing power. Gold, historically a hedge against inflation, naturally becomes a focal point for these strategies.
Second, the global economic landscape continues to be shaped by uncertainties, ranging from geopolitical tensions to fluctuating interest rates. These factors contribute to market volatility, which in turn increases demand for safe-haven assets like gold. Gold ETFs, with their ease of access and ability to be traded on major exchanges, offer an attractive option for investors looking to protect their portfolios.
Lastly, the increasing integration of gold into digital investment platforms has made it easier for a broader range of investors to access gold ETFs. Whether through traditional brokerage accounts or emerging financial technologies, gold ETFs are more accessible than ever, allowing both retail and institutional investors to participate in this market.
Top Gold ETFs to Watch in 2024
1. SPDR Gold Shares (GLD)
SPDR Gold Shares (GLD) is one of the most popular and widely traded gold ETFs in the world. Launched in 2004, GLD has established itself as a benchmark for gold ETFs, offering investors a convenient and liquid way to gain exposure to the gold market.
GLD is backed by physical gold held in vaults, with each share representing a fraction of an ounce of gold. This structure ensures that the ETF closely tracks the price of gold, providing investors with a reliable way to hedge against inflation and diversify their portfolios. As of 2024, GLD continues to attract significant interest due to its low expense ratio, liquidity, and transparency.
One of the key advantages of GLD is its scale. As one of the largest gold ETFs, it offers tight bid-ask spreads, which reduces trading costs for investors. Additionally, GLD’s long track record and strong brand recognition make it a preferred choice for both individual and institutional investors.
2. iShares Gold Trust (IAU)
iShares Gold Trust (IAU) is another top contender in the gold ETF market. Managed by BlackRock, IAU offers a cost-effective way to invest in gold, with an expense ratio that is typically lower than that of GLD. Like GLD, IAU is backed by physical gold, with shares representing fractional ownership of the gold held in trust.
IAU’s lower expense ratio makes it particularly appealing to cost-conscious investors who are looking to maximize their returns over the long term. Additionally, IAU’s smaller share price compared to GLD allows investors to buy in with a lower initial investment, making it more accessible to a broader range of investors.
In terms of performance, IAU has historically tracked the price of gold closely, providing similar returns to other major gold ETFs. The fund’s robust liquidity and large asset base also contribute to its attractiveness as a core holding in a diversified portfolio.
3. Aberdeen Standard Physical Gold Shares ETF (SGOL)
Aberdeen Standard Physical Gold Shares ETF (SGOL) is another excellent option for investors seeking exposure to physical gold. SGOL distinguishes itself by storing its gold in vaults located in Switzerland and London, which may appeal to investors who prefer geographic diversification in their gold holdings.
SGOL’s expense ratio is competitive, and the ETF is structured similarly to GLD and IAU, with each share representing a fractional interest in physical gold bullion. The fund’s approach to transparency is also notable, as it provides regular audits and detailed information about the gold bars held in its vaults.
For investors concerned about counterparty risk or seeking additional assurance about the safety of their gold investments, SGOL’s strong focus on transparency and secure storage makes it a compelling choice.
4. VanEck Merk Gold Trust (OUNZ)
VanEck Merk Gold Trust (OUNZ) offers a unique feature that sets it apart from other gold ETFs: the ability for investors to take physical delivery of the gold they own. While most gold ETFs only provide exposure to the price of gold, OUNZ allows investors to convert their shares into physical gold bars or coins, which can be delivered to them.
This feature may appeal to investors who value the option of holding physical gold but still want the liquidity and convenience of an ETF. OUNZ is backed by physical gold stored in secure vaults, and like other gold ETFs, it closely tracks the price of gold.
The expense ratio of OUNZ is comparable to other major gold ETFs, and its unique delivery feature makes it a standout option for investors who prioritize flexibility in their gold investments.
