How to Invest in Gold ETFs: Best Gold ETFs, Ways to Invest, and Top Stock Brokerages

In this article, we’ll explore how to invest in Gold ETFs, the best Gold ETFs, ways to invest in them, and the top stock brokerages to buy them.

Many investors also see gold as a safe-haven asset that can protect their portfolio against inflation, currency devaluation, and economic uncertainty but buying physical gold can be expensive, cumbersome, and risky, however, especially for retail investors. 

That’s where Gold ETFs come in – they offer a convenient, cost-effective, and liquid way to invest in gold without actually owning physical gold.

How to Invest in Gold ETFs

Investing in gold ETFs is relatively easy, and the process is similar to buying and selling stocks on the stock exchange. Here are the steps you need to follow to invest in gold ETFs:

1) Choose a Brokerage Account

You’ll need a brokerage account to buy and sell gold ETFs. Some popular brokerage platforms include Robinhood, TD Ameritrade, E*TRADE, Interactive Brokers or Etoro.

2) Research and choose a Gold ETF to invest in

After creating a brokerage account, the next step is to research Gold ETFs. There are several Gold ETFs available in the market, and each has its own expense ratio, liquidity, and investment strategy.

Several gold ETFs are available in the market, and you’ll need to select one that suits your investment goals. Some of the most popular gold ETFs include:

• SPDR Gold Shares (GLD), 
• iShares Gold Trust (IAU), 
• Aberdeen Standard Physical Gold Shares ETF (SGOL).

3) Place Your Order

Once you’ve chosen a gold ETF, you can place an order through your brokerage account. You can place a market order to buy or sell a gold ETF at the current market price or a limit order to set a specific price at which you want to buy or sell.

Best Stock Brokerages to Buy Gold ETFs

Investors can buy Gold ETFs through various online stock brokerages. Still, some of the best stock brokerages to buy Gold ETFs include:

1. Robinhood: Robinhood is a popular online brokerage that offers commission-free trading for Gold ETFs, making it a cost-effective option for investors.
2. Interactive Brokers: Interactive Brokers is a well-established brokerage that offers a wide range of investment options, including Gold ETFs, with low fees and advanced trading tools.
3. ETRADE: ETRADE is a user-friendly brokerage that offers a range of investment options, including Gold ETFs, with no account minimums and competitive pricing.
4. eToro: eToro is a social trading platform that allows investors to buy and sell Gold ETFs, as well as other assets, with low fees and a user-friendly interface.
5. TD Ameritrade: TD Ameritrade is a well-known brokerage that offers a range of investment options, including Gold ETFs, with no account minimums and advanced trading tools.

Comparing the best brokerages to invest in gold ETFs

As shown in the table, Robinhood, ETRADE, and TD Ameritrade have the lowest fees for ETFs, charging $0 per trade. Interactive Brokers charges $0.005 per share, while ETORO does not charge any fees for trading ETFs, but instead has a spread-only model. It’s important to note that while fees are an important consideration, investors should also evaluate other factors such as platform features, customer support, and investment options before choosing a brokerage.

What are Gold ETFs?

Gold ETFs (Exchange-Traded Funds) are investment vehicles that track the price of gold and allow investors to buy or sell shares of the fund on a stock exchange, just like any other stock.

Gold ETFs are typically backed by physical gold bullion held by custodians or banks, and the price of the ETFs reflects the current market price of gold. Gold ETFs offer several advantages over buying physical gold, such as liquidity, ease of trading, and low fees.

Benefits of Investing in Gold ETFs:

Investing in Gold ETFs can offer several benefits to investors, including:

1. Portfolio diversification: Gold ETFs can help investors diversify their portfolio by adding an asset class that has low correlation with other investments, such as stocks and bonds.
2. Inflation hedging: Gold has historically been considered an effective hedge against inflation, as its price tends to rise during periods of high inflation.
3. Protection against economic uncertainty: Gold has a reputation as a safe-haven asset that can provide a hedge against economic and geopolitical risks, such as market crashes, political instability, and currency devaluation.

