Every investor thinks of investing in gold at some point. The challenge is not knowing how to invest in gold or what to make of it as an investment. Gold often surfaces when economies don’t do well; it’s like humanity reverts back in time to an era without digital communication.
Gold ETFs have particular characteristics that you need to be familiar with before you invest.
Why Invest in Gold?
It’s an important question as not all gold investments are equal, just like investing in bonds. You can buy bullions (or bricks of gold if you are inclined), or ETFs, or gold mining stocks.
The price of gold impacts all of those investments.
Many invest in gold primarily because it is seen as a safe haven during market turbulence and economic uncertainty. However, it can be scary to invest in gold.
So, what do you want from a gold investment?
Do you want the physical gold bullion? Do you want a gold miner without understanding all the socioeconomic challenges that a miner could face? Or do you simply go for a Gold ETF?
Those are the three options available to get gold exposure. As it happens, you actually can use a Canadian Gold ETF to expose yourself to the physical gold or to the gold miners or to both. The options with gold ETFs are there.
While Exchange Traded-Funds (or ETFs for short) were introduced in the 1990’s, they have recently become a strong investment vehicles for many investors to avoid the abusive management fees of the mutual funds.
ETFs can provide a way to get exposed to gold if that’s of interest. Below are the Canadian gold ETFs you can pick from.
List of Canadian Gold ETFs
Here is the complete list of Canadian gold ETFs and their performance over the past 5 years. While they focus on gold, their performance is far from being equal.
I have excluded ETFs that invest in “future” derivatives as they fall outside of bullions and stocks and are more akin to trading a currency.
| wdt_ID | ETF | Name | Inception | Company | Assets |
|---|---|---|---|---|---|
| 2 | ZJG | BMO Junior Gold Index ETF | 19/01/2010 | BMO Asset Management | Gold Stocks |
| 5 | CGL | IShares Gold Bullion ETF | 28/05/2009 | BlackRock | Bullions |
| 6 | XGD | IShares S&P/TSX Global Gold Index ETF | 23/03/2001 | BlackRock | Gold Stocks |
| 7 | HGY | Horizons Gold Yield ETF | 17/12/2010 | Horizons ETFs Management | Gold Stocks |
| 12 | HEP | Horizons Enhanced Income Gold Producers ETF | 11/04/2011 | Horizons ETFs Management | Gold Stocks |
| 13 | KILO | Purpose Gold Bullion Fund | 29/10/2019 | Purpose Investments | Bullions |
| 14 | PHYS | Sprott Physical Gold Trust | 24/02/2010 | Sprott | Bullions |
| 15 | MNT | The Canadian Gold Reserves exchange traded receipt | 29/11/2011 | Royal Canadian Mint | Bullions |
| 16 | ZGD | BMO Equal Weight Global Gold Index ETF | 14/11/2012 | BMO Asset Management | Gold Stocks |
| 17 | CGXF | CI First Asset Gold+ Giants Covered Call ETF | 01/06/2011 | CI First Asset | Gold Stocks |
| 18 | HGGG | Harvest Global Gold Giants Index ETF | 07/01/2019 | Harvest Portfolio Group | Gold Stocks |
While I do not have gold in my portfolio, gold has long been considered a defensive investment but so are financial ETFs in Canada. Holding gold can put your mind at ease during poor market conditions or market volatility. Another option is to hold bonds, but it doesn’t have the same performance against inflation as some would say.
Obviously, no one can predict gold prices, and your guess is as good as mine when it comes to how gold will be priced in the future, but for now, we can evaluate the various approach of the listed Canadian gold ETFs.
Now, it’s important to separate the asset classes to compare apples to apples. As such you can see how the gold bullion ETFs do separately from the gold miners.
Best Gold Bullion ETF
The objective of the following ETFs is to replicate the performance of the price of gold bullion for investors, less expenses and fees. Many have a $USD option as well if desired.
| wdt_ID | ETF | Yield | MER | Frequency | Net Assets |
|---|---|---|---|---|---|
| 1 | PHYS | 0.00 | 0.42 | - | 4,840M |
| 5 | KILO | 0.00 | 0.20 | Annual, if any | 301M |
| 7 | CGL | 0.00 | 0.55 | Annual, if any | 1,043M |
| 10 | MNT | 0.00 | 0.35 | - | 659M |
As one of the long-standing ETFs, if your interest is to invest in Gold, the PHYS ETF is the best Gold ETF to hold. It’s a true play on the gold value.
