Precious Metals are one of the most popular asset classes globally as they have long been perceived as a hedge against equity and bond investments. However, unlike bonds and equities, whose values are heavily dependent on the state of the economy, the value of precious metals is backed by their fundamentally limited supply.
Over the past decade, excessive quantitative easing/money-printing by governments worldwide in response to the Great Financial Crisis and the pandemic has led to major concerns of long-term currency devaluations. Money printing/quantitative easing is a tool used by governments to increase the money supply in the hands of people artificially. They do so by buying up securities such as government bonds and Treasury bills from people to put more money to spend into the public’s hands. As governments buy up securities such as bonds and Treasury bills, their prices go up, and their yields start going down, thus making them less attractive to investors.
Governments also simultaneously reduce the lending rates offered by banks to savers, which makes deposits less attractive and stimulates spending, which drives the economy. Another knock-on effect of these measures is that borrowing becomes cheaper, thus promoting even more spending by businesses and people. However, the undesirable effect of this is high inflation. At present, Canada’s inflation is at record high levels of over 3%, while banks are offering sub 1% rates to savers. This means that savers will almost certainly erode their wealth if they save in the bank due to decreased purchasing power.
Over the past decade, the rise of ETFs, closed-ended Trusts, and Income Funds have given investors a simple, cheap, and hassle-free way of investing in precious metals. These funds usually invest directly in physical metals or companies involved in their production, such as miners, refiners, wholesalers/retailers, etc. Profits on ETF or listed instrument investments are taxed as capital gains, which have a lower rate than income or tax on interest received.
The Best Precious Metal ETFs in Canada
In this article, we will look at some of the best precious metal ETFs in Canada –
iShares S&P/TSX Global Gold Index ETF (TSE: XGD)
The iShares Global Gold Index ETF provides investors with global exposure to the gold sector, which is the most popular of all precious metals. The ETF gives investors exposure to gold miners worldwide and has a total of 58 holdings. The fund has net assets of C$1.1 billion and has been in operation for over 20 years. Over the past 5 years, the fund has returned 5.43% CAGR to investors, excluding dividends. This ETF has an expense ratio of 0.61%. It also pays investors a quarterly dividend; at present, it has a dividend yield of 2.38%.
Horizon Gold Yield ETF (TSE: HGY)
The Horizon Gold Yield ETF has a very different operating strategy than the iShares ETF. The Horizon ETF invests in gold as a commodity rather than companies in the gold sector. The ETF uses derivatives to replicate the returns of investing in physical gold. Horizon hedges its exposure against the CAD, thus protecting investors from the strengthening of the USD. Further, Horizon uses covered calls, which is essentially a way to sell the right of buying a commodity that one owns to someone. Horizon employs a covered call strategy on 33% of its holdings to minimize risk.
The fund has C$67 million of assets and an expense ratio of 0.98%. When the price of gold is on an uptrend, the fund distributes any gains to the ETF holders every month. However, this is entirely contingent on the price of gold going up; currently, the fund has a dividend yield of 5.3%.
Sprott Physical Silver (TSE: PSLX.U)
The Sprott Physical Silver Fund invests all most all its assets in silver bullion. Silver is the second most popular precious metal globally and has a very high correlation of price movement with gold. The fund has nearly C$3.76 billion in assets. Sprott invests in fully deliverable London Metal Exchange Silver bars. The fund has an expense ratio of 0.62%. The fund has returned 16% CAGR to investors over the past 3 years and 2.49% CAGR over the past 5 years. Silver stocks have a bright future as metal is increasingly being used in renewable energy and computing components due to its high electrical and heat conductivity.
Sprott Physical Palladium and Platinum (TSE: SPPP.U)
The Sprott Physical Palladium and Platinum Fund invest in fully deliverable palladium and platinum bullion. Unlike gold and silver, which are freely available for purchase, palladium and platinum are tough to acquire and store for retail investors. Further, like silver, these metals have an increasingly important role to play in decarbonization due to their unique properties. This fund aims to give investors cheap and liquid exposure to these metals. The fund has total assets of C$167 million, and the custodian of its assets is the Canadian Royal Mint. The expense ratio of this fund is 1.07%. The fund has been an excellent performer for investors with a 5-year CAGR of 17% and a 3-year CAGR of 30%.
Sprott Physical Uranium (TSE: U.UN)
The Sprott Physical Uranium fund is aimed at giving retail investors exposure to uranium prices. Uranium is a highly reactive metal, thus making its sale and usage heavily regulated. The biggest use of uranium is nuclear energy, a contender for the sustainable energy market. The fund has C$936 million of assets and an expense ratio of 0.35%. Sprott launched the fund just a few months ago; no long-term performance data is available. However, with more interest in nuclear energy, uranium stocks are gaining more attention.