Risks of Investing in Gold ETFs:

While Gold ETFs offer several benefits, they also come with some risks that investors should be aware of, such as:

1. Market volatility: The price of gold can be volatile, and Gold ETFs are subject to price fluctuations that can impact the value of the investment.
2. Geopolitical risks: Gold ETFs can be affected by geopolitical risks, such as changes in government policies, trade tensions, or conflicts that can impact the supply and demand for gold.
3. Potential lack of physical ownership of gold: Some Gold ETFs may not offer physical delivery of gold to investors, which means investors may not actually own physical gold.

Different ways to Invest in Gold ETFs:

There are several ways investors can invest in Gold ETFs, including:

1. Through a brokerage account: Investors can buy or sell Gold ETFs through a brokerage account, just like any other stock. This is the most common and convenient way to invest in Gold ETFs.
2. Exchange-Traded Funds (ETFs): Gold ETFs are exchange-traded funds that trade on a stock exchange, and investors can buy or sell shares of the ETFs on the exchange.
3. Mutual Funds: Some mutual funds also invest in Gold ETFs, providing investors with exposure to the gold market through a managed fund.

Best Gold ETFs:

There are several Gold ETFs available for investors, but some of the best Gold ETFs include:

1. SPDR Gold Shares (GLD): GLD is the largest and most popular Gold ETF, with over $70 billion in assets under management (AUM). GLD tracks the price of gold and is backed by physical gold bullion held by custodians.

2. iShares Gold Trust (IAU): IAU is another popular Gold ETF, with over $30 billion in AUM. IAU tracks the price of gold and is also backed by physical gold bullion held by custodians.
3. Aberdeen Standard Physical Gold Shares ETF (SGOL): SGOL is a relatively new Gold ETF, launched in 2009, but has quickly gained popularity among investors. SGOL tracks the price of gold and is backed by physical gold bullion held in a vault in Switzerland.
4. Invesco DB Gold Fund (DGL): DGL is a Gold ETF that invests in gold futures contracts rather than physical gold. This can provide investors with exposure to the gold market without the need for physical storage.
5. VanEck Vectors Gold Miners ETF (GDX): GDX is a Gold ETF that invests in gold mining companies rather than physical gold. This can provide investors with exposure to the gold market through the performance of mining stocks.

Is Buying Gold ETF a Good Investment?

Whether buying Gold ETFs is a good investment depends on various factors, such as the investor’s financial goals, risk tolerance, and investment horizon. Gold ETFs can provide a diversification benefit to a portfolio, as well as a hedge against inflation and economic uncertainty. However, Gold ETFs also come with risks, such as market volatility and geopolitical risks. Investors should consult a financial advisor and do their own research before investing in Gold ETFs.

Which Gold ETF is the Best?

There is no one-size-fits-all answer to which Gold ETF is the best, as each ETF has its own characteristics, such as fees, liquidity, and tracking error. 

Investors should consider their investment objectives, risk tolerance, and other factors when choosing a Gold ETF. Some of the popular Gold ETFs, as mentioned earlier, include:

• SPDR Gold Shares (GLD)
• iShares Gold Trust (IAU)
• Aberdeen Standard Physical Gold Shares ETF (SGOL)
• Invesco DB Gold Fund (DGL)
• VanEck Vectors Gold Miners ETF (GDX)

Comparing the best Gold ETFs

As shown in the table, the ETFs differ in terms of expense ratio, inception date, total assets, holdings, and benchmark. SPDR Gold Shares (GLD) has the highest total assets among the group, with over $71 billion, but it also has the highest expense ratio at 0.40%. 

In contrast, Aberdeen Standard Physical Gold Shares ETF (SGOL) has the lowest expense ratio at 0.17%.

The ETFs also differ in terms of their holdings. SPDR Gold Shares (GLD), iShares Gold Trust (IAU), and Aberdeen Standard Physical Gold Shares ETF (SGOL) all hold physical gold bullion, while Invesco DB Gold Fund (DGL) uses gold futures. 