5. Invesco DB Gold Fund (DGL)
Invesco DB Gold Fund (DGL) takes a different approach to gold investment by focusing on gold futures contracts rather than physical gold. This ETF is designed to track the price of gold by investing in a portfolio of gold futures contracts, which are financial instruments that allow investors to speculate on the future price of gold.
DGL’s strategy provides exposure to gold without the need to hold physical bullion, making it a more cost-effective option for investors who are comfortable with the risks associated with futures trading. The fund’s performance is closely tied to the price of gold, although it may experience greater volatility due to the nature of futures contracts.
For investors looking for a more aggressive approach to gold investment, DGL offers an alternative to physical gold ETFs, with the potential for higher returns in certain market conditions.
6. GraniteShares Gold Trust (BAR)
GraniteShares Gold Trust (BAR) is a relatively new entrant to the gold ETF market but has quickly gained popularity due to its low expense ratio and transparent structure. BAR is backed by physical gold, with each share representing ownership of gold bullion held in secure vaults.
BAR’s low expense ratio makes it one of the most cost-effective gold ETFs available, which is a significant advantage for long-term investors. The fund’s straightforward structure and focus on minimizing costs have contributed to its rapid growth and appeal among investors.
Despite being a newer fund, BAR has demonstrated strong performance and liquidity, making it a worthy competitor to more established gold ETFs like GLD and IAU.
7. SPDR Gold MiniShares Trust (GLDM)
SPDR Gold MiniShares Trust (GLDM) is a more recent offering from the same family as GLD, designed to provide a lower-cost alternative for investors. GLDM offers similar exposure to physical gold as GLD but with a lower expense ratio and a smaller share price, making it more accessible to investors with smaller portfolios.
GLDM is structured to track the price of gold closely, and its lower costs make it an attractive option for cost-conscious investors. The fund’s smaller size also allows for greater flexibility in portfolio management, particularly for investors who want to fine-tune their gold exposure.
Overall, GLDM provides a compelling combination of low costs, accessibility, and performance, making it a strong choice for investors looking to add gold to their portfolios in 2024.
8. Sprott Physical Gold Trust (PHYS)
Sprott Physical Gold Trust (PHYS) offers investors a unique structure that combines the benefits of a gold ETF with the characteristics of a closed-end fund. PHYS is backed by physical gold, with the gold bullion stored in secure vaults in Canada.
One of the key features of PHYS is its redemption mechanism, which allows investors to exchange their shares for physical gold bullion under certain conditions. This feature, similar to OUNZ, appeals to investors who value the option of taking physical delivery of their gold.
PHYS also offers potential tax advantages for U.S. investors, as it is structured as a closed-end trust, which may result in more favorable tax treatment compared to traditional gold ETFs. The fund’s focus on transparency, secure storage, and potential tax benefits make it a distinctive option for gold investors.
9. iShares MSCI Global Gold Miners ETF (RING)
iShares MSCI Global Gold Miners ETF (RING) takes a different approach to gold investment by focusing on the equities of gold mining companies rather than physical gold or gold futures. This ETF provides exposure to a diversified portfolio of global gold mining stocks, offering a way to benefit from the performance of gold-related companies.
RING’s performance is influenced by both the price of gold and the operational performance of the companies in its portfolio. This means that RING may offer greater upside potential during periods of rising gold prices, as well as exposure to the profitability of the gold mining industry.
For investors looking to diversify their gold exposure beyondthe price of gold itself, RING offers a unique investment proposition. By investing in gold mining companies, investors can gain leverage to the price of gold, as the profitability of these companies typically increases when gold prices rise. Additionally, gold miners often pay dividends, providing investors with income in addition to capital appreciation potential.
However, investing in gold miners also introduces additional risks, such as operational challenges, regulatory issues, and company-specific factors. Despite these risks, RING’s diversified portfolio and exposure to the global gold mining industry make it an attractive option for investors seeking a different angle on gold investment.
