What are the gold ETFs available? How do you choose?

Under the influence of the Federal Reserve's interest rate cuts, gold has continuously reached new historical highs. As of intraday on October 21, 2024, gold has risen by 32.18% for the year.

Along with the rise in gold prices, investment demand for gold has also grown stronger. According to the World Gold Council's analysis report, global gold ETFs have experienced net inflows for five consecutive months as of September 2024, and gold trading volume in September increased by 7% month-on-month.

Traditionally, investing in gold has been to preserve wealth. Many people's first reaction might be to buy physical gold, such as gold bars, gold nuggets, or gold coins.

As investment objectives and needs become more diverse, many people choose to invest in gold through other means, such as ETFs.

Investing in gold through ETFs not only avoids the "hassle" of storage and sale but also offers more flexibility and convenience in trading, helping investors seize investment opportunities arising from rising gold prices.

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Advantages and precautions of investing in gold through ETFs

ETFs have several potential advantages over physical gold, including:

Which is more suitable for you when investing in gold?

Are you deciding whether to invest in ETFs or physical gold? The answer depends on your investment goals.

If you are concerned about global financial market risks, don't plan to trade frequently, or have inheritance needs, then investing in physical gold may be more appropriate.

On the other hand, if you want to diversify your asset allocation or hedge against short-term stock market volatility, ETFs could offer a more flexible and convenient option.

Different categories of gold ETFs

Before investing, you need to know that based on the tracking objectives and underlying assets, the ETFs that invest in gold can be divided into two categories:

1. Gold ETFs: Track the price of gold.

2. Gold Miner ETFs: Track the stock prices of gold mine companies.

Gold ETFs: What are they? Who are they suitable for?

First, let's take a closer look at gold ETFs.

Gold ETFs track the price of gold and offer similar investment opportunities to physical gold.

As the gold price rises, the price of the gold ETF generally also increases, allowing investors to potentially profit from the price difference without owning actual gold bars.

For example, $SPDR Gold ETF (GLD.US)$ , currently the world's largest market capitalization, was launched in 2004 and was the first ETF to invest in physical gold, with a fee rate of 0.4%. GLD reserves a large amount of physical gold and will buy or sell a corresponding amount of physical gold every day based on the latest net value of the ETF. Even each piece of physical gold has a unique number. Interested investors can go to the issuer's official website to view a list of gold bar numbers in stock that is updated daily.

If you think GLD's 0.4% fee rate is higher, you can also choose other ETFs that track spot gold prices, such as $Gold Trust Ishares (IAU.US)$ the one issued by iShares, which has a fee rate of 0.25%, and $Austral Gold Ltd (AGLD.CA)$ the one belonging to State Street, which has a fee rate of 0.10%. However, the market value of the two is different. Under normal circumstances, ETFs with larger market capitalization have more active transactions and smaller bid-ask spreads. For those who want to hold ETFs for the long term, fees are an important consideration; but for those who trade frequently, the bid-ask spread has a greater impact. You can make a comprehensive comparison based on your investment objectives and risk appetite.

In addition, there are also leveraged or inverse ETFs among gold ETFs, which mainly use gold futures contracts and other tools to achieve leveraged or inverse effects.

However, it should be noted that gold ETFs will not pay dividends to investors. If you want to receive dividends, you can consider gold mining ETFs.

Gold miner ETFs: What are they? Who are they suitable for?

Theoretically, the trend of gold prices is positively correlated with the changes in the stock prices of gold mining companies. The rise in gold prices can also boost the stock prices of gold mining companies, and vice versa. However, there is an essential difference between gold mining ETFs and gold ETFs. If the gold ETF is backed by a basket of physical gold or gold futures, then the gold mining ETF is backed by a basket of gold mining company stocks.

For example, $VanEck Gold Miners Equity ETF (GDX.US)$ is currently the largest gold mining ETF in terms of market value and trading volume. It was issued in 2006 and aims to track large global gold mining stocks (tracking target: NYSE Arca Gold Miners index), with a fee rate of 0.51%.

On Futubull, we can view its latest constituent stocks. As of July 6, 2024, the stock with the largest holding of GDX is $Newmont (NEM.US)$ , which is also the world's largest gold mining company by market value. In addition to gold mining companies listed in the United States, it also invests in gold mining companies listed in other countries/regions, such as $Agnico Eagle Mines Ltd (AEM.CA)$ ., $Barrick Gold (GOLD.US)$ , $ZiJin Mining ADR (ZIJMY.US)$ , etc.

Due to the inconsistency of tracking targets, different gold mining ETFs have different focuses. Some may focus on large-cap companies, while others may only invest in small-cap companies. This may cause these gold mining ETFs to have different trends in the same period. For example, $VanEck Junior Gold Miners ETF (GDXJ.US)$ (VanEck Small Cap Gold Mining ETF), which belongs to the same issuer, is an ETF that specifically tracks small-cap gold mining stocks around the world. If you open the holdings list, you will find that it is very different from GDX's holdings. Therefore, although the general trend remains the same, there are still some differences.

Before investing in a gold mining ETF, you need to be aware that gold mining stocks are also affected by market sentiment, company operations, and other comprehensive factors. Generally, gold mining stocks are more volatile compared to the price of gold, thus a gold mining ETF might not necessarily be suitable for investors who aim to invest in gold over the long term.

How to find these etfs on Futubull?

1. Open Futu NiuNiu, click "Market", and select "ETF" in the upper navigation bar;

2. On the "ETF" page, click the arrow on the right side of the "Theme ETF" column to view more themes;

3. Select "Gold ETF" to view the list of specific ETFs;

4. In the list, you can also sort the order by price fluctuation, transaction volume, market value and other conditions;

5. Click on an ETF to enter the detailed quotation page and view its "profile" and "components".

Summary

Finally, let's summarize:

1. Compared with direct investment in physical gold, the advantages of investing in gold through ETFs are convenient trading, transparent prices, low entry fees, and no storage risks. The disadvantages are large price fluctuations, the need to pay other fees, no physical objects, and possible counterparty risks;

2. ETFs that invest in gold can be divided into two categories according to different tracking targets: gold ETFs and gold mining ETFs, which are essentially different;

3. Gold ETFs track gold prices, are linked to physical gold, and do not pay dividends;

4. Gold mining ETFs track the prices of a basket of gold mining stocks. The trend is related to the gold price, but it will also be affected by other factors. The volatility is greater than that of gold ETFs, and dividends may be paid regularly;

5. Through Futu Niu Niu, we can quickly find gold ETFs and gold mining ETFs, and view the detailed information of each ETF.

Which way do you think is better to invest in gold?

If you invest in gold through ETFs, would you choose gold ETFs or gold mining ETFs?

Welcome to share your unique views and discuss with everyone.