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 ETFs that track it can also be volatile.

Key Takeaways

  • The price of gold significantly underperformed the broader market over the past year.
  • The ETFs with the best 1-year trailing total return are AAAU, IAU, and BAR.
  • The sole holding of each of these ETFs is gold bullion.

There are 8 ETFs focused exclusively on gold that trade in the U.S., excluding leveraged or inverse funds as well as those with under $50 million in assets under management (AUM). These funds either invest directly in gold bullion or in gold futures contracts, as opposed to companies that mine for the metal. The price of gold futures increased 7.5% over the past 12 months, vastly underperforming the S&P 500's 1-year total return of 50.0%, as of May 6, 2021. The best-performing gold ETF, based on performance over the past year, is the Goldman Sachs Physical Gold ETF (AAAU). We examine the 3 best gold ETFs below. All numbers below are as of May 11, 2021.

Goldman Sachs Physical Gold ETF (AAAU)

  • Performance over 1-Year: 8.1%
  • Expense Ratio: 0.18%
  • Annual Dividend Yield: N/A
  • 3-Month Average Daily Volume: 550,529
  • Assets Under Management: $355.1 million
  • Inception Date: July 26, 2018
  • Issuer: Goldman Sachs

AAAU aims to reflect the performance of the price of gold, less fund expenses. The ETF is structured as a grantor trust, which may provide a certain degree of tax protection to investors. The fund is among the most competitively priced commodity ETFs available. The sole holding of the fund is gold bullion, which is stored in vaults in London. On Dec. 4, 2020, Goldman Sachs Asset Management, L.P. became the sponsor of the trust, and the name of the trust was changed from Perth Mint Physical Gold ETF to Goldman Sachs Physical Gold ETF.

iShares Gold Trust (IAU)

  • Performance over 1-Year: 8.1%
  • Expense Ratio: 0.25%
  • Annual Dividend Yield: N/A
  • 3-Month Average Daily Volume: 22,861,244
  • Assets Under Management: $29.3 billion
  • Inception Date: Jan. 21, 2005
  • Issuer: BlackRock Financial Management

IAU is a grantor trust aiming to reflect the performance of the price of gold before payment of the trust's expenses and liabilities. Like AAAU, the fund has a low expense ratio compared to other gold commodity ETFs, and its shares are listed and trade on NYSE Arca. The fund's sole holding is gold bullion.

GraniteShares Gold Trust (BAR)

  • Performance over 1-Year: 8.1%
  • Expense Ratio: 0.17%
  • Annual Dividend Yield: N/A
  • 3-Month Average Daily Volume: 382,718
  • Assets Under Management: $1.1 billion
  • Inception Date: Aug. 31, 2017
  • Issuer: GraniteShares

BAR is also structured as a grantor trust that seeks to track the performance of the price of gold bullion, less fund expenses. It provides both a cost-effective and convenient way for investors to invest in gold. BAR is listed on NYSE Arca and can be traded through a normal brokerage account. Like the funds listed above, BAR has a lower expense ratio than some alternative gold commodity ETFs. The sole holding of the fund is gold bullion, which is stored in vaults in London.

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