Gold ETF | Best Gold ETF to Buy

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Best Gold ETF to Buy

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So what is the best gold ETF to buy that will yield the highest returns possible in a gold bull market?  Do I have a personal favorite ETF gold fund?  Yes actually I do, but before I get too far into which ETF I think is best overall, it’s important to distinguish first what is meant by a Gold ETF as some investors interpret this differently than others.  Essentially there are two different types of Gold ETFs, one is an exchange traded fund that tracks the price of gold, with each share worth 10% of the gold price.  If referring to this type of ETF, I like the SPDR Gold Trust ETF (GLD), mainly because it has the highest average daily volume, and thus greater overall liquidity which allows me to trade the stock much more easily on the market.

The other type of Gold ETF, which is the one I want to focus on for this post is an ETF that contains gold stocks and securities sometimes known as a Gold Stocks ETF.  This type of ETF is obviously very different than one that simply tracks the price of gold.  As such, a gold stocks ETF though influenced by the price of gold, will not directly follow it since you are investing in gold companies and not the price of gold.

So what is the best ETF to buy in terms of those compiled of stocks?  Well, I’m going to cheat here and say that I like two; one that trades on the Canadian market and the other on the US Market.  The Canadian gold ETF I like is iShares CDN Gold Sector Index (XGD.TO).  Traded on the TSX (Toronto Stock Exchange) this gold stocks ETF contains some of the best gold and mining companies in the world including large cap names such as Barrick Gold, Goldcorp, Newmont Mining, Anglogold, Kinross gold, and gold fields.  It also contains some very high growth small cap gold stocks including Aurizon Mines, and Red Back Mining.  Also, with this ETF being priced in Canadian dollars, some might argue you are better protected from a weakening US dollar.  In actuality though, it’s really more of a convenience factor. If you have a Canadian brokerage account, you more than likely want to keep your funds in Canadian currency, particularly for an RRSP account.

The other Gold ETF to buy on the US market is the Market Vectors Gold Miners ETF (NYSE: GDX).  Traded on the New York Stock exchange, it is a very similar exchange traded fund to XGD but actually contains 30 holdings compared to the XGD’s 19, so you actually get a broader exposure to the precious metals sector.

Remember though, you don’t have to buy what I like, in fact it doesn’t really matter in the end which particular ETF gold fund you choose so as long as it has sufficient exposure to the gold sector, has had good past performance (meets or exceeds the gold index), and has a relatively low management expense ratio (MER).

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3 Comments

Comments

3 Responses to “Best Gold ETF to Buy”

  1. GREG on December 17th, 2010 5:20 pm

    HI WHAT IS A GOOD SMALL CAP GOLD ETF THX

  2. David on January 4th, 2011 9:35 pm

    I like the Market Vectors Gold ETF (NYSE: GDX) which contains a good mix of small and medium cap gold stocks.

  3. Kirk on September 21st, 2011 7:48 pm

    Would it make sense to invest in both GLD and GDX? The GDX seems to follow the GLD fairly closely. Or should you just go with one or or the other?