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. Some investors view ETFs as a relatively liquid and low-cost option for investing in gold compared to alternatives such as buying gold futures contracts or shares of gold mining companies. Still, the price of gold can see big swings, meaning ETFs that track it can also be volatile.
There are currently 9 ETFs focused on tracking the price of gold, excluding leveraged or inverse funds. The price of gold increased by 39.2% in the past year, significantly exceeding the 13.0% 1-year total return for the overall market, as represented by the S&P 500. The best gold ETF is the Invesco DB Precious Metals Fund (DBP) for Q4 2020. Below, we’ll look at the top 3 gold ETFs as measured by 1-year trailing total returns. All numbers are as of August 1.
- The gold sector has significantly outperformed the broader market over the past year.
- The gold ETFs with the best 1-year trailing total return are DBP, GLDM, and SGOL.
- The top holdings of these ETFs are gold bullion and gold futures.
- 1-Year Trailing Total Return: 37.3%
- Expense Ratio: 0.75%
- Annual Dividend Yield: 0.98%
- 3-Month Average Daily Volume: 20,429
- Assets Under Management: $173.4 million
- Inception Date: January 5, 2007
- Issuer: Invesco
The Invesco DB Precious Metals Fund is structured as a commodity pool, a fund which pools investor assets to invest in futures contracts. DBP aims to provide exposure to both gold and silver through futures in each of the two leading precious metals. As such, the fund is subject to risks associated with futures-backed products such as backwardation and contango. Currently, roughly 81.1% of the fund's holdings are invested in gold futures, with the remainder invested in silver futures.
- 1-Year Trailing Total Return: 36.5%
- Expense Ratio: 0.18%
- Annual Dividend Yield: N/A
- 3-Month Average Daily Volume: 2,671,529
- Assets Under Management: $3.2 billion
- Inception Date: June 25, 2018
- Issuer: State Street SPDR
With an expense ratio of 0.18%, the objective of the SPDR Gold MiniShares Trust is to track the spot price of gold, less its expenses. The fund is structured as a grantor trust, meaning that the investors in the fund are the direct owners of its underlying assets, which in this case is gold bullion. Being structured as a grantor trust also means that any taxes owed by the fund are "passed through" to the fund's investors and paid as part of the investors' individual tax returns. The market price of the trust is intended to track the price of 1/100th of an ounce of gold, with the actual gold bullion owned by the fund being stored in London, UK. The fund’s sponsor, State Street SPDR, publishes a weekly update of the total amount of gold bullion which it holds. As of August 1, its most recent weekly figure was roughly 1,649,056 ounces.
- 1-Year Trailing Total Return: 36.3%
- Expense Ratio: 0.17%
- Annual Dividend Yield: N/A
- 3-Month Average Daily Volume: 1,695,918
- Assets Under Management: $2.6 billion
- Inception Date: September 9, 2009
- Issuer: Aberdeen Standard Investments
Like GLDM above, the Aberdeen Standard Physical Gold Shares ETF aims to track the spot price of gold, less fund expenses. The issuing company holds gold bullion in a Swiss vault and provides investors with serial numbers of the gold bars for added security. As with GLDM, the top and only holding of SGOL is gold bullion.