Fear of sovereign currencies losing their value due to artificial money printing by governments has spurred the popularity of alternative assets such as cryptocurrencies and precious metals. Precious metals have long been very popular among investors as they have historically had a low correlation to the equity markets. While equity markets are great for long-term wealth creation, they largely move in tandem, leading to very volatile and cyclical returns. Therefore, an uncorrelated hedge such as precious metals can help investors lower their risk and maximize returns, which is why we believe you should hold a portion of your portfolio in precious metals.
Precious Metals Etf Canada
Canadians have many choices when it comes to choosing ETFs, but not all of them work for us. Sources: 8
If you like gold bullion or gold mines, the ETF option is seen as a way for investors to diversify their portfolios and hold insurance against a falling market. If you use an equity ETF based on bars, diversifying your portfolio into precious metals makes silver ETFs an attractive investment tool during research into the storage of the metal. By buying bullion and gold mining stocks that have access to the markets the fund trades, exchange-traded funds (ETFs) offer a light exposure to these assets. Investors should also know that buying a Canadian Index Fund (ETF) can expose them to gold, thereby reducing the risk of looking for a profitable gold fund. Sources: 0, 1, 5, 7
Ultimately, investing in gold ETFs is about tracking the price performance of a single precious metal. The mechanisms of investing in gold will be different for each ETF, which will be quite different. To determine which silver ETF best suits their precious metal needs, investors should consider all available options. Sources: 12, 14
Find the right Equity Precious Metals for you by ranking the 10 best precious metal ETFs in Canada and the 100 best precious metal ETFs in Canada. Sources: 3
Top holdings include Newmont Mines and Barrick Gold, and we provide a breakdown of each ETF’s individual holdings. If you want to invest in gold companies, the iShares S & P 500 Gold Trust (NYSE: GOLD) ETF, but it’s School taI strongly recommend you to find out about it on the way. The best options are the ISAs Silver & Gold ETF (NASDAQ: GLD) and the Gold Shares ETF Canada. (TSX: GDX). If you are looking for a gold company to invest in, this is a good option for you, which sounds convincing to me. Sources: 2, 3, 8
The Horizons Gold Yield ETF (HGY) also provides hedged exposure to covered calls to generate income. The top precious metal ETF is classified as an international value ETF based on the past year’s performance because the trust fund’s holdings are assigned to physical bullion. These funds lease gold and always maintain a balance of gold holdings in silver, platinum, palladium, copper, gold, and silver futures. They are the best way to track an index, but they are also a good option for investors with a long-term interest in gold. Sources: 4, 7, 8
ETFs that invest in companies active in various sectors of gold and other precious metals. ETFs that invest globally in companies engaged in various types of mining activities, such as gold mining, silver mining or other mining activities. Sources: 8
The S & P TSX Gold Index comprises 115 precious metal mining companies traded on the Toronto Stock Exchange (“TSX”). The investment fund includes companies such as Goldcorp Inc. (NYSE: GLD), Barrick Gold Corp. and Rio Tinto Ltd., which trade in the United States, Canada, Australia, New Zealand and the United Kingdom. Sources: 8, 11
This fund is a top-heavy metals portfolio focused on mining stocks. Alternatives to gold investments include buying gold exchange-traded funds such as the Gold Bullion Exchange – Pan American Gold. You can make investments in gold and silver by holding coins or ingots or buying exchange-traded funds. I own gold bullion in the form of the BMG Bullions Fund investment fund, which holds three gold, silver and platinum bullion. Sources: 8, 9, 13
If you are interested in investing in junior gold mining companies, the BMO Junior Gold Index ETF is a good choice. Sources: 8
The NAV chart shows only the different distributions of the ETF and the average annual return for each of its top holdings over the past 12 months. I like ETFs in terms of individual stocks, but it’s not an ETF when the same stocks are made up of all the top 10 stocks (with the latter heavily invested in Wheaton Precious Metals) or make up the majority of their top holdings. Sources: 5, 8
Kletz says the bullion ETF will appeal to investors looking for diversification because it owns gold, silver, platinum and palladium. The best way to invest in gold in Canada is to go to the store, buy physical gold from the Royal Canadian Mint and invest through Questrade. If you want to invest in Gold Canada by buying bullion with precious metals, your best option is the GLD ETF. Sources: 1, 8
Gold is the most famous precious metal, but silver, platinum and palladium, all known as white metals, protect and reduce risk. ETFs can offer various options for investing in precious metals, such as buying futures contracts, buying bullion or buying shares in listed companies involved in the exploration and production of these metals. For example, the GLD ETF’s ability to invest in some of the world’s largest gold mining companies allows you to invest in gold and silver stocks, as well as silver and platinum stocks. Canada’s most popular exchange-traded funds (ETFs) invest directly in metals, either physically or with futures contracts based on exposure. Sources: 4, 6, 10
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