Gold Trust ETFs Explained: A Comprehensive Guide

Gold Trust ETFs are a popular way to invest in gold, allowing you to buy and sell gold through the stock market. They're backed by physical gold, stored in vaults, and their value is directly tied to the price of gold.

Gold Trust ETFs are designed to track the price of gold, so if the price of gold goes up, the value of your investment will also increase. You can buy and sell shares of the ETF just like any other stock, making it a convenient way to invest in gold.

To invest in a Gold Trust ETF, you'll need to open a brokerage account and purchase shares of the ETF. The most well-known Gold Trust ETF is the SPDR Gold Shares (GLD), which holds over 1,000 tons of gold in its vaults.

Investing in a Gold Trust ETF is relatively low-risk, as the value of your investment is tied to the price of gold, not the performance of a specific mining company.

For more insights, see: I Shares Silver Trust Stock Price

Gold investors can use gold ETFs to diversify their portfolio and take advantage of the metal's unique features. Gold ETFs provide a hedge against inflation and can grow in value amid high and rising domestic and/or geopolitical uncertainty.

It's a good idea to learn the ins and outs of gold investing before using commodity ETFs. Investing in gold should be a small portion (5%) of your portfolio for several reasons, including liquidity, low expenses, and ease of use.

You can leverage gold ETFs to invest in gold, and there are several low-cost options available. Our list includes the most ubiquitous gold ETFs on the market, as well as a few that aren't as well-covered but might make more sense for you than their better-known brethren.

The price of gold is a crucial factor to consider when investing. Gold is seen as a safe haven by many investors, especially in financial turmoil, and has shown to stabilise equity/bond portfolios.

Investors can easily track the spot gold price with listed products like ETFs or ETCs. These products closely follow the spot gold price, taking management fees into account.

The advantage of exchange-traded gold products is the minimal bid-ask spread compared to a direct trade in gold bullion. This is mainly due to the large 12.5kg bullion that are held and traded at fund level.

Currently, gold is tracked by 19 ETFs and/or ETCs.

Recommended read: Gold Bullion as an Investment

If you're looking for low-cost options to invest in gold, you're in luck. The total expense ratio (TER) of Gold ETCs is between 0.00% p.a. and 0.59% p.a., which is relatively low.

There are a few ETFs that stand out for their low expense ratios. The boerse.de Gold ETC, EUWAX Gold, and EUWAX Gold II all have a TER of 0.00% p.a., making them the cheapest Gold ETFs on the market.

If you're looking for more options, Bankrate selected its top funds based on several criteria, including assets under management of at least $800 million and expense ratios under 0.60 percent. Some of the top gold ETFs include the SPDR Gold Shares and the iShares Gold Trust.

A unique perspective: Gold Investment Options

If you're looking for a more liquid option, the SPDR Gold Shares (GLD) is by far the most popular and most liquid of the gold ETFs, with over $100 billion in assets under management.

Here are some of the top gold ETFs, ranked by total expense ratio:

These are just a few of the many options available for investing in gold. Be sure to do your research and choose the option that best fits your investment goals and risk tolerance.

Gold ETCs are certificates issued by a financial institution collateralised with physical gold.

In contrast to some European countries, Swiss regulation allows ETFs for single commodities like gold, offering investors a different investment option.

Gold ETCs are mainly used in European countries due to regulatory restrictions.

The regulatory investment fund framework (UCITS) does not allow UCITS funds with only one constituent, which is why gold ETCs are the preferred choice in many European countries.

If you're interested in investing in precious metal miners, there are a few options to consider. The U.S. Global GO GOLD and Precious Metal Miners ETF (GOAU) is one such option, with assets under management of $87.7 million and an expense ratio of 0.60%.

This ETF holds fewer than 30 companies engaged in the production of gold or other precious metals, which can be a good thing considering the 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 in GOAU include Franco-Nevada (10.3%), Wheaton Precious Metals (9.9%), and Royal Gold (9.8%), all of which have interests in royalties, streaming agreements, or production streams.

The U.S. Global GO GOLD and Precious Metal Miners ETF is a relatively small fund, but it's a good option for those looking to diversify their portfolio with a mix of gold and other precious metals.

Here are some key facts about GOAU:

The GLD fund was the first ETF to track the price of gold, starting its trading in 2004.

Its expense ratio is 0.4%, which is not the lowest among gold ETFs, but still quite reasonable.

The iShares Gold Trust, for instance, has a lower expense ratio of 0.25%.

However, the difference in expense ratio is likely to be minimal for most investors.

In fact, fluctuations in the spot price of gold will have a much larger impact on returns.

As of June 19, 2020, the GLD fund had a substantial net asset value of $62.4 billion.

This fund's one-year total return was approximately 14%.

You can buy shares in the GLD fund through any broker.

It trades on the NYSE Arca exchange.

Broaden your view: Dsp Gold Etf Fund of Fund

The performance of Gold ETFs/ETCs can vary significantly, making it essential to compare them before making an investment decision. One of the key factors to consider is the fund size, with Invesco Physical Gold AIE00B579F325 and iShares Physical Gold ETC IE00B4ND3602 having the largest fund sizes of 16,138m EUR and 15,973m EUR respectively.

