We realized that minerals with intrinsic value are far more essential than other “valued” goods in times of uncertainty, such as the COVID-19 era.
When the stock market is in decline, investors flock to gold. Gold is a good hedge against potential stock market downturns for this reason. If you want to diversify your portfolio and protect it from inflation and currency threats, a gold ETF (Exchange Traded Fund) could be profitable.
Unlike stocks, gold is often mutually independent from stock markets during times of significant uncertainty.
Some say that gold is a medieval relic that has lost its monetary value. Paper cash is the preferred form of payment in today’s economy. They argue that the only advantage of gold is that it is a substance used in jewelry. Those who believe gold is an asset with distinct intrinsic attributes that make it valuable and vital for investors to retain it in their portfolios are on the other end of the spectrum.
This means that when investors escape the financial markets, they may flock to gold, driving up the price of the precious metal, even if the entire market is in negative territory.
However, gold is a volatile asset, and you should avoid over-exposing your portfolio to any security that you are not comfortable with in terms of risk tolerance.
6 Canadian Gold ETF You Should Invest In
For Canadian investors looking to diversify their investment portfolio while keeping it profitable, here are the most promising Gold ETFs.
iShares S&P/TSX Global Gold Index ETF (TSX:XGD)
XGD aims to deliver long-term capital growth by attempting to replicate, as closely as feasible, the S&P/TSX Global Gold Index’s performance. XGD will primarily engage in equity securities issued by foreign issuers in the mining sector under normal market conditions.
iShares S&P/TSX Global Gold Index ETF (XGD) invests in ten of the world’s leading gold miners, including Barrick Gold, Newmont Mining Corporation, Franco Nevada Corporation, and Wheaton Precious Metals Corporation. XGD is globally diverse, with stakes in Canada, the United States, South Africa, and Peru, and over 50 firms in its portfolio.
It is available for both registered and non-registered investment accounts and pays quarterly dividends. The current dividend yield stands at 1.019%. With over 1.6 billion in assets under management(AUM), this long-running iShares ETF is massive. It is hands down the biggest of the gold ETFs on this list. Aside from the scale, there are a few more reasons to admire this fund. For starters, it has a very low MER of only 0.61%, which is exceptionally low for a precious metals ETF.
Trading at $22.01 as of March 17, 2022 (12:31 PM), this ETF is expected to grow further, making it the best time to invest in it.
BMO Equal Weight Global Gold Index ETF (TSX:ZGD)
The BMO Equal Weight Global Gold Index ETF has over 25 underlying holdings scattered across Canada, the United States, Africa, and South America, making it a truly global investment. ZGD aims to mirror the performance of an equal weight diversified global gold mining businesses index, net of fees, to the highest degree practicable.
ZGD invests in gold mining shares to track the Soloactive Equal Weight Global Gold Index and attempt to duplicate its performance (net of fees). K92 Mining, Wesdome Gold Mines, Endeavour Mining Corp, Dundee Precious Metals, Franco Nevada, B2Gold, Kinross Gold, and other gold mining firms are among the 35 stocks it owns (all equally weighted- approximately).
Over the last five years, the average annual return has been a solid 19.60 percent. The current dividend yield for this company is 0.329%. Furthermore, the MER for XZD is 0.61 percent, with an average annual return of 8.55 percent over the last five years.
Trading at $81.53 as of March 17, 2022 (12:43 PM), analysts mark this as a stable investment. The P/E ratio of 10.50 further supports the analysts’ claims.
Horizons Gold Yield ETF (TSX:HGY)
HGY invests in gold ETFs (such as the SPDR Gold MiniShares ETF), covered call option techniques on gold portfolio instruments, and cash to gain exposure to gold. It hedged to the Canadian dollars.
HGY isn’t just a gold fund; it also invests in silver-based securities and is a globally diversified ETF, although not to the same extent as the market leaders.
HGY pays monthly dividends and had a 12-month trailing yield of 6.78 percent as of March 31, 2021. It is available for both registered and non-registered accounts and has a risk rating of “medium.”
This fund manages risk and generates income with an active management method, and it has a high MER of 1.17 percent. Presently, it pays a monthly dividend of 5.583%.
Trading at $5.34 as of March 17, 2022 (12:59 PM), this ETF holds a promising future. A market capitalization of 71,465,359 is a testament to its exceptional performance.
iShares Gold Bullion ETF (TSX:CGL)
The iShares Gold Bullion ETF (CGL) invests directly in physical gold bullion with the goal of replicating gold bullion’s returns, lowering expenses and fees. This ETF is one of the closest copies you’ll discover in the Canadian gold bullion ETF market if you’re interested in the benefits of owning gold.
