Best Five largest Most Profitable and Successful USD Gold ETFs

Compare the Top Five Best Gold ETFs for Rising Interest Rates

If you've ever thought of venturing into investments that outlive stock market tremors and tried to dodge head-on collisions with financial crisis, one word you've probably encountered multiple times is 'gold.' Yet, only some people comprehend the conundrum of gold investments, and fewer still understand Gold Exchange-Traded Funds (ETFs). This article will demystify Gold ETFs and spotlight the best gold ETFs to invest in the US.

Key Highlights

  • Gold holds a reputation as a 'safe-haven' investment; when stock markets tremble, Gold often displays an inverse correlation.

  • Short- to medium-term investments in Gold can yield 10% yearly returns.  

  • GDX focuses on companies specifically in the gold mining space. 

What are Gold ETFs?

Simply put, investors can access the precious metal through gold ETFs without purchasing, holding, or selling the physical metal. Using these ETFs, you may participate in the gold surge without all the hassle. Consider them backdoors.

Gold ETFs track gold prices directly and potentially expose investors to mining companies. In this scenario, the fund issues shares to investors corresponding to their investment amount. As the underlying gold price or the value of the gold-related company stock changes, these shares also fluctuate.

Why invest in Gold ETFs? 

Gold holds a reputation as a 'safe-haven' investment; when stock markets tremble, Gold often displays an inverse correlation. In essence, it acts as a financial buoy that keeps your investment ship safe amidst the market storms. Despite the graph of gold prices showing fluctuations, it has been acclaimed for its long-term value preservation.

What Is the Best Gold ETF to Buy?

Let's examine the best gold ETFs in the US to consider five reliable and top-rated choices you might include in your investment portfolio.

The ETF data regarding performance shown below is current as of October 12, 2023.

SPDR Gold Shares (GLD)

SPDR Gold Shares, commonly known as GLD, are undeniably under the spotlight when it comes to gold ETFs. The fund's high liquidity and massive assets under management, coupled with its approach to investing in physical Gold, make it a reliable choice for those wanting direct exposure to Gold.

  • 2023 YTD performance: 2.1%

  • Five-year annual return: 8.5%

  • Assets under management: $52.0 billion

  • Expense ratio: 0.40%

GLD adopts a direct approach to gold investment, investing directly in physical gold and tracking gold spot prices consistently.

iShares Gold Trust (IAU)

Next on the list of the best gold ETFs to invest in is iShares Gold Trust's IAU. This ETF also mirrors the spot price of Gold through ownership of gold bars stored in vaults worldwide, but its lower expense ratio gives it an edge over GLD.

  • 2023 YTD performance: 2.3%

  • Five-year annual return: 8.7%

  •  Assets under management: $24.5 billion

  • Expense ratio: 0.25%

IAU positions itself as a cost-effective choice for gold investments, featuring a lower expense ratio than many of its competitors.

VanEck Gold Miners ETF (GDX)

Shifting a bit away from direct Gold and into the gold mining sector, GDX focuses on companies specifically in the gold mining space. Some companies also invest in other precious metals, diversifying the fund's holdings slightly.

  • 2023 YTD performance: -3.2%

  • Five-year annual return: 8.1%

  • Assets under management: $11.0 billion

  • Expense ratio: 0.51%

VanEck Junior Gold Miners ETF (GDXJ)

GDXJ, another offering from VanEck, takes a unique angle by focusing on small-cap mining companies. About half of these companies are based in Canada, providing some geographic diversity.

  • 2023 YTD performance: -9.6%

  • Five-year annual return: 2.9%

  • Assets under management: $3.6 billion

  • Expense ratio: 0.52%

Seizing the opportunity in smaller gold and silver mining firms, GDXJ introduces a global perspective to your gold portfolio.

GraniteShares Gold Trust (BAR)

The GraniteShares Gold Trust, or BAR, brings another direct investment strategy, holding its Gold in a London vault under the surveillance of ICBC Standard Bank. Its price closely tracks the spot price of the yellow metal.

