Gold ETF: how to invest in gold with an ETF?
Gold is a popular investment, especially in uncertain times. However, it can be impractical to fill your home with gold bars. Fortunately, there is a smart solution that allows you to still benefit from the price movement of gold: a gold ETF! In this article, you will learn everything you need to know about investing in gold ETFs.
What is a gold ETF?
A gold ETF is an investment instrument that attempts to track the price of gold as closely as possible. By investing in a gold ETF, you can also invest in the gold price. A gold ETF does not always physically hold the commodity: sometimes derivatives are used. In this article, you can read more details about gold ETFs.
How can you invest in a gold ETF?
ETFs are traded on the stock exchange: the price of a gold ETF can therefore fluctuate regularly. You need an account with a broker to invest in gold ETFs.
You need an account with a reliable broker to invest in gold ETF’s:
| Brokers | Benefits | Register |
|---|---|---|
 | Buy gold ETF's without commissions. Your capital is at risk. Other fees may apply. | |
 | Speculate with CFD's on increasing & decreasing prices of gold ETF's! 82% of retail CFD accounts lose money. | |
 | Benefit from low fees, an innovative platform & high security! | |
 | Speculate on price increases and decreases of gold ETF's with a free demo! |
After you have created an account with a broker, buying a gold ETF works the same as buying a share. You can use the search bar to find the gold ETF you want to buy. Then, press the buy button to open the order screen.
Within the order screen, you can then determine whether you would like to place a limit order or market order. With a limit order, you open the investment at a certain price, and with a market order, you open the order at the prevailing price. You can sell gold ETFs at any time after purchasing them.
What to Consider When Selecting a Gold ETF?
Despite all gold ETFs attempting to track the price of gold, there are differences between the various funds. In this part of the article, we discuss what to consider when selecting a gold ETF.
The Structure
Physical gold ETFs actually hold the gold in a large vault. A disadvantage of physical gold ETFs is that costs are often higher. After all, payment must be made for storing and insuring large amounts of gold. Additionally, constantly buying and selling physical gold costs money.
Synthetic gold ETFs, on the other hand, use derivatives to mimic the price of gold. Synthetic gold ETFs typically charge lower costs because the gold does not actually have to be purchased. However, transparency with synthetic gold ETFs is lower: derivatives are more complex, which makes it more challenging to understand how the gold price is established within the fund. You can read more about the differences between these structures in this article.
Size of the fund
The size of the fund can also influence performance. Large gold ETFs typically perform better because they have lower transaction costs. When a fund purchases larger volumes of gold at once, purchase costs are lower. Additionally, fixed costs (such as administrative costs) can be spread over more customers. Therefore, a large fund is often preferred.
The Currency of the Fund
Another factor that can affect the performance of a gold ETF is the currency of the fund. Gold is traded in dollars on the market. Therefore, if the gold ETF is listed in a different currency, the exchange rate can have a significant impact on the outcome. For example, if the gold ETF is expressed in euros, your result can be significantly influenced by euro exchange rate developments.
Leverage
Some gold ETFs apply leverage. You can read leveraged ETFs work in this article. Gold ETFs with leverage are often more suitable for short-term speculation. With a leverage ETF, both your profit and loss can increase more quickly. It is important to be careful with leveraged gold ETFs due to the higher risk.
Why Invest in Gold?
Not everyone is a big fan of gold: it essentially lies around without producing anything. However, under the influence of scarcity, the value of gold can continue to rise: the commodity is highly sought after, and global supply is decreasing.
Additionally, gold is an excellent protection against inflation, making it possible to use gold for wealth preservation. If you want to learn more about investing in gold, read our special on the subject:
What Are the Best Gold ETFs?
Ultimately, the best gold ETF is obviously the one that suits you best. In this part of the article, we discuss some gold ETFs that may be of interest.
Invesco Source Gold ETC
This is one of the best funds for investing in physical gold. The annual fund costs are only 0.15%, and you can find this fund under IE00B579F325. The gold bars are held in the vault of the well-known J.P. Morgen Chase bank in London. This makes it a very cost-effective fund; physical gold ETFs are normally much more expensive.
Xetra Gold
For this gold ETF, you pay higher transaction costs: 0.3% per year. An additional, unique feature of this fund is that you can have the gold delivered to your home at some point. Until then, the gold is safely stored in a vault in Frankfurt guarded by the German Central Bank. You can find the Xetra Gold fund under ISIN DE000A0S9GB0.
WisdomTree Physical Swiss Gold ETC
This fund is very similar to the Invesco Source Gold ETC, which you can find under ISIN JE00B588CD74. The fund’s annual costs are only 0.15%, and the fund is denominated in dollars. The gold is safely stored in vaults in Zurich…
VanEck Vectors Gold Miners UCITS ETF A USD
With this ETF, you can indirectly invest in the gold market. With the VanEck Vectors Gold Miner Gold ETF, you invest in a selection of gold mines. The fund is denominated in dollars, and the costs are 0.53% per year. You can find this gold ETF under ISIN IE00BQQP9F84. They limit the weight of companies that also engage in silver mining to a maximum of 20%.
With this ETF, you can also invest in companies engaged in gold mining. The cost percentage of this ETF is 0.55%, and you can find the fund under ISIN IE00B6R52036.
Conclusion: What is the best gold ETF?
There are hundreds of gold ETFs, and not every broker offers the same gold ETFs. It is therefore worth comparing the different ETFs with each other. This allows you to determine which gold ETF suits you best. When investing in a physical gold ETF, the cheapest fund is often the best option.
Unfortunately, there is no physical fund with which you can invest in gold included in the DEGIRO core selection. However, you can invest in four equity ETFs that follow various mining companies.
A gold ETF continually tries to track the gold price as accurately as possible. However, there is often a tracking error, which can make the performance of a fund slightly better or worse.
When investing in gold ETFs, you mainly face market risk: when the price of gold performs poorly, your investments will also perform poorly. In addition, you also face currency risk: the gold price is typically quoted in dollars. Therefore, only invest money in gold ETFs that you can afford to lose.
