Whoever has the gold makes the rules
Gold has always been seen as a precious asset. With its incredible store of value through inflation or other economic conditions, gold holds or increases in value in the long term. Please read our article to discover how to hold yourself a diversified basket of gold through Canadian Gold ETFs.
How to Invest In Gold In Canada
Gold ETFs are an excellent investment if you want to diversify your portfolio. You can buy shares of an ETF that tracks the price of gold, silver, platinum, palladium, or other precious metals. This makes it easy to invest in gold without worrying about storing, transporting, or selling gold.
Who would have thought that investing in gold could be so simple? The answer is people who don’t like financial uncertainty and want to own physical assets.
The best way to protect yourself from fluctuating markets is by hedging with Gold.
How Does a Gold ETF Work?
There are many different types of gold ETFs available. Some are very diversified, while others focus on a single asset class. Gold ETFs are created to track a particular batch or single asset – in the case of gold, it can be large-cap gold companies, junior mining or track the prices of bullion.
This article will be looking at some of the most popular gold ETFs that hold Canadian gold assets available today. We will cover Gold Index, Gold Yield, Gold Mining and Gold Bullion – these are the main categories of Gold ETFs.
A note on MER; the management expense ratio increases with the fund management activity. You may notice higher MERs, but they often coincide with better returns (not always the case). Take a look at the fund sheets links under each ETF to find associated MER.
The Best Gold ETFs in Canada
Here is a comprehensive list of Canadian gold ETFs with a summary of their features. We will analyze the performance from our perspective and why you might choose the particular ETF. While these are all based on gold, they differ based on their holdings, structure and more – their performance is far from equal.
Gold Index ETFs – Growth
These are ETFs that focus on the growth of gold companies. Depending on their focus, they may provide a small yield but primarily focus on the growth and operations of gold companies and, in turn, the price of gold.
iShares S&P/TSX Global Gold Index ETF
Seeks to provide long-term capital growth by replicating the performance of the S&P/TSX Global Gold Index, net of expenses.
We had to put the ETF first, the 2nd largest asset value ETF on our list but holding 60% of Canadian assets.
This fund has been around for 21 years and, as you can see below, has been a consistent performer providing both average annual growth and quarterly distributions.
Capitalization – $1,239,267,923
Quarterly Distributions – 1.36% Yield
Highest Growth Year – 40%
AAGR (Average Annual Growth Rate): 5%
TOP 10 HOLDINGS (%)
NEWMONT – 20.39 BARRICK GOLD CORP – 15.52 FRANCO NEVADA CORP – 10.87 AGNICO EAGLE MINES LTD – 8.85 WHEATON PRECIOUS METALS CORP – 7.62 GOLD FIELDS ADR REPRESENTING LTD – 4.81 ANGLOGOLD ASHANTI ADR REPTG LTD – 3.75 ROYAL GOLD INC – 3.07 KINROSS GOLD CORP – 2.52 ENDEAVOUR MINING PLC – 1.83
Harvest Global Gold Giants Index ETF
This ETF tracks an equally-weighted set of the top 20 gold companies by market cap globally. This is one of our top choices as it provides a great yield and AAGR with a low MER.
Here are some reasons this fund is quite successful;
• The top 20 dominant, large-capitalization global gold companies • Low cost, passively managed index • Proven survivors & consolidators through the cycle • Equally weighted to reduce capitalization effect • Down cycle in gold has resulted in the sector becoming more efficient & shareholder-friendly • Leverage to gold in both rising and flat commodity environment • Mid-late cycle opportunity for inflation & downside protection
MER – .40%
Capitalization – 16B
Annual distribution – 3.92% Yield
Highest growth year – 41.83%
AAGR – 8.75%
BMO Equal Weight Global Gold Index ETF
The ETF seeks to replicate, to the extent possible, the performance of an equal weight diversified global gold mining companies index, net of expenses. Currently, the ETF seeks to replicate the Solactive Equal Weight Global Gold Index (the “Index”). The Index includes global securities in the gold industry.
This is a high-risk fund that seeks to establish gains from the performance of gold companies and gold prices. As you’ll see below, this ETF has one of the highest single-year returns, as it capitalizes on the changing price of gold in volatile years. In turn, you experience minimal distributions and low long-term AAGR.