TER, or total expense ratio, is another important factor to consider, with Xetra-Gold DE000A0S9GB0 having a TER of 0.00% p.a., making it the cheapest option.

Some Gold ETFs/ETCs also offer a currency hedge, which can help to reduce the impact of currency fluctuations on your investment. Xtrackers IE Physical Gold EUR Hedged ETC Securities DE000A2T5DZ1 and WisdomTree Physical Gold - EUR Daily Hedged JE00B8DFY052 offer a currency hedge in EUR.

Here is a summary of the fund sizes and TERs of the Gold ETFs/ETCs listed:

By considering these factors, you can make a more informed decision about which Gold ETF/ETC is right for you.

The SPDR Gold Shares ETF has a rich history that dates back to November 2004 when it was first listed on the New York Stock Exchange under the name streetTRACKS Gold Shares.

It has since undergone a name change and is now traded on NYSE Arca, as well as on several other exchanges including the Hong Kong Stock Exchange, Singapore Stock Exchange, and Tokyo Stock Exchange.

The gold bullion held by the Trust is stored as London Good Delivery gold bars, which weigh 400 oz each.

The Trust's gold is stored in their vault in London or by several custodians worldwide.

The ETF charges an expense charge of 0.40% per annum, which is a relatively standard rate for this type of investment.

The Trust's gold bullion is stored as London Good Delivery gold bars (400 oz.) and held in their vault in London or by several custodians worldwide.

The Trust has a straightforward expense charge of 0.40% per annum.

The trustee of the Trust is BNY Mellon Asset Servicing, a reputable company in the financial industry.

The physical gold is custodied by HSBC Bank, a well-established bank with a global presence.

The sponsor of the Trust is World Gold Trust Services, and the marketing agent is State Street Global Markets, both experienced companies in the financial sector.

The Trust's management structure is designed to be efficient and secure, with multiple custodians holding the gold bullion.

A unique perspective: Global Gold Etf

The SPDR Gold Shares fund has a rich history that dates back to November 2004, when it was first listed on the New York Stock Exchange under the name streetTRACKS Gold Shares.

It was sponsored by the World Gold Council and listed by State Street Global Advisors. The fund has undergone a name change since then.

In 2007, the fund started trading on NYSE Arca, and the name change took effect on May 20, 2008. Today, it also trades on other major stock exchanges.

The fund is listed on the Hong Kong Stock Exchange under the ticker 2840, the Singapore Stock Exchange under the ticker GLD 10US$, and the Tokyo Stock Exchange under the ticker 1326.

For another approach, see: Gold Spot Price Stock Symbol

The Franklin Responsibly Sourced Gold ETF is a notable example of ESG investing in the gold market. It has assets under management of $87.5 million.

This ETF focuses on sourcing gold from LBMA accredited refiners that meet certain environmental and social standards. These refiners are required to demonstrate their efforts to respect the environment and combat money laundering, terrorist financing, and human rights abuses.

The fund's expenses are a very competitive 0.15% annually, making it a relatively affordable option for investors.

The investment process for a gold trust ETF is relatively straightforward.

You can invest in a gold trust ETF through a brokerage account, such as a self-directed IRA or a taxable brokerage account, with a minimum investment requirement of $100.

The ETF will then buy physical gold and store it in a secure vault, allowing you to own a portion of the gold without having to physically store it yourself.

GLD tracks the price of gold by holding gold bullion in a trust kept in the form of London Gold Delivery bars of 400 ounces.

The physical gold is held by the custodian in a vault in London or in the vaults of other sub-custodians, providing a secure storage for the gold.

GLD has an annual tracking error of around 0.93%, which is the difference between the price of the ETF and the underlying spot price of gold.

This tracking error is mainly caused by the expenses charged for managing the fund, transaction costs, and whether the fund holds any cash.

Intriguing read: What Does Spot Price of Silver Mean

Shares of GLD are purchased by the trust for the fund in baskets of 100,000 shares, which are then sold to the public at the prevailing market price for gold and the ETF.

The trust issues these shares in baskets to authorized participants, usually large financial institutions, on a constant basis at the net asset value (NAV) on the day that an order to create a basket is accepted by the trustee.

To buy gold ETFs, you need to decide whether you want exposure to physical gold or public companies involved in gold mining. These two asset classes have different risk profiles.

Determine your financial goals first. This will help you choose the right investment strategy. For example, if you're saving to buy a second home, your investment strategy will be different from someone saving for their child's college education.

Research gold funds carefully. Look at the fund's performance, expense ratios, top holdings, and assets under management. You can find this information in the fund's prospectus.

Check this out: Gold Investment Strategy

Before investing, outline your asset mix. Take an inventory of all your assets and calibrate your portfolio accordingly. Remember, the key is to remain diversified.

To get started, here are some key factors to consider when selecting gold ETFs: