Find the best gold ETFs
How to pick the right gold for your portfolio
Gold exchange-traded funds (ETFs) let you invest in gold without owning the metal itself. Instead, these funds trade like stocks and either track the spot price of gold or invest in entities involved in the gold industry, such as gold mining companies.
Gold ETFs are an excellent option for investors who want exposure to the gold market and gold futures without dealing with shipping, storage and insurance.
There are dozens of gold ETFs on the market to choose from, but to help you narrow down your choices, we’ve rounded up a few of the most popular.
Our top 5 picks for gold ETFs
While you’re reviewing gold ETFs, consider performance, expense and stability. In our review of popular gold ETF options, we used ETF.com for market performance and the individual fund managers' websites for specific fund information. All of the ETFs we have selected have expense ratios below the average of 0.61%.
The commodity ETFs on our list are almost all ones that trade in physical gold. However, you might also look to gold mutual funds that have a position in gold mining companies.
Not every ETF on this list will fit your investing goals, so we’ve put together a list of things we like about each one, plus a few things to consider.
- Granite Shares Gold Trust (BAR)
- Goldman Sachs Physical Gold ETF (AAAU)
- Aberdeen Standard Physical Gold Shares ETF (SGOL)
- iShares Gold Trust (IAU)
- SPDR Gold Shares (GLD)
Gold and other precious metals are an investment and carry risk. Consumers should be alert to claims that customers can make a lot of money in these or any investment with little risk. As with any investment, you can lose money and past performance is not a guarantee of future performance results. Consumers should also obtain a clear understanding of the fees associated with any investment before agreeing to invest.
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GraniteShares manages a low-cost ETF that consists of 100% gold assets. The company is a fast-growing fund provider within the gold sector, and its flagship fund, BAR, was listed on the NYSE in 2017, allowing for easy trading within a standard brokerage account.
BAR tracks the gold spot price minus any trust expenses and liabilities. Gold bars are held at a secure facility in London, which is inspected twice annually. With a 0.17% expense ratio, BAR earned its title as a low-cost ETF.
What we like
- Low expense ratio
- Backed by physical gold bars
- Assets secured in an insured vault in London
What to consider
- Taxed at collectibles capital gains rate (up to 28%)
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Goldman Sachs Physical Gold ETF consists entirely of physical gold assets. AAAU has an inception date of July 26, 2018, and presently manages assets totaling more than $632 million.
AAAU tracks the gold spot price minus trust expenses. The fund's physical gold assets are held in a secure vault in London. With an expense ratio of 0.18%, AAAU is one of lowest-cost funds on our list.
Investors who appreciate a fund manager with broad market experience will find value in the oversight of Goldman Sachs.
What we like
- Closely tracks the spot price of gold
- Fully backed by physical gold assets
- Low share price
What to consider
- Slightly higher expense ratio than some competitor ETFs
- Taxed as a collectible
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The Aberdeen Physical Gold Shares ETF has $2.7 billion in assets and over 1.3 million ounces of gold in storage vaults in London and Zurich (as of March 31, 2023). The annual expense ratio for this fund is a low 0.17%, but it has some special tax implications due to its grantor trust status.
One thing that differentiates SGOL from other funds is its focus on investors seeking smaller positions: SGOL serves this market segment by trading at 1/100th the spot price of gold. This makes the fund a fan favorite of retail investors who want to diversify but don't intend to take a significant position in gold.
What we like
- Fully backed by physical gold bullion
- Closely tracks spot price of gold
- Low share price better for small investments
- Taxed at individual income tax rate due to Grantor Trust status (potentially lower tax rate)
What to consider
- Slightly underperforms other gold ETFs
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The iShares Gold Trust is a popular ETF managed by BlackRock, with shares backed by physical gold held in secure vaults. This ETF tracks closely with the daily price movement of spot gold, and the trust holds over 14 million ounces of gold. There are over $28 billion in assets under management (as of July 31, 2023), and it has an annual expense ratio of 0.25%.
Widely traded with a daily volume over $150 million, iShares Gold Trust is popular with stock traders but is also a good long-term hold. With a reasonable expense ratio and low share price (valued at 1/100th of a gold ounce), this ETF is a solid choice.
