Many investors use gold exchange-traded funds (ETFs) to trade or invest in the precious metal. These funds can have an important role in many institutional and individual portfolios, and there are multiple fund options to choose from. Here’s an overview of these funds and the three best Gold ETFs in 2021.
What Are Gold ETFs?
Gold ETFs specifically invest in gold assets, which are usually either gold bullion, gold futures contracts or a combination of the two. These investments distinguish gold ETFs from mutual funds that might invest in companies that operate within a gold-related industry, such as mining. The underlying assets of gold ETFs aren’t dependent upon the operations of any one company, but rather the value of gold itself.
Because gold ETFs are invested in gold itself, these funds offer an alternative to other investments. The funds aren’t directly linked to the stock market or official currency, and they’re often used as a hedge against market fluctuations and general inflation. ETFs are also used as a non-physical gold IRA account asset.
Both institutional and individual investors may buy and sell gold ETFs.
What Gold ETFs Are Available?
The United States currently has nine publicly traded gold ETFs, excluding inverse funds, leveraged funds and funds with under $50 million in assets under management. These three types of funds are commonly excluded from lists of gold ETFs because they either bet against the price of gold or present greater risk, neither of which investors who want to invest in gold are generally interested in.
The Best Gold ETFs in 2021
Of the nine U.S. gold ETFs, three have distinguished themselves thus far this year. Below are the three best gold ETFs in 2021, along with what type of investor might be interested in each one.
(As is the case with all investments, whether a particular gold ETF is right for you requires conducting your own due diligence. Each investment opportunity must be considered in light of your own personal situation and risk tolerance, and the past performance of an investment doesn’t guarantee future results.)
DBP: Invesco DB Precious Metals Fund
The Invesco DB Precious Metals Fund is an index fund that follows the DBIQ Optimum Yield Metals Index Excess Return. This is an index that’s linked to the futures contracts of gold and silver, and the DBP fund has exposure to both precious metals as a result.
The DBP fund generally has 77% of its assets in gold futures and 23% in silver futures. A minor stake in U.S. Treasury bonds also provides some interest income, but this is minimal compared to the precious metals holdings.
The DBP fund is generally suited for investors who want a convenient and cost-effective way to invest in gold and silver futures, with a heavier weight on gold futures. The fund has a 12.76% return over the past year and averages a 5.45% return over the past five years.
DBP Gold and Silver ETF Snapshot:
- 1-Year Return: 12.76%
- 5-year Annualized Return: 5.45%
- Annual Dividend: N/A
- Expense Ratio: 0.75%
- Assets Under Management (AUM): $128.1 million
- Issuing Company: Invesco
- Inception: January 5, 2007
SGOL: Aberdeen Standard Physical Gold Shares ETF
The Aberdeen Standard Physical Gold Shares ETF tracks the current spot price of gold bullion, and its assets consist primarily of gold bullion that’s stored in Zurich and London. This makes the fund a true gold ETF, and it’s proven to be one of the best gold ETFs in 2021.
The SGOL’s returns can be expected to equal the return of gold less the fund’s expense ratio. This has provided a 3.88% return over the past year and a 6.07% annualized return for the previous five years.
The SGOL is specifically set up as a grantor trust, which may have tax benefits for U.S. investors that they can’t realize when purchasing bullion directly. For this reason, the gold ETF deserves consideration by anyone who wants to own physical gold.
SGOL Gold ETF Snapshot:
- 1-Year Return: 3.88%
- 5-year Annualized Return: 6.07%
- Annual Dividend: N/A
- Expense Ratio: 0.17%
- Assets Under Management (AUM): $2.6 billion
- Issuing Company: Aberdeen Standard Investments
- Inception: September 9, 2009
GLDM: SPDR Gold MiniShares Trust
The SPDR Gold MiniShares Trust is another true gold ETF, and it operates much like the SGOL. The GLDM trust is specifically tied to the London Bullion Market Association’s Gold PM Price, and it also is a grantor trust for tax benefits. Returns from the GLDM trust will likely be similar to those of the SPRD trust, making this also one of the best gold ETFs in 2021.
GLDM Gold ETF Snapshot:
- 1-Year Return: 3.87%
- 5-year Annualized Return: N/A
- Annual Dividend: N/A
- Expense Ratio: 0.18%
- Assets Under Management (AUM): $4.2 billion
- Issuing Company: State Street SPDR
- Inception: June 25, 2018