A gold ETF (Exchange Traded Fund) may come in handy if you are looking to diversify your portfolio and hedge it against inflation and currency risks.
Unlike stocks, an alternative investment asset like Gold is often uncorrelated with the stock markets during periods of extreme uncertainty.
What this means is that when investors are fleeing the financial markets, they may pile into gold, pushing its price up, even though the overall market is in negative territory.
That said, gold is also a volatile asset, and you should be careful about over-exposing your portfolio to any security beyond what you are comfortable with from a risk-tolerance perspective.
In addition to purchasing a gold ETF using a brokerage account, other ways to gain exposure includes purchasing physical gold bullion, gold stocks, and gold derivatives.
In this article, I cover some of the best gold ETFs you can buy in Canada in 2022.
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What are Gold ETFs?
A gold ETF is an exchange-traded fund that either invests in gold (i.e. the commodity/metal) and tracks its price or that invests in gold mining companies. Some gold ETFs also invest in gold futures and other derivatives tied to the value of gold.
Gold ETFs trade on the stock exchange similar to stocks and offer investors access to the precious metal without needing to hold the physical gold bullion (coins, bars, or jewellery).
They are more liquid and are easier to buy and sell without needing to worry about the hassles of storage and security.
Also, a gold ETF that invests in a basket of gold stocks provides some diversification and is potentially less volatile than buying individual gold mining companies.
Best Gold ETFs in Canada
Here are the most popular gold ETFs:
1. iShares Gold Bullion ETF
- Ticker symbol: CGL
- MER: 0.55%
- 5-year average annual return: 5.07%
- Invests in: Gold bullion
- Issuer: BlackRock (iShares)
- Assets under management: $755 million
- Inception date: May 28, 2009
iShares Gold Bullion ETF (CGL) invests directly in physical gold and it aims to replicate the returns of gold bullion, excluding expenses and fees.
If you are interested in the benefits offered by holding gold, this ETF is one of the closest replicas you will find in the Canadian market.
CGL-7 is hedged to Canadian dollars. Its unhedged alternative trades under the ticker: CGL-C.
CGL is eligible for both registered and non-registered accounts and has a “medium to high” risk rating.
2. iShares S&P/TSX Global Gold Index ETF
- Ticker symbol: XGD
- MER: 0.61%
- 5-year average annual return: 9.74%
- Invests in: Gold miners
- Issuer: BlackRock (iShares)
- Assets under management: $1.05 billion
- Inception date: March 23, 2001
iShares S&P/TSX Global Gold Index ETF (XGD) is invested in 10 top gold miners including the likes of Barrick Gold, Newmont, Franco Nevada, and Wheaton Precious Metals Corporation.
With over 50 companies in its portfolio, XGD is diversified geographically with holdings in Canada, the United States, South Africa, and Peru.
This fund has a “high” risk rating and should ideally not make more than a small portion of your portfolio.
XGD is eligible for registered and non-registered investment accounts and distributes dividends on a quarterly basis. It seeks to “provide long-term capital growth by replicating the performance of the S&P/TSX Global Gold Index, net of expenses”.
Related: Best Money Management Apps.
3. BMO Equal Weight Global Gold Index ETF
- Ticker symbol: ZGD
- MER: 0.61%
- 5-year average annual return: 8.55%
- Invests in: Gold miners
- Issuer: BMO GAM
- Assets under management: $187.41 million
- Inception date: November 14, 2012
ZGD tracks the Soloactive Equal Weight Global Gold Index and aims to replicate its performance (net of expenses) by investing in gold mining equities.
It holds 35 gold mining stocks including K92 Mining, Wesdome Gold Mines, Endeavour Mining Corp, Dundee Precious Metals, Franco Nevada, B2Gold, Kinross Gold, and more (all equally weighted- approximately).
Its stock holdings are diversified geographically with the majority in Canada, the U.S., and South Africa, and the remainder in Ivory Coast, Brazil, Tanzania, Australia, Turkey, Burkina Faso, and Kyrgyzstan.
ZGD is eligible for registered and non-registered investment accounts and carries a “high” risk rating.
4. Horizons Gold Yield ETF
- Ticker symbol: HGY
- MER: 1.17%
- 5-year average annual return: 3.84%
- Invests in: Gold bullion and covered calls
- Issuer: Horizons ETF
- Assets under management: $65.675 million
- Inception date: December 17, 2010
HGY provides exposure to gold by investing in gold ETFs (e.g. SPDR Gold MiniShares ETF), covered call option strategies on securities in the gold portfolio, and cash. It is hedged to the Canadian dollar.
This fund uses an active management strategy to manage risk and generate income, and it has a high MER of 1.17%.
HGY pays put dividends on a monthly basis and had a 6.78% 12-month trailing yield as of March 31, 2021.
