Gold has been on a torrid upswing over the past few years, reflecting investors’ fears of inflation and recession. Accompanying that rise has been the increasing popularity of gold exchange traded funds (ETFs). When it comes to knowing which one you should own, though, it’s a matter of what you want.
If it’s liquidity, look at the biggest fund. To date, the most popular gold ETF has been the $52 billion SPDR Gold Shares ETF (NYSEArca: GLD). However, Blackrock is making a move to change that with its own gold ETF, reports Ian Salisbury of The Wall Street Journal. [ETF Assets in June.]
That brings us to price. Last week, Blackrock cut the fees on its $3.3 billion iShares Comex Gold Trust ETF (NYSEArca: IAU) by more than a third, to 0.25%. The lower fees make IAU a very compelling option, says Morgan Stanley ETF analyst Dominic Maister. [Gold ETFs: Ready to Explode?]
If you’re concerned with where the physical gold is held, ETFS Physical Swiss Gold Shares (NYSEArca: SGOL) is another option. The gold in this fund is held in vaults in Zurich, Switzerland.
In addition, GLD is a lot more liquid than IAU. GLD trades $1.9 billion worth of shares to IAU’s $35 million. The higher liquidity lowers bid/ask spreads, which save investors money, especially those who trade frequently.
Of course, in hindsight, it would be unwise to invest in gold if the gold market were to tumble within the next few weeks. During these tough economic times, investors seem to be attracted to gold as a hedge against inflation and shelter from a possible double-dip recession. If the global economy starts to rev up, gold prices could take a beating. Premium members can set alerts so they don’t miss a key trend crossover. [The Virtues of Gold ETFs.]
But if you think the economy is not going anywhere anytime soon, then Mike Pienciak of The Motley Fool thinks that investing in gold mining stocks would be the better, although more aggressive, play. He remarks that noted investor John Hathaway primarily owns shares of gold miners in his market-beating Tocqueville Gold Fund. [Gold ETF Surges to New Milestone.]
The two pure-play gold miner ETFs are Market Vectors Gold Miners ETF (NYSEArca: GDX) and the Market Vectors Junior Gold Miners ETF (NYSEArca: GDXJ).
For more stories on gold, visit our gold category.
Sumin Kim contributed to this article.