Capitalization – $52.3 Million
Annual Distribution – .35% Yield
Highest growth year – 49.1%
AAGR – -0.5%
TOP 10 HOLDINGS (%)
1. IAMGOLD Corporation 3.9% 2. Pretium Resources Inc. 3.8% 3. Gold Fields Limited, ADR 3.8% 4. AngloGold Ashanti Limited, ADR 3.8% 5. Harmony Gold Mining Company Limited, ADR 3.8% 6. New Gold Inc. 3.4% 7. SSR Mining Inc. 3.2% 8. Osisko Mining Inc. 3.1% 9. Seabridge Gold Inc. 3.0% 10. Eldorado Gold Corporation 3.0%
BMO Junior Gold Index ETF – High Volatility
The BMO Junior Gold Index ETF (ZJG) has been designed to replicate, to the extent possible, the performance of the Dow Jones North America Select Junior Gold Index, net of expenses. The Fund invests in and holds the constituent securities in the same proportion as they are reflected in the Index.
Due to the nature of the gold stocks this fund tracks, it is very high-risk and can be pretty volatile in the long-term, allowing for significant returns (or losses). Therefore, this fund would be a great buy every time the price of gold has a considerable drop, providing the most opportunity to catch the upside when it recovers.
Something to note here is this is a newer fund, so it has had less chance to capitalize on gold appreciating value, causing a negative SIR. But its ability to capture volatility in bull markets is the best on our list.
Capitalization – $90.2 million
Annual distribution – N/A
Highest growth year – 63.06%
AAGR – -2.05%
Since Inception Return – -22.15%
TOP 10 HOLDINGS (%)
15.19% ROYAL GOLD INC 8.77% YAMANA GOLD INC 7.94% B2GOLD CORP 7.75% SSR MINING INC 5.49% ALAMOS GOLD INC 3.75% EQUINOX GOLD CORP 3.56% CENTERRA GOLD INC 3.47% OSISKO GOLD ROYALTIES LTD 3.40% ELDORADO GOLD CORP 3.21% NOVAGOLD RESOURCES INC
Gold Yield ETFs – Distributions
These ETFs pay substantial distributions in exchange for slightly higher MER and lower volatility. As a result, these are an excellent long-term option for exposure to gold; more actively managed, they provide a little less risk and higher reliability for returns.
Horizons Gold Yield ETF
Tax-Efficient Gold Bullion ETF with Monthly Distributions
The Horizons Gold Yield ETF (“HGY”) seeks to expose investors to the price of gold bullion, hedged to the Canadian dollar, while providing monthly, tax-efficient distributions.
During times of economic uncertainty, gold bullion remains an attractive investment option. However, fluctuations in the value of currencies, threats of deflation, or even inflation may cause Gold’s price, or even inflation may cause Gold’s price to exhibit significant price volatility. To hedge against these potential risks, HGY writes covered calls on one-third of their gold-exposed securities. A covered call strategy can effectively retain exposure to a significant portion of the potential upside of gold’s price while simultaneously lowering your portfolio’s overall volatility and risk while generating monthly income from distributions.
- Highly correlated performance to physical gold (as represented by the SPDR® Gold Shares)
- Retains two-thirds of the potential upside performance of securities that provide exposure to gold bullion
- Exposure to a conservative covered call option writing strategy that can lower the volatility of returns
- Higher volatility in gold prices can likely increase call option premiums (revenue)
- Attractive, tax-efficient distributions
- Option writing caps the upside potential of each security.
Capitalization – $70.9 million
Monthly distributions – 6.2% Yield
AAGR – .09% since inception
Highest growth year – 20%
100% SPDR GOLD SHARES – MINI SHARES TRUST
SPDR Gold MiniShares represents fractional, undivided beneficial ownership interests in the Trust, which holds only physical gold bullion and cash from time to time. Learn more here: https://www.spdrgoldshares.com/gldm/
Horizons Enhanced Income Gold Producers ETF
Another high yield ETF for your portfolio, the Horizons Enhanced Income Gold Producers ETF (HEP), is a well-managed ETF that provides investors with exposure to an equally-weighted portfolio of some of the largest and most liquid North American gold-producer stocks and then uses a covered call strategy to earn additional income on the portfolio potentially.
Capitalization – $193.59 million
Monthly distribution – 8.93% Yield
AAGR – -2.13%
Highest growth year – 41.97%
TOP 10 HOLDINGS (%)
YAMANA GOLD INC 8.39% ANGLOGOLD ASHANTI LTD ADR 8.33% ROYAL GOLD INC 8.20% BARRICK GOLD CORP 8.20% ENDEAVOUR MINING PLC 7.98% B2GOLD CORP 7.69% FRANCO-NEVADA CORP 7.55% WHEATON PRECIOUS METALS CORP 7.55% OSISKO GOLD ROYALTIES LTD 7.50% NEWMONT CORP 7.45%
CI First Asset Gold+ Giants Covered Call ETF
This is an actively managed portfolio, with quarterly distributions, the opportunity for increased capital appreciation through investment in a portfolio of equity securities of 15 of the largest gold and precious metals mining companies listed on a North American exchange, and lower overall risk of loss through covered calls.
