The Best Gold ETFs with Low Costs
These seven gold ETFs provide investors with numerous ways to play the metal, from direct exposure to stock-related angles, on the cheap.
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It's a good time to be an aficionado of gold and gold exchange-traded funds (ETFs). The cost of investing in gold through funds continues to trickle lower, and the variety of ways to get exposure to gold continues to grow.
On top of that, 2023 is at least setting up to be a good year for the yellow metal.
Gold spent much of last year on the downswing amid rocketing interest rates and, eventually, strength in the U.S. dollar. The former tends to hurt gold demand because institutional money migrates to the improving yields on bonds and other interest-bearing debt; the latter because gold is priced in U.S. dollars but most often bought in other currencies that are weakening by comparison.
However, a slowing (and potential end) to rate hikes in 2023 bodes much better for gold strength throughout the year.
"Gold prices have started the year strong, like in 2022," says John LaForge, head of Real Asset Strategy, Wells Fargo Investment Institute. "We suspect that gold may end 2023 on a more positive note, though. We may even need to increase our year-end 2023 target range should the U.S. dollar remain range-bound and we gain confidence that rate hikes are near their end."
Gold investors typically tout several virtues of the yellow metal: It hedges against inflation, they say, it's an uncorrelated asset that doesn't move with the stock market and it can grow in value when national or even global uncertainty is high. Those features help build the bull case, which you can leverage via gold ETFs.
We recommend that if you look to use this commodity to diversify your portfolio, you first learn the ins and outs of investing in gold. Even then, make it a small portion (5%) of your portfolio. And use ETFs, for several reasons, including liquidity, low expenses and ease of use.
Here's an introduction to seven low-cost gold ETFs that offer varying types of exposure to the precious commodity. This list includes the most ubiquitous gold ETFs on the market – funds you typically can read about in just about any daily commodity wrap-up – as well as a few that aren't as well-covered by the financial media but might be better investments than their high-asset brethren.
Data is as of Feb. 3.
SPDR Gold Shares
- Assets under management: $55.5 billion
- Expenses: 0.40%, or $40 annually for every $10,000 invested
The SPDR Gold Shares (GLD (opens in new tab), $173.46) is the prototypical gold fund: It represents fractional interest in physical gold bullion stored in vaults. That allows investors to participate in the upside of gold prices without having to deal with the hassles of physically storing, protecting and insuring bullion or coins.
The SPDR Gold Shares debuted in November 2004, making it the oldest U.S.-traded gold ETF, albeit by just two months. But being first to market – especially in a major category like physical gold – has, historically speaking, been a massive advantage for fund providers.
To wit, GLD is also the largest U.S.-traded gold ETF by a country mile. The second-largest gold ETF doesn't even boast half of GLD's $56 billion in assets – and yes, it's the very same fund that debuted two months after SPDR's gold ETF.
GLD's sheer size and popularity breeds several benefits for traders: The fund is extremely liquid and has tight bid-ask spreads, and its options market is more robust than any other traditional gold fund.
It does have one glaring downside: a relatively high expense ratio. Several competitors successfully exploited that for some time, though SPDR finally addressed it. (More on that in a minute.)
Learn more about GLD at the SPDR provider site. (opens in new tab)
iShares Gold Trust
- Assets under management: $27.3 billion
- Expenses: 0.25%
The iShares Gold Trust (IAU (opens in new tab), $35.37) is the aforementioned No. 2 gold ETF by assets, and it has long been the premier low-cost alternative to the GLD. A significant difference in fees, as well as its relative longevity (inception was in early 2005), have helped it amass some $27 billion in assets under management.
IAU's shares, like GLD's, are meant to represent a fraction of an ounce of gold, and it acts practically identically to SPDR's gold ETF.
This iShares gold ETF isn't as liquid as the SPDR Gold Shares, and its bid-ask spreads aren't as tight, so it's not ideal for short-term traders. However, its significantly lower cost makes it a better buy for long-term buy-and-holders.