CGL-7 is a Canadian dollar hedged stock. CGL-C is the ticker for its unhedged equivalent. CGL accepts both registered and non-registered accounts and has a risk rating of “medium to high.” This ETF has a current market cap of 805,475,000 while the trading volume stands at 29,008.
Trading at $15.95 as of March 17, 2022 (1:10 PM), it is promising stock for Canadian investors. The anticipated price of gold bullion further predicts the success of this fund in the gold market.
Alamos Gold Inc. (TSX:AGI)
Alamos Gold Inc is a gold and precious metals company based in Canada and Mexico that purchases, explores, and manufactures gold and other precious metals. The Young-Davidson Mine in Canada, as well as the Mulatos and El Chanate Mines in Sonora, Mexico, are the company’s three active mines in North America. The Young-Davidson mine generates the majority of the company’s revenue, and the property also has mineral leases and claims covering around 11,000 acres. Additionally, the company has a sizable pipeline of projects in the development stage in Canada, Mexico, Turkey, and the United States. Alamos employs over 1,700 people and is dedicated to the highest standards of environmental sustainability.
On March 3, 2022, Alamos Gold Inc. reported that its Board of Directors has declared a quarterly dividend of US$0.025 per common share. The company has paid dividends for 13 years in a row, returning $247 million to shareholders in the form of dividends and share buybacks, including $51 million in 2021.
The company has a market capitalization 4,173,625,657 of and offers a dividend yield of 1.22%. Trading at $10.65 as of March 17, 2022 (1:28 PM), the company holds a prosperous future for gold enthusiasts.
Barrick Gold Corporation (TSX:ABX)
Barrick Gold Corp. operates mines in North America, South America, Australia, and Africa, making it one of the world’s major gold producers. Carlin, Cortez, Turquoise Ridge, Pueblo Viejo, Loulo-Gounkoto, Kibali, Veladero, North Mara, and Bulyanhulu are the company’s nine gold mines. The Carlin mine division delivers the most revenue. Geographically, the United States accounts for the majority of its revenue.
Donlin Gold LLC, a 50:50 joint venture between Barrick Gold Corporation and NOVAGOLD RESOURCES INC., announced on Feb. 28, 2022, the publication of the final set of assay results from the 2021 drill program. The 79-hole, 24,264-meter 2021 drill program generated multiple high-grade gold intercepts. The findings back up the current global resource estimate, new modelling approaches, and strategic mine planning efforts.
The company pays a quarterly dividend of 1.698%. Current market cap for this company is 54,643,256,147. Trading at $30.71 as of March 17, 2022 (1:39 PM), the future prospects for this are promising.
Why You Should Invest in Gold ETF in Canada
As previously stated, gold futures are exchange-traded contracts in which a buyer commits to purchase a particular quantity of the commodity at a predetermined price at a future date. Futures contracts are used by many hedgers to manage and reduce the price risk associated with commodities. Speculators can also participate in the market using futures contracts, which do not require any physical backing.
Futures contracts allow investors to take long or short positions. In a long position, the investor purchases gold in the hope of a price increase. The investor is bound to accept the metal’s delivery. In a short position, the investor sells a commodity with the intention of repurchasing it at a lower price later. It provides investors with more economic power, flexibility, and financial stability than trading real commodities because they trade on exchanges.
In comparison to the related ETFs, gold futures are simple. Gold can be bought or sold at any time by investors. There are no management costs; taxes are shared between short- and long-term capital gains; no third parties make decisions on behalf of investors, and investors can own the underlying gold at any moment. Finally, due to margin, a dollar invested in gold futures can be worth $20 or more in real gold.
The Bottom Line
Analysts crown gold as one of the safest investments. Especially with physical gold bullion, it is almost as if you were buying actual gold rather than the stocks of some company. Even during the COVID-19 period, gold stocks as a whole were profitable.
There are several gold funds and ETFs available on the market. Some gold ETFs are backed by physical gold (bars) held in vaults, others track gold futures, and some gold ETFs invest directly in mining companies. Gold ETFs trade on an exchange similar to stocks and offer investors access to the precious metal without having to hold physical gold bars (coins, bars, or jewelry). Gold ETF (Exchange Traded Fund) can come in handy to diversify your portfolio and ensure it is against inflation and currency risks.
Another way to gain indirect access to gold is to invest in exchange-traded funds (ETFs) that own gold mining companies. Many investors see ETFs as a liquid and low-cost option to access this part of the gold mining industry. The best way to invest in gold stocks or ETFs is to open a brokerage account with discounts because you can easily track your investments and save money on trading fees and commissions. Investing in gold ETFs, whether it’s an ETF that tracks the metal’s spot price, follows gold miners, or another method, can be part of a diversified portfolio.