Capitalization – $422.56 million
Annual Distribution – 7.14% Yield
SIR – negative 1.33%
Highest growth year – 36.69%
TOP 10 HOLDINGS (%)
Agnico Eagle Mines Ltd – 11.55% Sibanye Stillwater Ltd – ADR – 9.26% Gold Fields Ltd – ADR – 7.87% Endeavour Mining PLC – 7.35% Yamana Gold Inc – 7.12% Royal Gold Inc – 7.10% Barrick Gold Corp – 7.10% AngloGold Ashanti Ltd – ADR – 6.74% Newmont Corp – 6.50% Franco-Nevada Corp – 6.38%
Gold Bullion ETFs – Price of Gold
These ETFs track the price of gold bullion by investing directly in gold bullion and holding a bit of cash.
Royal Canadian Mint – Canadian Gold Reserves ETF
Unlike many other listed gold-related investments, holding ETRs provides investors with liquid direct beneficial ownership of gold bullion. The ETRs are listed on the Toronto Stock Exchange and traded in Canadian and U.S. dollars under MNT and MNT.U.
Shares Gold Bullion ETF
The iShares Gold Bullion ETF tracks the price of gold bullion, providing a hedge against inflation using a reliably priced asset, gold.
- Targeted exposure to the price of gold that is hedged to the Canadian dollar
- Convenient, cost-effective exposure to physical gold bullion
- You can use it to help diversify your portfolio and help protect against inflation
Capitalization – $801 million
Annual Distribution – N/A
SIR – 4.06%
100% Gold Bullion (sometimes cash)
Bonus Gold Bullion ETFs
Check out these other two Gold Bullion ETFs;
KILO – Purpose Gold Bullion Fund
PHYS – Sprott Physical Gold Trust
It’s essential to separate the asset classes to compare apples to apples. So, for example, you can see how the gold bullion ETFs differ from the gold miners.
As you can see, there are plenty of ways to get exposure to gold with ETFs. In addition, gold has long been considered a defensive investment. Holding gold can put your mind at ease during poor market conditions or market volatility.
No one can predict gold prices, and your guess is as good as mine when it comes to how gold will be priced in the future, but for now, we can evaluate the various approach of the listed Canadian gold ETFs.
Canadian Gold ETF FAQ
Here are some common questions you may have about Gold ETFs in Canada;
Is It Worth It to Buy Gold Bullion and Bullion ETFs?
Buying gold bullion in Canada may be a good decision, but you have to provide a secure place. There are many downsides to owning physical gold, the foremost being you may lose it somehow.
As far as gold bullion ETFs – this is a much easier way to hold physical gold you do not have but are entitled to (the value of anyway)
Gold Bullion ETFs are a great way to invest directly in the price of gold as a commodity without dealing with any other market risks associated with holding equities of companies.
There are situations in which both are worth it, but more so investing in ETFs.
Alternatives to Buying Gold ETFs
Instead of buying any of these ETFs, there are some other ways you can get exposure to gold.
- Pick your basket of gold companies from within the funds based on your personal preferences.
- Invest in single gold company stocks
- Invest in other sectors correlated to the price of gold (other precious metals, production, etc.)
- Invest in mutual funds which hold Gold Companies
- Invest in a gold futures contract (risky)
- Another option is to hold bonds, but it doesn’t have the same performance against inflation.
- Buy physical gold
- Stake a Mining Claim for yourself.
One easy way is to invest in Canadian mining companies; Canada produces most of the world’s gold. The United States produces about 10% of the world’s gold supply. Some of the other largest producers include Australia, Russia, and China.
Many countries and companies are invested in gold in Canada – Canadian Gold ETFs reflect that.
How Can I Buy a Gold ETF?
Gold ETFs aren’t available to go and purchase walking into a bank. Gold ETFs are a financial derivative traded on the open market. Buying gold ETFs requires a stockbroker; you can check out HardBacon’s review of online discount brokers. There are many options for brokers to purchase ETFs in Canada – if you need to learn more about investing in Canada, please read our article.