We show you the REIT ETF that you can buy in Europe which is also a UCITs fund.
There are a lot of gold ETFs. We show you the best gold ETFs and show you the 6 important requirements for picking a good gold ETF.
We have thoroughly researched 20 gold ETFs and found what we consider the best one suited for most people.
So what is the best gold ETF?
The best gold ETF for most people is: abrdn Physical Gold Shares ETF (SGOL)
There are other gold ETFs available, but there is really only a handful that is worth considering.
Why you should choose abrdn Physical Gold Shares ETF
When you pick a good commodity ETF you need to look at 6 things:
- The expense ratio for the ETF needs to be low. The expense ratio is always expressed as a percentage. The percentage denotes how much of your total investment in that ETF that you need to pay the provider. This should be below 0.30% and preferably lower than that. For gold ETFs, the expense ratio is usually a bit higher. This is because there is an additional cost involved with gold. Gold needs to be stored and held at a secure location.
- The ETF should invest passively. The ETF should not engage in market timing and buy and sell gold when the portfolio manager thinks it’s a good idea. Passively managed funds typically beat actively managed funds on expenses and investment returns.
- The ETF needs to be highly liquid. This means that the difference between the buy and sell price (bid/ask) for the ETF is small. This is called the price spread.
- The ETF needs to have a large number of assets under management. This is abbreviated as AUM. This guarantees that the ETF doesn’t close in the near future and is also an indicator of low price spreads.
- The ETF needs to follow its index without a large tracking error. If the ETF has a large tracking error in comparison to its index we are not getting what we are paying for. A large tracking error is also an indication that the ETF is executing poorly on its replication of the index that it is tracking which is not desirable. For a gold ETF that invests
- The ETF needs to invest in gold-backed by physical gold. This means the ETF needs to be buying actual gold bars and storing them in a secure location. We don’t want future contracts on gold nor do we want to be exposed to companies that mine for gold.
When you compare the six requirements to each other the most important thing to focus on is the expense ratio, as that is the most reliable indicator of how well the ETF will perform in the future.
Why you should choose abrdn Physical Gold Shares ETF
abrdn Physical Gold Shares ETF fulfills all of the above requirements. It is cheaper than most other gold ETFs and tracks the price of gold with little tracking error.
It is highly liquid with a large AUM.
What is the historical return of gold?
Portfolio data was last updated on 11th of August 2023, 08:35 ET
|Gold return (%)
|CAGR since 1989
|CAGR 10 years
|CAGR 5 years
|CAGR 3 years
Here is how you read the table.
CAGR stands for Compound Annual Growth Rate. This is the rate of the return with included interest on interest. It includes reinvestment of dividends.
CAGR Since 1989 is the return since 1989. This is the year which we have chosen, as we have had reliable data for most asset classes since 1989.
CAGR 10 years is the return for the past 10 years, not including the current year.
CAGR 5 years is the return for the past 5 years, not including the current year.
CAGR 3 years is the return for the past 3 years, not including the current year.
Last year is the return for the asset class last year.
Return YTD is the Year To Date return for the asset class.
How does gold compare to the best portfolios?
Below you can see the returns of the best portfolios that we have benchmarked.
|Year to date
|Return in 2022
|10 year return
|CAGR since 1989 (%)
|Ben Stein Retirement
|Paul Merriman 4-Fund-Portfolio
|Paul Merriman Target Date Portfolio (25 year old)
|Scott Adams Dilbert Portfolio
|JL Collins, Simple Path To Wealth, Wealth Building Portfolio
|American Institute of Individual Investors (AAII) Portfolio
|Paul Merriman Target Date Portfolio (35 year old)
|Assetbuilder.com Portfolio 14
|Balanced Portfolio 90/10
What is gold?
Gold is a raw material. Gold is used in both manufacturing of electronic components and jewelry. Most gold however is stored at secured vaults – doing nothing other than looking gorgeous!
What are the top 5 uses for gold?
1. Gold is used in wealth protection and a financial exchange
One of the oldest uses of gold is for coins, and other financial assets. Gold is used to store physical wealth. Gold has shown the ability to maintain value over long periods of time.
The exact amount of gold bullion held for investment purposes is difficult to put an exact figure on. As well as national reserves, individuals can also own investment bullion. It is believed that the US holds the largest reserves but there has not been a physical full audit since Eisenhower’s time in the 1950s. Germany is believed to have the second-largest reserves but both Russia and China are adding to their stockpiles at an increasing rate.
2. Gold is used in jewellery, adornments, and medals
Jewelry, and other decorative gold products, account for the largest global use of gold. China and India are the two largest consumers, taking over half of all global production in 2018. In that year, over 1,200 tonnes of gold were consumed for jewelry in China, and over 500 tonnes in India.
Whilst no doubt admiring the beauty and prestige of gold jewelry, many of these buyers will also have an eye for its investment value.
This precious metal has historically been used as a symbol of luxury, superiority, and wealth. Besides jewelry, gold is used to increase the value of a huge range of decorative items, such as medals and badges. Goldleaf has traditionally enhanced artworks and, recently, artist Maurizio Cattelan has even exhibited a gold toilet in the Guggenheim museum in New York!
