Find the Right Gold for your Portfolio
Investors have several options to consider when looking to gain exposure to gold and tap into its diverse potential benefits. Understanding the potential advantages and considerations for the different gold investment vehicles – be it ETFs, mutual funds, gold bars and coins or gold mining stocks, can help an investor to determine which option is best suited to their personal investment situation.
Comparing Gold Investment Vehicles
- Gold-Backed ETFs offer investors gold exposure through the many benefits of passive ETF investing, including the access and transparency of intraday trading on national exchanges and lower average expense ratios than those of many of the other options. Physically backed gold ETFs, like SPDR’s gold ETFs, provide a cost-effective way to access gold bullion through a historically low-transaction-cost vehicle with low bid-ask spreads and low tracking error1 to the market price of gold. They also may provide deep liquidity and access to the market to rebalance and position exposure. But it’s important for investors to note that not all gold ETFs are created equal — or invest exclusively in gold bullion — and investors should carefully review the holdings to determine how much of the ETF’s portfolio is invested in physical gold. This is especially true when comparing gold mining ETFs and gold mutual funds that invest only a small portion of their assets in gold.
- Gold Mutual Funds provide investors with the same daily liquidity as gold ETFs do, but they do not trade intraday on national exchanges, as do ETFs. And many mutual funds that hold gold in their portfolio of investments may not exclusively invest in gold, which means they may not track gold’s price movements and reap the full value of gold’s diverse potential benefits. Mutual funds also tend to maintain a higher total expense ratio than that of many ETFs.2
- Gold Mining Stocks and ETFs are another way that investors can gain exposure to gold. But investing in these companies is not the same as directly investing in gold bullion or a gold-backed ETF. These represent investments in gold mining companies and operations, and these companies may be impacted by certain additional factors beyond the price of gold — such as profitability, industry competition, and other financial and operational decisions.
- Gold Bars and Coins remain the most popular way that global investors access gold. But that habit may be shifting — especially in 2020, as we have seen gold-backed ETFs reach record highs this year. Although directly holding bars and coins has a high level of transparency with physical possession, investors are often required to pay a premium over the spot price of gold for their purchase. Cost and liquidity considerations also come into play when holding bars and coins outright — including costs for insurance, transportation and safekeeping, each of which can impact the underlying performance benefits realized.
- Gold futures are often used by larger or institutional investors looking to leverage their portfolios. Gold futures provide intraday trading and a way to manage underlying risks of other securities held in their portfolio. Gold futures require unique knowledge about the gold market and are not typically the vehicle of choice for the average investor. Gold futures are not physically backed by gold, and they carry defined expiration dates, which require holders to roll over the contract according to a scheduled expiry to maintain their gold exposure. Although gold futures are generally traded in larger positions with lower brokerage commissions due to their size, the associated brokerage and roll costs need to be considered when determining the total cost of ownership.
Choosing ETFs for Gold Exposure
For many investors, the case for gold ETFs may be strong relative to those for other gold investment vehicles, particularly in terms of accessibility, transparency, and cost. ETFs often provide a higher degree of flexibility for investors at a potentially lower overall cost than many of the other options do – and gold-backed ETFs are no exception.
Gold ETFs have grown to record levels in terms of popularity and AUM since 2004, when SPDR ETFs introduced the first physically backed gold ETF designed to track the price of gold bullion, SPDR® Gold Shares. Since that time, gold investing via gold-backed ETFs has grown to $239 billion in assets.3 2020 has seen gold ETF investing hit record highs, adding 21% — or US $49.1 billion4 — to global gold-backed ETF assets through July 31, and providing investors a cost-effective and efficient way to access gold’s unique benefits during 2020’s market volatility.
Although gold-backed ETFs have seen positive inflows from all regions during 2020, North American investors were responsible for adding nearly 75% of July’s total $9.7 billion of inflows into global gold-backed ETFs — that’s US $7.0 billion.5 Global investors — US investors in particular — have responded to eroding market conditions, placing assets into gold-backed ETFs as market volatility and uncertainty have risen – tapping into the diversification, liquidity and risk-adjusted returns that an allocation to gold may potentially offer6.
Work with a Global Gold Leader
In November 2004, the World Gold Council partnered with SPDR ETFs to launch the SPDR® Gold Shares, the first US gold-backed exchange traded fund. The SPDR® Gold Shares’ arrival made it convenient and cost effective for investors to hold gold in their portfolios. Since then, the SPDR® Gold Shares has reached over $78 billion in assets,7 making it the largest and most liquid gold-backed ETF in the world.8
Both ETFs provide investors a relatively efficient and liquid way to access the gold bullion market through physically backed ETFs. Learn more about our heritage in the gold market , or read more about our gold ETF below.
Largest and Most Liquid
SPDR® Gold Shares, the largest gold-backed ETF in the world by AUM,9 is designed to offer all investors easy and highly liquid access to the gold market.
Related ETFs