Gold has been getting back some of its luster. During this week, the precious metal hit a six-month high, reaching nearly $1,300 a troy ounce on the Comex.
Then again, there are a variety of factors at work. First of all, the fall of the U.S. dollar has made it more affordable for foreign investors to buy gold (the reason is that it is denominated in the dollar).
Although, perhaps the biggest reason for the rally in gold is the geopolitical uncertainty. Here are just some of the concerns:
- The Federal Reserve and the European Central Bank may take actions on monetary policies during the next couple weeks.
- The Trump administration is under tremendous scrutiny, such as with the upcoming testimony from fired FBI director James Comey.
- Several Gulf States have taken aggressive actions against Qatar.
- There has been a surge in terrorist attacks, especially in the U.K. The country is also in the midst of high-stakes election.
No doubt, gold represents a safe-haven asset for investors. And yes, it seems to be playing this role yet again.
OK then, so how can you participate? What are the best exchange-traded funds for gold? Let’s take a look at four:
Best ETFs to Buy Gold: SPDR Gold Trust (GLD)
SPDR Gold Trust (ETF) (NYSEARCA:GLD), which was launched 13 years ago, is the largest player among gold ETFs. Consider that there are $34.4 billion assets under management.
According to the GLD’s prospectus:
“The investment objective of the Trust is for the Shares to reflect the performance of the price of gold bullion, less the Trust’s expenses. The Sponsor believes that, for many investors, the Shares represent a cost-effective investment in gold.”
Now each share of the GLD represents a fractional undivided beneficial interest in physical gold, which is stored in secured, undisclosed locations in London. Keep in mind that each share is about 10% of the value of gold.
What’s more, the expenses for the GLD are reasonable, coming to about 0.4% of the assets.
Best ETFs to Buy Gold: ETFS Gold Trust (SGOL)
ETFS Gold Trust (NYSEARCA:SGOL) is very similar to the GLD — that is, both hold vaults of gold bullion.
Yet, there are some important distinctions. For example, GLD’s asset base is much smaller, at about $1 billion. The expense ratio is also a bit less: 0.39%.
But perhaps the most important difference — and key attraction — of SGOL is the location of the gold. That is, it is in vaults in Zurich, Switzerland. In other words, for some investors, this provides more comfort since the country has a long and trusted history with gold.
After all, back during the Great Depression of the 1930s, President Franklin Roosevelt made the ownership of gold illegal. Because of this, Americans found ways around this by moving assets to Switzerland. Granted, the odds of this happening again are slim. But then again, when it comes to investing in gold, a big focus is on the security of the commodity.
Something else: Zurich is the second-largest market for trading in physical gold behind London. It certainly helps that the country has major financial institutions like Credit Suisse Group AG (ADR)(NYSE:CS), Swiss Bank Corporation and UBS Group AG (USA) (NYSE:UBS).
Best ETFs to Buy Gold: Merk Gold Trust (OUNZ)
Merk Gold Trust (NYSEARCA:OUNZ) is an ETF that holds London bars. But there is an interesting twist: you can redeem shares for the actual gold on deposit!
In fact, you can take delivery not only just in London Bars but also Australian bars, Canadian Maples, American Gold Eagles and American Buffalos. Although, you will not be able to request a certain mint year.
Of course, a redemption will involve various fees, such as for shipment and processing. There will also be an extra cost if you want an armored car delivery (but this is not allowed for a residence).
If you wind up not taking this route — which will probably the case for most investors — then there’s still an expense ratio of 0.4%.
Best ETFs to Buy Gold: Market Vectors Gold Miners ETF (GDX)
Besides ETFs that are backed by vaults of gold, you can also get exposure by investing in the miners themselves. This approach can actually provide for higher returns. The reason is that — when gold price go up — the profits are generally higher because the costs tend to be fixed.
So one option to consider is the Market Vectors Gold Miners ETF (NYSEARCA:GDX), which is based on the performance of the NYSE Arca Gold Miners Index. Some of the top holdings include Barrick Gold Corp (USA) (NYSE:ABX), Newmont Mining Corp (NYSE:NEM), Goldcorp Inc. (USA) (NYSE:GG) and Kinross Gold Corporation (USA) (NYSE:KGC).
GDX has a hefty amount of assets, at about $9.4 billion, and the expense ratio is at 0.51%. As for the return this year, it’s at 8.46%. Although, last year it was a sizzling 52.92%.
Tom Taulli runs the InvestorPlace blog IPO Playbook and is the author of various books, including All About Commodities, All About Short Selling and High-Profit IPO Strategies. Follow him on Twitter at @ttaulli. As of this writing, he did not hold a position in any of the aforementioned securities.