Let's say you wanted to invest $10,000 for 30 years. And let's assume about 5% annual growth. IAU would end up saving you $1,770 in fees and opportunity cost vs. GLD over the life of the investment. Not bad.
Learn more about IAU at the iShares provider site. (opens in new tab)
iShares Gold Trust Micro
- Assets under management: $1.2 billion
- Expenses: 0.09%
The gold ETF space has been the site of a massive fee war over the past few years.
For a while, a couple of smaller players – including the GraniteShares Gold Trust (BAR (opens in new tab)) and abrdn Physical Gold Shares ETF (SGOL (opens in new tab)) – undercut both GLD and IAU with sub-0.20% annual expenses.
Fast-forward to 2018, and SPDR launched the SPDR Gold MiniShares Trust (GLDM (opens in new tab)) – similar to IAU in that each share represents 1/100th of an ounce of gold rather than 1/10th – at a 0.18% annual fee, giving SPDR a much more price-competitive fund to pit against BAR and SGOL.
That gave SPDR a total threat in the gold space, offering both a dirt-cheap product (GLDM) for buy-and-hold retail investors, as well as a high-volume trading product (GLD) for institutional and other accounts.
However, iShares fired back in summer 2021 with the iShares Gold Trust Micro (IAUM (opens in new tab), $18.62) at 0.15%, making it the low-cost leader among gold ETFs. Then in spring 2022, SPDR punched back by lowering GLDM to just 0.10 %. But – as of now – iShares is enjoying the last laugh, having dipped just underneath GLDM again with a mere 9-basis-point fee.
IAUM has one other noteworthy trait: Shares cost less than $20 at present. That's an even more digestible number than the high-$30s costs of both sister fund IAU and rival GLDM, making it one of the best ETFs for beginners (opens in new tab) working with smaller dollar amounts.
Learn more about IAUM at the iShares provider site. (opens in new tab)
Franklin Responsibly Sourced Gold ETF
- Assets under management: $48.9 million
- Expenses: 0.15%
ESG investing has reached the gold ETF space.
The Franklin Responsibly Sourced Gold ETF (FGLD (opens in new tab), $24.97), like the aforementioned gold ETFs, is a fund that represents the physical metal. How the Franklin Responsibly Sourced Gold ETF tries to differentiate itself is where its gold comes from. Per Franklin Templeton:
"Gold sourced from LBMA accredited refiners that are required to demonstrate their efforts to respect the environment and combat money laundering, terrorist financing and human rights abuses in accordance with the LBMA's Responsible Gold Guidance."
This potentially more eco- and human-friendly approach doesn't appear to weigh on performance, either. FGLD doesn't have much of a trading history – it launched in June 2022 – but so far, it's behaving just like its rivals.
This gold ETF isn't hard on the wallet, either, charging an extremely competitive 0.15% in annual fees.
Learn more about FGLD at the Franklin Templeton provider site. (opens in new tab)
VanEck Gold Miners ETF
- Assets under management: $13.1 billion
- Expenses: 0.51%
Gold ETFs that represent physical holdings are the most direct way to invest in gold via the stock market. But you can also play gold via mining stocks.
The very short exploration: Gold miners extract gold ore from a mine and then process it into gold. And they try to do that at a cost that's less than the price they sell the gold for, generating a profit. The ideal situation: Holding gold miners that have low costs of production while gold prices are both increasing and higher than those companies' costs to produce the gold.
One popular way to play this industry is the VanEck Gold Miners ETF (GDX (opens in new tab), $30.20) – a collection of roughly 50 companies in the gold mining industry.
It's a market-cap-weighted ETF, which means the bigger the stock, the greater the percentage of assets GDX invests in it. The ETF is heavily weighted, then, in bigger miners such as Newmont (NEM (opens in new tab), 13% of assets), Barrick Gold (GOLD (opens in new tab), 10%) and Franco-Nevada (FNV (opens in new tab), 9%). In fact, almost two-thirds of the fund's assets are concentrated in just the top 10 holdings.