VanEck Vectors Gold Miners ETF (GDX) invests in the stocks of companies involved in the gold mining industry, rather than directly in gold.

Investors should consider their investment goals and risk tolerance when choosing a gold ETF. 

Best Gold ETF for Physical Gold

Those looking for exposure to physical gold may prefer SPDR Gold Shares (GLD), iShares Gold Trust (IAU), or Aberdeen Standard Physical Gold Shares ETF (SGOL).

Best Gold ETF for Gold mining

VanEck Vectors Gold Miners ETF (GDX) invests in the stocks of companies involved in the gold mining industry, rather than directly in gold so investors who seek exposure to the gold mining industry may prefer VanEck Vectors Gold Miners ETF (GDX). 

Best Gold ETF for advanced Investors

Invesco DB Gold Fund (DGL) may appeal to investors seeking a more tactical approach to investing in gold because Invesco DB Gold Fund (DGL) uses gold futures rather than conventional financial instruments like stocks or gold bullion.

What is the Minimum Investment for Gold ETF?

The minimum investment for Gold ETFs varies by brokerage and ETF. Some Gold ETFs may have no minimum investment, while others may require a minimum investment of several hundred or thousand dollars. Investors should check with their brokerage or the ETF provider for the minimum investment requirements.

How Much Does Gold ETFs Cost?

The cost of Gold ETFs includes the expense ratio, which is the annual fee charged by the ETF provider for managing the fund, as well as any trading fees or commissions charged by the brokerage. 

The expense ratio for Gold ETFs ranges from 0.17% to 0.50%, depending on the ETF, while trading fees or commissions vary in each brokerage. Investors should compare the fees and costs of different Gold ETFs and brokerages before investing in Gold ETFs.

Financial Risks of Investing in Gold ETFs:

While Gold ETFs can provide investors with exposure to the gold market and potentially diversify their portfolio, they also come with risks. Some of the risks of investing in Gold ETFs include:

• Market Volatility: The price of Gold ETFs can be volatile and can fluctuate based on various factors, such as economic conditions, geopolitical risks, and supply and demand factors.
• Tracking Error: Gold ETFs aim to track the price of gold, but there can be tracking errors that result in the ETF’s performance not matching the actual price of gold.
• Liquidity Risk: Some Gold ETFs may have lower trading volumes and may not be as liquid as other ETFs or physical gold, which can make it difficult to buy or sell the ETF at a fair price.
• Counterparty Risk: Some Gold ETFs may hold futures contracts or derivatives, which can expose investors to counterparty risk if the counterparty defaults or fails to meet its obligations.

Financial Benefits of Investing in Gold ETFs:

Despite the risks, Gold ETFs can provide investors with various benefits, including:

• Diversification: Gold ETFs can provide diversification to a portfolio by providing exposure to an asset class that has a low correlation with traditional assets, such as stocks and bonds.
• Inflation Hedge: Gold is often seen as an inflation hedge, as it can maintain its value during periods of inflation and currency devaluation.
• Easy Access: Gold ETFs are easy to buy and sell through online brokerages, and investors do not need to worry about the storage and security of physical gold.

Alternatives to Gold ETFs:

Investors who want exposure to the gold market but do not want to invest in Gold ETFs can consider other alternatives, such as:

• Physical Gold: Investors can buy physical gold in the form of coins or bars and store them in a safe or bank vault.
• Gold Mining Stocks: Investors can invest in gold mining companies through Gold ETFs or individual stocks.
• Gold Futures: Investors can invest in gold futures contracts through a futures brokerage account.

Bottom Line

Gold ETFs can be a valuable addition to an investor’s portfolio, providing diversification and potential inflation protection. However, they also come with risks, such as market volatility and tracking errors. Investors should do their own research and consult a financial advisor before investing in Gold ETFs. Additionally, investors can consider alternatives to Gold ETFs, such as physical gold, gold mining stocks, and gold futures.