It stays closer to the gold value as you can see in the second graph where it’s all relative to gold prices. It is also the largest and is therefore easily traded.
This graph shows the ETF performance in relation to the gold value. You can see the variation up and down against gold as a flat line.
Best Gold Stocks ETF
The purpose of those ETFs is to primarily expose investors to gold stocks through various strategies.
Investing in gold stocks is a proxy to gold. It’s not fluctuating solely based on the price of gold as the ETFs hold companies, and companies have to be well managed. This is about mining for gold for the most part and pricing against inventory (or future inventory).
While investing in gold bullion is like managing a currency, when investing in gold stocks, you want to also pick the right account to do so. Be mindful of the account where you hold your gold stocks, as opposed to your gold coins.
The best gold stocks ETF is the iShares S&P/TSX Global Gold Index ETF, or XGD ETF. It has the most assets and performs well.
| wdt_ID | ETF | Yield | MER | Frequency | Net Assets |
|---|---|---|---|---|---|
| 1 | HGY | 4.96 | 1.09 | Monthly | 55M |
| 5 | HEP | 5.28 | 0.84 | Monthly | 163M |
| 7 | ZJG | 0.00 | 0.60 | Annually | 117M |
| 8 | XGD | 0.22 | 0.61 | Quarterly | 1,479M |
| 9 | ZGD | 0.00 | 0.62 | Annually | 240M |
| 10 | CGFX | 0.00 | 0.65 | Quarterly | 453M |
| 11 | HGGG | 0.00 | 0.40 | Annually | 9M |
Psst … Did you see that the gold currency outperforms all of those ETFs? Maybe the gold bullion ETF is better.
Each of the ETFs will hold the various gold stocks traded on the Canadian and US exchanges.
| Ticker | Ticker | Company | Market Cap | P/E | Yield | Aristocrat | Graph | SectorID | IndustryID |
|---|---|---|---|---|---|---|---|---|---|
| NGT | TSE:NGT | Newmont | 52.65 | 0.00 | 2.94 | NO | 1 | 1 | 46 |
| ABX | TSE:ABX | Barrick Gold | 37.38 | 21.79 | 2.53 | YES | 1 | 1 | 46 |
| AEM | TSE:AEM | Agnico Eagle Mines | 36.63 | 13.30 | 2.93 | YES | 1 | 1 | 46 |
| FNV | TSE:FNV | Franco-Nevada Corp | 29.83 | 31.77 | 1.25 | YES | 1 | 1 | 46 |
| WPM | TSE:WPM | Wheaton Precious Metals Corp | 27.34 | 37.90 | 1.34 | YES | 1 | 1 | 46 |
| K | TSE:K | Kinross Gold | 8.90 | 15.99 | 2.23 | NO | 1 | 1 | 46 |
| YRI | TSE:YRI | Yamana Gold | 7.57 | 21.87 | 2.03 | NO | 1 | 1 | 46 |
| AGI | TSE:AGI | Alamos Gold | 7.16 | 25.31 | 0.75 | NO | 1 | 1 | 46 |
| BTO | TSE:BTO | B2Gold | 4.64 | 113.51 | 6.06 | NO | 1 | 1 | 46 |
| OR | TSE:OR | Osisko Gold Royalties | 4.05 | 0.00 | 1.10 | NO | 1 | 1 | 46 |
| CEE | TSE:CEE | Centamin PLC | 2.08 | 20.02 | 3.03 | NO | 1 | 1 | 46 |
| DPM | TSE:DPM | Dundee Precious Metals | 1.82 | 7.44 | 2.15 | NO | 1 | 1 | 46 |
| CG | TSE:CG | Centerra Gold | 1.63 | 0.00 | 3.70 | NO | 1 | 1 | 46 |
How to Buy Gold ETFs
You can’t walk in a bank and buy a gold ETF. You can’t buy gold at the bank, either.
The simplest way to buy a gold ETF is with a discount broker, preferably one with free ETFs such as Questrade, so you pay no transaction fees, but any discount broker will work.
If you decide a gold ETF isn’t for you, you can buy gold miner stocks with a discount broker.