3. Gold is used in electronics
Gold does not corrode easily (all metals do corrode eventually though). Gold is a great conductor of electricity and is highly resistant to heat. Physically, it is a soft, pliable metal and can be easily stretched or plated into thin coatings. For these reasons, gold is perfect to use in electronics, particularly for cables and connectors.
With consumer technology growing annually, there is increasing demand from the electronics industry, particularly in cell phones. In 2018, electronics consumed over 1,400 tonnes of gold, and in 2017, it accounted for 34% of the gold used in the US.
4. Gold is used in space exploration
Closely allied with electronic uses, space exploration and satellites are another growing consumer of gold. Besides the numerous electronic components, thin coatings of the metal are used in for shields and visors, and golds dependability is essential for the high-risk situation of space travel and exploration.
Gold particles reflect infrared radiation from the sun, helping to keep temperatures down on darker panels and visors. Gold can also be used as a lubricant, and the volatility of organic lubricants makes them unsuitable for the extreme temperature ranges and high radiation of space.
Gold is used in medicine and dentistry
Because it is non-reactive and non-toxic, gold has for many years been used in dentistry and medicine. New applications are being discovered every year, for example in prostheses, where longevity is essential. Gold has even been used in Covid tests!
What am I buying when I buy a gold ETF?
When you buy a gold ETF you are buying actual gold.
abrdn Physical Gold Shares ETF is designed to track the spot price of gold bullion by holding gold bars in a secure vault in Switzerland that is audited twice a year. The company also posts the serial numbers of the bars, giving investors further security over the status of their investment.
Make sure that the ETF you buy actually buys physical gold and not contracts or other derivates.
What other gold ETFs should you consider?
There are many gold ETFs. In addition to the requirements listed above, you need to keep a keen eye on what exactly the gold ETF is holding.
Here are two other alternatives to our recommended ETF.
- iShares Gold Trust (IAU), expense ratio of 0.25%
- SPDR Gold Trust (GLD), expense ratio of 0.40%.
Both of them hold physical gold in a secure vault. Since gold is…well gold…you want to pick the cheapest one which is our recommended (SGOL).
The two alternatives do have more assets under management and are more liquid. It is, however, no concern since SGOL has over $2 billion in AUM which is above and beyond what we need to make the ETF liquid.
Should I pick junior gold miners?
No, when you invest in gold you want a pure play on the gold price. If you buy iShares MSCI Global Gold Miners ETF (RING) you are exposed to companies that extract gold from the ground (mining companies). That means that you also expose yourself to others factors like the company’s leadership, operational performance, etc.
Is gold a good hedge against inflation?
No, gold is not a good hedge against inflation. Gold is better than holding cash but holding equities is much better.
Based on our data of 61 asset classes going back to 1989 gold has not been a good hedge against inflation.
It has performed significantly worse than other asset classes.
Gold comes in at number 53 in terms of returns! Most bond ETFs are better and have lower volatility.
We have reliable data going further back to 1969 but in 1971 Nixon halted the conversion from dollar to gold thereby freeing the gold price from the dollar. (The Nixon shock).
Since 1972 gold has returned (CAGR) 7.42% each year.
Since 1972 stock in the USA has returned 11.12% each year.
Holding gold over the Long-Term gives you a lower return than holding stocks.
Gold could be a good idea if you hold it over several centuries or millennia.
How do I build a great portfolio with ETFs?
A high-performing portfolio is constructed by combining different asset classes. If you just want the market return you should buy one ETF (VTI). You don’t need anything else.
If you want a shot at outperforming the market you need to apply the following recipe to your investing strategy.
- Start with adding a broad US-based stock ETF.
- Then, add exposure to international stocks. This is usually divided into developed countries and emerging markets. Developed markets include Europe, Canada, Japan, Australia, and small parts of Asia. Emerging markets include Eastern Europe, Africa, most of Asia, and South America.
- Then tilt (overweight) your portfolio towards high-performing asset classes like value and small-cap. Value stocks and smaller stocks have historically outpaced larger growth stocks. This has not been true in the past 10 years, however.
If you want the best performing, pre-made, and benchmarked portfolios that we have tested then you should consider our premium service that shows you how to construct the best portfolios that we have benchmarked.
Suggestions for your next steps
If you have already committed to a portfolio then maybe you need help maintaining the portfolio. In this case you will find our rebalance worksheet useful.
Rebalancing your portfolio lowers your risk and may provide higher returns in the long run. It is completely FREE.
You can find the rebalance worksheet in our article Here Is The Most Easy To Use Portfolio Rebalance Tool.
What is a good commodity ETF?
The best commodity ETF is Shares GSCI Commodity Dynamic Roll Strategy ETF (COMT).
What is the best ETF that tracks oil?
The best ETF that tracks the price of oil is the United States Oil Fund LP (USO). It buys short-term NYMEX futures contracts on WTI crude oil.