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 underperformed the broader market over the past year.
  • The ETFs with the best 1-year trailing total return are DBP, SGOL, and GLDM.
  • The top holdings of the first fund are gold futures, while the top and only holding of the other two is gold bullion.

There are 9 gold ETFs 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 16.0% over the past 12 months, underperforming the S&P 500's 1-year total return of 18.7%, as of February 5, 2021. The best-performing gold ETF, based on performance over the past year, is the Invesco DB Precious Metals Fund (DBP). We examine the top 3 best gold ETFs below. All numbers below are as of February 8, 2021.

Invesco DB Precious Metals Fund (DBP)

  • Performance over 1-Year: 19.1%
  • Expense Ratio: 0.75%
  • Annual Dividend Yield: N/A
  • 3-Month Average Daily Volume: 23,587
  • Assets Under Management: $128.1 million
  • Inception Date: January 5, 2007
  • Issuer: Invesco

DBP tracks the DBIQ Optimum Yield Precious Metals Index Excess Return, a rules-based index comprised of futures contracts of both gold and silver. The ETF, which is structured as a commodity pool, provides exposure to both of these precious metals with more than 77% of its total assets invested in gold futures and nearly 23% invested in silver futures. The fund also includes interest income from its holdings of U.S. Treasury securities. It is designed for investors looking for a cost-effective and convenient way to invest in commodity futures, but may not be suitable for all investors due to the volatile nature of futures contracts.

Aberdeen Standard Physical Gold Shares ETF (SGOL)

  • Performance over 1-Year: 15.5%
  • Expense Ratio: 0.17%
  • Annual Dividend Yield: N/A
  • 3-Month Average Daily Volume: 1,554,663
  • Assets Under Management: $2.6 billion
  • Inception Date: September 9, 2009
  • Issuer: Aberdeen Standard Investments

SGOL is designed to track the spot price of gold bullion, less the fund's expenses. The ETF is structured as a grantor trust, which may provide a certain degree of tax protection to investors. It is physically backed by bars of physical gold bullion held in vaults located in London and Zurich. The fund is designed to offer investors a cost-effective and convenient way to invest in physical gold, but it may not be the most liquid way to gain exposure to the metal.

SPDR Gold MiniShares Trust (GLDM)

  • Performance over 1-Year: 15.4%
  • Expense Ratio: 0.18%
  • Annual Dividend Yield: N/A
  • 3-Month Average Daily Volume: 3,135,246
  • Assets Under Management: $4.2 billion
  • Inception Date: June 25, 2018
  • Issuer: State Street SPDR

GLDM is also structured as a grantor trust that seeks to track the performance of the price of gold bullion, less fund expenses. The ETF's benchmark is the London Bullion Market Association (LBMA) Gold PM Price. It provides a cost-effective and convenient way for investors to invest in gold, as buying and selling shares of GLDM may be lower than the costs of buying, selling, storing, and insuring the physical metal.

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