10. VanEck Vectors Gold Miners ETF (GDX)
VanEck Vectors Gold Miners ETF (GDX) is one of the largest and most popular gold mining ETFs, offering exposure to a broad portfolio of gold mining companies around the world. GDX includes major gold producers, as well as smaller companies involved in exploration and development.
One of the key advantages of GDX is its leverage to the price of gold. When gold prices rise, gold mining companies typically see an increase in their profitability, which can lead to outsized gains in the stocks held by GDX. Conversely, during periods of declining gold prices, the fund may experience greater volatility and losses compared to physical gold ETFs.
GDX also offers the potential for income through dividends, as many of the companies in its portfolio pay regular dividends to shareholders. This can provide an additional return on investment, making GDX a potentially attractive option for income-focused investors as well as those looking for capital appreciation.
However, it’s important to note that GDX carries risks associated with the operational and financial health of the companies it holds. Factors such as management decisions, geopolitical risks, and environmental regulations can impact the performance of gold mining stocks, making GDX a more volatile investment compared to physical gold ETFs like GLD or IAU.
Factors to Consider When Investing in Gold ETFs
When choosing among the top gold ETFs, investors should consider several factors to ensure that their investment aligns with their financial goals and risk tolerance. Here are some key considerations:
- Expense Ratio: The expense ratio represents the annual cost of owning an ETF, expressed as a percentage of the investment. Lower expense ratios are generally more favorable, as they reduce the overall cost of the investment. ETFs like IAU and BAR are known for their low expense ratios, making them attractive to cost-conscious investors.
- Liquidity: Liquidity refers to how easily an ETF can be bought or sold without affecting its price. High liquidity is important for investors who may need to enter or exit a position quickly. ETFs like GLD and GDX are among the most liquid gold ETFs, ensuring that investors can trade shares with minimal impact on the price.
- Tracking Error: Tracking error measures how closely an ETF’s performance matches its underlying index or benchmark. For gold ETFs, this typically means how closely the ETF tracks the price of gold. A lower tracking error indicates that the ETF is more accurately reflecting the price movements of gold, which is desirable for investors seeking precise exposure to gold prices.
- Structure and Tax Implications: The structure of the ETF (e.g., physical gold-backed, futures-based, or equity-based) can have implications for taxation and performance. For example, physically backed ETFs like GLD and IAU are generally more tax-efficient than futures-based ETFs, which may be subject to higher tax rates on gains. Additionally, closed-end funds like PHYS may offer unique tax advantages for certain investors.
- Geopolitical and Market Risks: The gold market is influenced by a variety of factors, including geopolitical events, interest rates, and currency fluctuations. Investors should consider how these factors might impact the performance of their chosen gold ETF. For instance, ETFs that invest in gold mining stocks, like GDX and RING, may be more sensitive to geopolitical risks in the countries where the mining companies operate.
Which Gold ETF Is Right for You?
The top gold ETFs in 2024 offer a range of options for investors looking to diversify their portfolios and hedge against market risks. Whether you prefer the simplicity of a physically backed ETF like GLD or IAU, the unique features of OUNZ, or the leverage provided by gold mining ETFs like GDX, there is a gold ETF to suit nearly every investment strategy.
For conservative investors focused on preserving wealth, ETFs like GLD, IAU, and SGOL provide direct exposure to gold prices with minimal risk and lower costs. These ETFs are ideal for those seeking a stable, long-term investment that can act as a hedge against inflation and economic uncertainty.
On the other hand, investors with a higher risk tolerance who are looking for growth opportunities might consider gold mining ETFs like GDX or RING. These funds offer the potential for higher returns, particularly during periods of rising gold prices, but come with additional risks related to the mining industry.
Ultimately, the best gold ETF for you will depend on your individual investment goals, risk tolerance, and market outlook. By carefully considering the factors discussed in this guide, you can select the gold ETF that best aligns with your financial objectives and provides the desired exposure to the gold market in 2024. As always, it’s important to conduct your own research and consult with a financial advisor to ensure that your investment choices are well-informed and suited to your overall portfolio strategy.