It is eligible for registered and non-registered accounts and has a “medium” risk rating.
5. Horizons Enhanced Income Gold Producers ETF
- Ticker symbol: HEP
- MER: 0.81%
- 5-year average annual return: 9.74%
- Invests in: Gold miners and covered call options
- Issuer: Horizons ETF
- Assets under management: $136 million
- Inception date: April 11, 2011
HEP invests in gold mining and exploration companies and uses covered call options to minimize risk.
Distributions are paid monthly, and the fund has an estimated 12-month trading yield of 7.39%.
With regards to its holdings, HEP is diversified across mining companies in Canada, the United States, South Africa, and Burkina Faso.
It is eligible for all accounts and carries a “high” risk rating.
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Related: ZBAL – BMO Balanced ETF Review
6. CI First Assets Gold+ Giants Covered Call ETF
- Ticker symbol: CGXF
- MER: 0.65%
- 5-year average annual return: 5.36%
- Invests in: Gold and precious metals companies + covered calls
- Issuer: CI Investments Inc.
- Assets under management: $512 million
- Inception date: June 1, 2011
CGXF is another gold ETF option for investors looking to grow their portfolios and earn some income at the same time.
The fund invests in the stocks of 15 or more of the largest gold and precious metals companies in North America.
It minimizes portfolio risk by using covered call options and holds 30 securities, with the following top-5 holdings:
- Sibanye Stillwater Ltd (7.10%)
- Royal Gold Inc. (6.99%)
- Franco-Nevada Corp (6.91%)
- B2Gold Corp (6.84%)
- Endeavour Mining Corp (6.80%)
This fund is eligible for registered and non-registered accounts and makes quarterly distributions when applicable.
7. Horizons Gold ETF
- Ticker symbol: HUG
- MER: 0.45%
- 5-year average annual return: 3.88%
- Invests in: Gold futures
- Issuer: Horizons ETF
- Assets under management: $38.5 million
- Inception date: June 24, 2009
The Horizons Gold ETF (HUG) aims to replicate the performance of the Soloactive Gold Front Month MD Rolling Futures Index ER, net of fees, distributions, and expenses.
HUG gives investors exposure to physical gold bullion using futures contracts.
It is eligible for registered (RRSP, TFSA, etc.) and non-registered accounts and has a “medium” risk rating.
8. Sprott Physical Gold Trust
- Ticker symbol: PHYS
- MER: 0.45%
- 5-year average annual return: 6.32%
- Invests in: Gold bullion
- Issuer: Sprott
- Assets under management: $4.51 billion
- Inception date: February 24, 2010
PHYS is a closed-end trust that invests directly in gold bars. If you want to hold one of them ‘babies’ in your hands, you can redeem your ETF unit for physical gold bullion (starting at a weight of between 350 and 430 troy ounces).
The custodian for the bullion held by the trust is the Royal Canadian Mint.
While PHYS is not an ETF, it offers similar advantages by offering direct investment in the physical asset and easy buy and sell trading via a self-directed brokerage account.
One other way to invest in gold with an option to redeem the physical commodities is through the Royal Canadian Mint – Canadian Gold Reserves (MINT).
MNT is an exchange-traded receipt (ETR).
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9. BMO Junior Gold Index ETF
- Ticker symbol: ZJG
- MER: 0.61%
- 5-year average annual return: 10.04%
- Invests in: Gold miners
- Issuer: BMO GAM
- Assets under management: $83.22 million
- Inception date: January 19, 2010
ZJG invests in junior gold mining stocks in North America and tries to replicate the performance of the Dow Jones North America Select Junior Gold Index (net of fees).
It has a “high” risk rating and holds 38 stocks with the top-5 holdings including Royal Gold Inc., B2Gold Corp, Yamana Gold Inc., Endeavour Mining Corp, and Ssr Mining Inc.
Note that the past performance of the Gold ETFs listed does not signify that they will continue to do well or poorly (if applicable) in the future.
Related: Best ETFs in Canada
How To Invest in Gold in Canada
You can invest directly or indirectly in gold by purchasing a gold ETF using a discount brokerage account such as Questrade and Wealthsimple Trade.
Questrade:
This brokerage platform supports ETFs, stocks, options, FX, mutual funds, precious metals, and more.
ETF purchases are free and you pay a small fee when you sell them. Get $50 in free credit after depositing at least $1,000 in your Questrade account.
Get more details in the Questrade review.
Wealthsimple Trade:
This trading platform offers free ETF ‘buy’ and ‘sell’ trades. It also supports free stock trading and fractional shares.
To get started, sign up here and get a $50 sign-up bonus after depositing and trading at least $150 worth of securities.
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Great review, very thorough. Thanks Enoch!