Finding and investing in the best Canadian gold ETFs can provide a solid hedge for your portfolio, especially in volatile markets. Investing in gold ETFs can give you more flexibility to understand the price movements of the rare yellow metal during inflationary markets without having to directly own physical gold or build a self-managed portfolio of publicly-traded gold-related companies. Gold ETFs may be the best way to gain broad exposure to gold without the risk of investing in individual companies. Additionally, a gold ETF that invests in a basket of gold stocks provides a degree of diversification and may be less volatile than buying individual traditional miners.
Ultimately, the performance of these ETFs will depend on the price of gold. Still, for investors looking for lower-risk, an ETF will not inherently be as volatile as buying individual shares in the stock market. As a result, this ETF can be a great asset if you’re interested in making a profit based on gold price performance rather than the performance of gold-related companies. He pursues a mixed strategy, investing in growth and value stocks, mainly small-cap gold miners.
Best Canadian Gold ETFs
Some of the significant stock holdings include Newmont, Barrick Gold and Franco Nevada. The ETF consists of 37 holdings, most registered in Canada or Australia.
Each ETF will contain different gold stocks traded on Canadian and U.S. exchanges. These ETFs primarily aim to expose investors to gold holdings through various strategies. The goal of the following ETFs is to replicate the price performance of gold bars for investors, minus commissions and fees.
The table below contains tax information for all US-listed Gold Miners ETFs currently tracked by the ETF database, including the applicable short- and long-term capital gains rates and the tax form on which gains or losses will be calculated. Each ETF reported. This page contains historical performance information for all Gold Miners ETFs listed on US exchanges currently tracked by the ETF Database. Seven gold miner ETFs are traded in the United States, excluding inverse and leveraged ETFs and funds with less than $50 million in assets under management (AUM).
RING tracks the MSCI ACWI Select Gold Miners Investable Market Index, which includes global companies that derive most of their revenue from gold mining. The ETF comprises 42 holdings, over 53% of which are based in Canada, with another 21% registered in the US and 13% based in South Africa.
The top three holdings include leading industry players such as Newmont Goldcorp Corp., Barrick Gold Corp. and Franco Nevada Corp., among 36 mining companies. In addition, his company likes the iShares S&P/TSX Global Gold Index Fund (XGD), which is the best Canadian gold exchange stock index in terms of trading volume. The two preferred companies are the iShares Gold Bullion ETF (CGL), which offers exposure to physical gold and is hedged in Canadian dollars, and the iShares Gold Trust (IAU), denominated in USD, which provides exposure to physical gold with a small expense ratio lower than from the popular SPDR Gold Trust (GLD), which also trades in US dollars.
There is also the Horizons Gold Yield (HGY) ETF, which offers Canadian dollar bullion hedging and call option hedging strategies as a means of generating income. Another fund to consider is the Horizons AlphaPro Enhanced Income Gold Producers ETF (HEP), which provides shareholders with an equally weighted North American gold mining and exploration stocks portfolio. However, the fund is not a pure gold fund; he also owns silver-based stocks.
The fund tracks a weighted market cap benchmark for gold and silver mining companies. According to the Fund ETF Facts document, the fund’s objective offers “a capital appreciation opportunity by investing with equal weight in a portfolio of 15 of the largest gold and precious metals companies by market capitalization listed on the North American Stock Exchange, which has liquid option markets.”
OUNZ tracks the spot price of gold by storing gold in London vaults, which investors can access if they buy back their shares in exchange for coins and bars. The ETF tracks the spot price of gold, minus the deposit and fund fees, held in a vault in London. The Fund generally does not sell any of these precious metals except to raise cash to pay off client debt.
With almost zero diversification, even in ETFs, gold is a very volatile investment. They are very volatile, especially during and around recessions, because gold tends to act against market trends. I find gold too “stable” as a long-term asset, but gold stocks and ETFs can be powerful investments.
Gold ETFs that offer dividends can have volatile allocation patterns, but they can be very generous when markets are down, and gold prices soar. Investors should also be aware that when they buy a Canadian ETF or ETF, they automatically get gold in their portfolio, reducing the risk of picking a successful gold stock. You can invest in gold directly or indirectly by purchasing gold ETFs using discount brokerage accounts such as Questrade and Wealthsimple Trade. The easiest way to buy a gold ETF is from a discount broker, preferably a free ETF like Questrade, so you don’t have to pay transaction fees, but any broker with a discount will do.