The SPDR Gold Shares (NYSEARCA:GLD), the world’s largest exchange-traded fund (ETF) backed by physical holdings of gold, is lower by nearly 5% year-to-date, underscoring weakness in a wide array of gold ETFs.
Recently, bullion’s safe-haven status has been renewed, which could bode well for gold ETFs in 2019. GLD is up about 4% in the fourth quarter while gold has managed to stay about the technically important $1,200 per ounce level.
“There is a growing sense that gold could find some staying power within this correction, so long as the markets continue to discount prospects of the Fed tightening beyond 2019 which would otherwise support the appeal for the greenback,” reports FXStreet.
Gold recently reached its highest levels in five months, indicating investors’ appetite for the yellow is rebounding ahead of the new year. Over the near-term, bullion and gold ETFs could add more upside.
“Gold bulls’ next upside near-term price breakout objective is to produce a close in February futures above solid technical resistance at the July high of $1,284.10,” notes Kitco News.
Here are some of the best gold ETFs to consider in 2019.
VanEck Vectors Gold Miners ETF (GDX)
Expense ratio: 0.53% per year, or $53 on a $10,000 investment.
The VanEck Vectors Gold Miners ETF (NYSEARCA:GDX) is the largest gold miners ETF. This gold ETF follows the NYSE Arca Gold Miners Index (GDMNTR), a benchmark comprised of large- and mid-cap gold miners.
Miners funds can be valid avenues for accessing the precious metals trade, but there are some risks to considers. Notably, mining equities can overshoot gold ETFs’ moves to the downside when bullion falters. This has been a common occurrence over GDX’s more than 12 years of trading history. Additionally, mining equities are far more volatile than gold ETFs and the broader market. GDX has a three-year standard deviation of 36.70%, according to issuer data.
There is potential opportunity in 2019 with this gold ETF, particularly if economic activity slows, prompting a flight to safer assets.
“Conditions in housing and autos indicate economic weakness has begun to set in. We believe 2019 is shaping up to be an interesting year for gold as we continue to see signs that the U.S. economic expansion is on its final legs,” according to VanEck.
Sprott Junior Gold Miners ETF (SGDJ)
Expense ratio: 0.57% per year
The Sprott Junior Gold Miners ETF (NYSEARCA:SGDJ) is a smart beta alternative for accessing junior miners. As is the case with the aforementioned GDX, this gold ETF can exaggerate gold’s downward moves as highlighted by its year-to-date decline of more than 32%.
SGDJ, which turns four years old next March, tracks the Sprott Zacks Junior Gold Miners Index. That benchmark “uses a transparent, rules-based methodology that is designed to identify between 30 to 40 junior gold stocks with market capitalization between $250 million and $2 billion. Excluding companies with market capitalization below $250 million aims to exclude very early stage exploration companies whose historical success rate is low,” according to the issuer.
This gold ETF’s holdings are weighted based on revenue growth and price momentum. The weighted average market value of SGDJ’s 37 holdings is just over $1 billion, putting this gold ETF firmly in small-cap territory.
SPDR Long Dollar Gold Trust (GLDW)
Expense ratio: 0.50% per year
One of the key drivers of gold prices and price action in gold ETFs is the dollar. Historically, a strong dollar saps commodities’ prices, including gold. The SPDR Long Dollar Gold Trust (NYSEARCA:GLDW) is a gold ETF that can help investors stick with bullion even as the dollar rises.
GLDW tracks the Solactive GLD Long USD Gold Index, a benchmark designed “to represent the daily performance of a long position in physical gold and a short position in a basket (“the FX Basket”) comprised of each of the Reference Currencies (i.e., a long USD exposure versus the FX Basket),” according to State Street.
This gold ETF is proving its worth in 2018. At a time when the dollar is one of this year’s best-performing major currencies, GLDW is up about 1.50% year-to-date.
Aberdeen Swiss Physical Gold Shares (SGOL)
Expense ratio: 0.17%
Issuers of gold ETFs are willing to lower fees to attract investors. The latest fee cut in the world of gold ETFs comes courtesy of the Aberdeen Swiss Physical Gold Shares (NYSEARCA:SGOL).
SGOL recently reduced its annual expense ratio to 0.17% from 0.39%, making this, at least for now, the least expensive gold ETF on the market.
SGOL is backed by physical holdings of gold so investors should expect performances that are inline with those of other traditional gold ETFs, such as the aforementioned GLD.
Global X Gold Explorers ETF (GOEX)
Expense ratio: 0.66% per year
Like other gold miners ETFs, the Global X Gold Explorers ETF (NYSEARCA:GOEX) is struggling through 2018, but this gold ETF is could be ready for better things next year. A fourth-quarter gain of almost 4% proves as much.
GOEX tracks the Solactive Global Gold Explorers & Developers Total Return Index and often goes overlooked in the gold ETFs conversation. Embracing GOEX means taking on some added volatility as this gold ETF has annualized volatility of just over 39%, according to issuer data.
GOEX holds 47 stocks and is a global gold ETF with exposure to eight countries, but Canada and Australia combine for over 81% of the fund’s geographic exposure.
Todd Shriber does now own any of the aforementioned securities.
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