It’s better to have gold and not need it than to need gold and not have it.
After all, it’s the one asset that is uncorrelated with stocks and bonds — and unaffected by inflation.
These properties make gold a must-have in the event of an economic downturn or a sudden drop in the purchasing power of the dollar.
But not all gold investments are created equal. There are a few different ways to own the yellow metal and each has its quirks. Bullion requires storage, and individual mining stocks can be extremely volatile.
Gold exchange-traded funds (ETFs) solve many of these problems. They eliminate the need to physically store and maintain your gold holdings and they mitigate gold mining stock volatility through diversification.
But even these aren’t always perfect. Too many investors are holding gold funds that are unnecessarily expensive, annoyingly illiquid, or poorly allocated.
As a new Energy and Capital subscriber, you deserve better. That’s why our research team put together this free report outlining the three best gold ETFs to buy and hold forever.
Below, we’ll look at one bullion ETF, one mining ETF, and one junior mining ETF that are set to outperform their peers in the coming years.
GraniteShares Gold Trust (NYSE: BAR): The Best Gold Bullion ETF
Bullion ETFs provide direct exposure to the yellow metal without the hassles of physical bullion storage. That’s why they’re among the most widely-held gold investments in the world.
There are three major bullion ETFs on the market with volumes of more than 100,000 shares per day. The largest of the bunch is SPDR Gold Shares (NYSE: GLD) followed by the iShares Gold Trust (NYSE: IAU) and the GraniteShares Gold Trust (NYSE: BAR).
The holdings of these three ETFs are identical. They’re all 100% invested in physical gold bullion, but they’re differentiated by their expense ratios — and the GraniteShares Gold Trust (NYSE: BAR) is by far the cheapest of the three.
The GraniteShares ETF’s 0.17% expense ratio makes it 32% less expensive than the iShares trust and 57.5% less expensive than SPDR Gold Shares.
Generally speaking, cost shouldn’t be the only variable you consider when choosing between ETFs. As an example, our research team chose the other two gold ETFs in this report partially based on their holdings and dividend yields.
However, gold bullion ETFs are a special case because of the nature of their holdings. Gold bars are inanimate objects. They don’t compete against each other the way companies do in an industry — and they don’t pay dividends.
These properties make most aspects of fund management irrelevant when choosing a bullion fund, with the exception of expense ratios. And the GraniteShares Gold Trust is the clear winner among bullion ETFs when it comes to expense.
iShares MSCI Global Gold Miners ETF (NYSE: RING): The Best Gold Mining ETF
Of course, bullion isn’t the only type of gold investment on the market. Gold mining stocks also provide a hedge against inflation and underperforming stock and bond markets.
Their prices are often more volatile than the price of the metal itself — and their returns can be much higher. For instance, Kirkland Lake Gold (NYSE: KL), a mid-size Canadian-Australian mining firm, delivered investors a return of nearly 3,000% over the last five years as it ramped up production at its Ontario and Victoria mines.
But investors have to be careful with gold mining stocks. For every Kirkland Lake, there’s several miners that lose their investors substantial amounts of money — or fail outright.
With this in mind, our research team knew that it couldn’t choose a gold mining ETF based on expense ratio alone; it had to consider holdings and dividend yield as well.
There are two high-volume gold mining ETFs to choose from: the VanEck Vectors Gold Miners ETF (NYSE: GDX) and the smaller iShares MSCI Global Gold Miners ETF (NYSE: RING).
The iShares MSCI Global Gold Miners ETF (NYSE: RING) is the winner for a number of reasons. Its 0.39% expense ratio is 22% lower than the VanEck ETF, and its 0.82% dividend yield is more than twice as high.
What’s more, the iShares ETF is more carefully invested than the VanEck ETF. It holds just 37 miners while the VanEck fund holds almost 60.
Ordinarily, more diversification is better, but in the high-risk, high-reward world of gold mining stocks, careful selection is a valuable skill. And the managers of the iShares MSCI Global Gold Miners ETF seem to have it.
VanEck Vectors Junior Gold Miners ETF (NYSE: GDXJ): The Best Junior Mining ETF
Gold miners are more volatile than gold — and junior gold miners are even more volatile than gold miners.
These early-stage mining and exploration companies are generally busy searching for new deposits of gold. They often trade as penny stocks until they strike it rich (or shut their doors).
ETF investors have three choices of junior mining funds: the VanEck Vectors Junior Gold Miners ETF (NYSE: GDXJ), the Sprott Junior Gold Miners ETF (NYSE: SDGJ), and the Global X Gold Explorers ETF (NYSE: GOEX).
This is one case where the largest of the bunch, the VanEck Vectors Junior Gold Miners ETF (NYSE: GDXJ) takes the cake.
It doesn’t quite have the lowest expense ratio of the bunch; its 0.54% fee is a few points higher than the Sprott ETF. But it’s 17% less expensive than the Global X ETF.
Perhaps more excitingly, the VanEck ETF is the only junior mining ETF to pay a significant dividend. It yields 0.35% at the time of writing. That may not sound like much, but it compares very favorably to the Global X ETF’s 0.06% yield and the Sprott ETF’s 0% yield.
VanEck’s management also has a proven track record of picking winners from this volatile sector. That’s why its junior mining ETF has smashed the competition over the last year...
These three categories of gold investments — bullion, miners, and junior miners — are all easier to hold for the long term in ETF form. And as a newly-minted Energy and Capital subscriber, you deserve to own the best ETFs available for each of these categories.
After all, poorly-chosen long-term holdings can significantly reduce your returns. That’s why it’s important to look for funds with low expense ratios, high yields, and time-tested management.
The GraniteShares Gold Trust (NYSE: BAR), the iShares MSCI Global Gold Miners ETF (NYSE: RING), and the VanEck Vectors Junior Gold Miners ETF (NYSE: GDXJ) are clear winners by these metrics.
Commodity investors who are looking for shorter-term gains should check out Bull and Bust Report. Editors Christian DeHaemer and Luke Burgess have just released a fascinating report about a small group of stocks that are set to soar as 5G is rolled out nationwide. Click here to learn more.