  • 2023 YTD performance: 2.3%

  • Five-year annual return: 8.7%

  • Assets under management: $885.1 million

  • Expense ratio: 0.175%

With its rock-bottom expense ratio, BAR transforms into a compelling choice for cost-conscious investors aiming for direct gold exposure.

How to Buy Gold ETFs?

Before buying into gold ETFs, you must clarify your financial objectives, thoroughly research various funds, cleverly distribute your assets, and understand what you're investing in.

Determining Your Financial Goals

Setting investment goals is crucial to any strategy. It depends on your situation. Are you saving for a property down payment? You may be growing a nest egg for retirement or saving for your child's college fund.

Researching Gold Funds

Many ETFs are accessible, yet they are not all created equal. It is advisable to look at a fund's past performance, expense ratio, assets under management, and top holdings.

Outlining Your Asset Mix

It's crucial to determine what other assets you have before deciding to invest in gold ETFs. Maintaining a balanced portfolio to ensure you're well-diversified is a great idea.

Knowing What You Own

It's essential to regularly review your investments, ensuring you know exactly what you own. A periodic review helps identify if any adjustments are needed and allows you to make those changes proactively.

Are Gold ETFs a Good Investment?

If someone asks whether gold ETFs are a good investment, it is the right time to buy Gold. Gold prices are rising, so investing now is beneficial. Gold investing includes risks and rewards like any other investment.

  • They're more lucrative than gold-based investments if you plan to invest large sums or trade regularly.

  • No physical storage or insurance problems.

  • "All that glitters is not gold."

  • Be wary of brokerage or commission charges. Shop around and find a fund manager whose charges are low.

  • Don't choose based on just low fees. Consider the fund's performance over the years.

  • Watch gold price trends before transacting. 

  • As a general rule, you should buy low and sell high.

  • Short- to medium-term investments in Gold can yield 10% yearly returns.  

  • Keep your gold investments lightweight and short-term.

  • Ideally, 5-10 percent of your investment portfolio allotted to gold ETFs can keep your portfolio robust and your returns stable.

Are Gold ETFs Tax-Free?

If gold coins or bars are held for 36 months or more, they qualify as long-term capital assets for tax reasons. When purchased until March 31, 2023, gold ETFs and units of Gold Savings Funds are taxed and treated as actual Gold. They are long-term capital assets after 36 months.

After 36 months, owner earnings are sold for a flat 20% tax as long-term capital gains after indexation. Gains realized within 36 months are recognized as short-term capital gains and are subject to taxation at your individual slab rates.

If you sell or redeem Gold ETFs or gold savings funds you bought after March 31, 2013, you will be taxed on the profits as short capital gains, no matter how long you held them. These will be taxed like bank fixed deposits, but the earnings are only taxed when you sell or redeem the investments. There are two ways to tax the income on a fixed deposit, but not when you buy the assets. You can tax it when it is payable or when the set bank interest is paid. Calculate interest using accrual or receipt every year.

Final Words

Now that we have listed the best Gold ETF in the US, the choice resides in your hands. Each of these five best gold ETFs in the US has its strengths:
Lower fees
Direct exposure to gold prices
A measure of diversity through mining investments
Your selection should align with your investment goals, risk tolerance, and overall strategy. Intelligent and informed investing can indeed make your gold ETF investment shine.

Gold was not made to rust. Consider investing smartly in gold ETFs and let your investments sparkle.

Remember, the ultimate goal of your investment strategy is aligned with your financial objectives. Wisely chosen and managed, gold ETFs can add a lustrous edge to your investment strategy.

Suggested Articles:

  1. Countries with the Highest Gold Reserves

  2. ETFs vs Mutual Funds Explained

  3. How to Diversify Investment Portfolio

  4. No-Penalty CDs with High Returns

26 Nov, 2023


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