What we like
- Tracks the daily spot price of gold
- All shares backed by physical gold
- Trades at 1/100 the price of 1oz of gold
What to consider
- Taxed as a commodity (higher capital gains taxes)
- Slightly higher expense ratio than some other ETFs
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The most popular gold ETF on the market today, SPDR Gold Shares (GLD), is fully backed by physical gold bullion. State Street Global Advisors manages the fund, and it holds over 29 million ounces of gold in its vaults as of July 31, 2023. The fund has over $57 billion in assets under management, and it carries an annual expense ratio of 0.40%.
The issuer of GLD, State Street Global Advisors, also manages SPDR Gold MiniShares Trust (GLDM). GLDM consists of about 10% of the gold per share as GLD, allowing a much lower entry point for investors. In addition to the lower cost per share, it offers an expense ratio of 0.10%, which is the lowest on our list.
Whether you are looking for the go-to fund for the gold market or its smaller, more cost-efficient spinoff, you'll find GLD and GLDM are hard to beat.
What we like
- Widely traded with great liquidity
- All shares backed by physical gold bullion in vaults
- Has a “MiniShares” version with a lower expense ratio
What to consider
- Higher expense ratio than other gold ETFs
How to invest in gold ETFs
If you're new to investing in gold ETFs, don't worry — it is very similar to investing in the stock market. There are no accreditation requirements, and many funds offer affordable entry points, so the barrier to gold investments is low.
Here’s a quick starter guide to investing in gold ETFs:
- Set your budget. Determine how much money you'd like to invest — and how much you are comfortable risking.
- Do your research. Gain a deeper understanding of the gold market as well as individual gold funds you're considering. Take time to understand gold futures as well, as this is another investment strategy to consider.
- Open a brokerage account. If you don't already have a brokerage account, you'll need to open one with a traditional brokerage or an online trading platform.
- Buy gold. You can buy shares of gold just as you would buy shares of stock. Some brokers offer fractional share investing, allowing you to invest in smaller amounts.
- Prepare for the tax implications. As with most other assets and investments, gold is taxable, so you'll want to plan accordingly.
» MORE: Capital gains vs. investment income: how they differ
“Investing in gold ETFs isn't rocket science, but it does require some strategy,” said James Allen, the founder at Billpin, a personal finance website. “It's not just about buying low and selling high. You need to consider your overall portfolio, risk tolerance and investment horizon.”
Allen also recommends choosing several ETFs instead of just one. “Diversification is key. Don't put all your eggs in one basket, or in this case, all your gold in one ETF. And remember, patience is a virtue in the world of investing.”
» MORE: What is a good investment?
FAQ
Are gold ETFs safe?
Gold ETFs are regulated by the Securities and Exchange Commission (SEC). Gold has traditionally been considered a “safe haven” asset that retains its purchasing power over time — however, there is still a risk of loss when investing in gold ETFs, including total loss of funds. While ETFs are regulated, it doesn’t mean their value can’t go to zero.
Do gold ETFs pay interest?
Unlike dividend stocks and other investments, gold ETFs do not typically pay any interest. Returns are solely based on the price of gold. Some gold mining ETFs may offer a dividend or interest, but it varies based on the ETF you are investing in.
Are gold ETFs taxed?
If you’re investing in a physically backed gold fund, meaning your investment results in real gold with your name on it, the IRS views it as a collectible rather than a traditional investment. You may not possess the gold, but you do own it. Tax rates on collectibles can be up to 28%, which is a bit more than the typical 20% capital gains rate of other investment classes.
To avoid the increased collectibles tax, you might consider investing in a gold fund made up entirely of gold mining companies. You are exposed to the volatility of the companies within the fund and the gold market, but you won’t trigger the collectible tax by owning physical gold.
Is a gold ETF better than physical gold?
One is not necessarily better than the other, as both physical gold and commodity ETFs give you diversification and exposure to the fluctuations of the gold market. However, while with ETFs you only need to connect your brokerage account and purchase shares of the fund, owning physical gold requires you to arrange shipment and delivery, and you may need to pay for storage and insurance as well.
Bottom line
Gold ETFs have become a popular way to invest in gold without the hassle of shipping, storing and insuring physical gold bullion. There are several good options to choose from with low expense ratios that are backed by physical gold, making it a great way to invest in this precious metal.
Article sources
- ETF.com, “ Gold Overview .” Accessed July 27, 2023.
- IRS, “ Issue Snapshot - Investments in Collectibles in Individually-Directed Qualified Plan Accounts .” Accessed July 27, 2023.
- IRS, “ Topic No. 409, Capital Gains and Losses .” Accessed July 27, 2023.
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