That'd be more of a concern in a broad-market ETF where the supposed goal is wide sector/industry diversification. But, like how some energy ETFs are effectively an indirect play on oil prices, GDX is an indirect play on gold prices – all of its holdings will move somewhat similarly based on the underlying commodity, so the lopsided exposure isn't as worrisome.
But you should note that gold stocks tend to be more reactive to the price of gold than gold ETFs that actually hold the metal. In other words, when GLD improves, GDX tends to improve more (and vice versa). That's great in boom times and good for shorter-term trades. But it can also mean more pain in bust times and less stability over the long term.
Learn more about GDX at the VanEck provider site. (opens in new tab)
VanEck Vectors Junior Gold Miners ETF
- Assets under management: $3.9 billion
- Expenses: 0.52%*
Another way to leverage gold that's even riskier than traditional miners but also has more "pop" potential: junior miners.
When you think of mining companies, you tend to think of the companies in GDX – they operate mines, process the ore and sell the gold. But there's a lot that goes on first, and that's where junior gold miners come in. These firms employ engineers and geologists to help discover new gold deposits, determine how big their resources are and even help start mines up.
These are highly risky companies given the nature of their work. A seemingly promising project could turn south overnight, decimating the value of the stock. These small companies typically aren't flush with cash, either, so there's not much of a backstop should disaster strike. The flip side? Success can send these stocks flying quickly.
Holding one or two of these stocks can be extremely risky. If you want exposure to this type of gold play, the VanEck Vectors Junior Gold Miners ETF (GDXJ (opens in new tab), $36.86) spreads the risk across nearly 100 such companies – names such as Yamana Gold (AUY (opens in new tab), 6% weight), Kinross Gold (KGC (opens in new tab), 5%) and Alamos Gold (AGI (opens in new tab), 4%).
Interestingly, despite the fact that this index fund (opens in new tab) has more holdings and is less top-heavy than GDX – top-10 holdings account for just 39% of the fund's assets – the riskier nature of junior miners results in slightly more volatile performance, for better or worse.
* 0.50% in management fees and 0.02% in other expenses
Learn more about GDXJ at the VanEck provider site. (opens in new tab)
U.S. Global GO GOLD and Precious Metal Miners ETF
- Assets under management: $88.3 million
- Expenses: 0.60%
One last option puts you in touch with miners of not just gold, but other precious metals.
The U.S. Global GO GOLD and Precious Metal Miners ETF (GOAU (opens in new tab), $16.74) is another tight portfolio, this time of fewer than 30 companies that are engaged in the production of gold or other precious metals, whether that's actively (say, mining) or passively (owning royalties or production streams).
That's not a bad deal considering that many of the same factors that can drive gold higher, such as a sliding U.S. dollar, can also lift other precious metals and the companies that dig for them.
Top holdings include the likes of Royal Gold (RGLD (opens in new tab), 10%), which deals in streaming agreements tethered to gold, silver and other precious metals, as well as Wheaton Precious Metals (WPM (opens in new tab), 10%) and the aforementioned Franco-Nevada (9%), which are similar royalty-and-streaming companies.
Learn more about GOAU at the U.S. Global Investors provider site. (opens in new tab)
Kyle Woodley is the Editor-in-Chief of Young and The Invested (opens in new tab), a site dedicated to improving the personal finances and financial literacy of parents and children. He also writes the weekly The Weekend Tea (opens in new tab) newsletter, which covers both news and analysis about spending, saving, investing, the economy and more.
Kyle was previously the Senior Investing Editor for Kiplinger.com, and the Managing Editor for InvestorPlace.com before that. His work has appeared in several outlets, including Yahoo! Finance, MSN Money, Barchart, The Globe & Mail and the Nasdaq. He also has appeared as a guest on Fox Business Network and Money Radio, among other shows and podcasts, and he has been quoted in several outlets, including MarketWatch, Vice and Univision. He is a proud graduate of The Ohio State University, where he earned a BA in journalism.
You can check out his thoughts on the markets (and more) at @KyleWoodley (opens in new tab).
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