If you’re considering investing in gold to hedge against inflation and diversify your portfolio, then this post about the best Gold ETFs in Canada is for you.
Gold has been used as a form of currency and investment for centuries. It is often seen as a safe haven during times of economic uncertainty.
Gold prices have surged in recent years, as investors have become increasingly concerned about inflation and other global economic factors. If you are looking to add gold to your portfolio, or want to learn more about how to invest in gold, read on!
In this blog post, we will discuss the best gold ETFs in Canada for hedging against inflation and diversifying your portfolio. We will also provide tips on where to buy gold ETFs in Canada.
What are Gold ETFs?
Gold ETFs are exchange-traded funds that track the price of gold. They are a convenient and cost-effective way to invest in gold without having to purchase and store physical gold.
Gold ETFs are a popular choice for investors who want to hedge against inflation or diversify their investment portfolios.
They come in different forms, such as physically-backed gold ETFs or gold miner ETFs.
With physically-backed gold ETFs, the ETF buys physical gold and each unit of the ETF represents ownership of the gold, while Gold miner ETFs invest in stocks of companies that mine or produce gold.
Pros and Cons of Investing in Gold ETFs
Just like other types of investments, there are several pros and cons of gold ETFs that you need to know before investing in them. Here are some of the advantages and disadvantages of gold ETFs:
Pros
- You don’t need to pay any storage fee
- Gold ETFs has high liquidity
- There is a tax advantages when you invest in gold ETFs through a TFSA or RRSP account
- Assurance of gold purity
Cons
- Trading may cause the values of ETF units to differ from their real underlying values
- The size of gold ETFs could be small
- The backing of actual gold could not always be there
Best Gold ETFs in Canada
There are several different gold ETFs available on the Canadian stock market to interest investors.
Below, we have compiled a list of the best gold ETFs in Canada for those looking to start investing in Gold ETFs.
The iShares S&P/TSX Global Gold Index ETF is one of the most diversified gold ETFs in Canada. It tracks the S&P/TSX Global Gold Index, a benchmark of global gold producers.
iShares S&P/TSX Global Gold Index ETF (XGD) is one the largest gold ETFs in Canada, with about $1 billion in net assets.
It’s also among the cheapest, with a management fee of just 0.55%. The fund has exposure to a variety of gold companies including gold mining, producing, and exploration companies.
The fund has over 40 holdings. Among its top 10 holdings are Barrick Gold Corporation, Newmont Mining Corporation, Franco-Nevada Corporation, and Agnico Eagle Mines Limited.
Finally, XGD has a high-risk rating so keep that in mind when deciding on how much to allocate to the ETF.
XGD Key Facts:
- Inception: March 23, 2001
- Net assets: CAD 990,505,396 (Mar 7, 2023)
- MER: 0.61%
- Management fee: 0.55%
- 5-year performance: 9.18%
2. Horizons Gold Yield ETF
Horizons Gold Yield ETF (HGY) is another popular choice for investors looking to invest in gold ETFs and earn regular distribution.
This actively managed exchange-traded fund (ETF) is designed to provide exposure to gold while generating income by selling covered call options on the securities in the gold portfolio.
Horizons Gold Yield ETF has a medium risk rating. It has $71.8 million total net assets and charges a management fee of 0.60% annually. You can invest in HGY through registered and non-registered accounts.
HGY Key Facts
- Inception: December 17, 2010
- Net assets: CAD 71,833,196 (Mar 6,2023)
- MER: 0.90%
- 5-year performance: 3.94%
3. BMO Junior Gold Index ETF
The BMO Junior Gold Index ETF (ZJG) seeks to track the performance of the Dow Jones North America Select Junior Gold Index.
ZJG funds are invested in the same proportion as they are represented in the Index. The fund is broadly diversified across multiple companies with exposure to 39 gold stocks.
The fund is particularly suited for investors who wish to gain exposure to small to medium capitalized gold-mining companies in North America.
Because it has a high-risk rating, you should only invest a small portion of your portfolio in it.
ZJG Key Facts
- Inception: January 19, 2010
- Net assets: $ 60.26 million (Mar 7, 2023)
- MER: 0.61%
- 5-year performance: 0.54%
iShares Gold Bullion ETF (CGL) is one of the most popular gold ETFs in Canada, and for good reason.
It holds gold bars in its vaults and is designed for investors that want to hold physical gold, but without the extra stress.
The fund currently has over $700 million in net assets. It tracks the price of gold bullion, which means it is set up to earn returns from increases in gold prices.
iShares Gold Bullion ETF (CGL) has a risk rating of medium to high and is an excellent choice for investors who want to use gold as a hedge against inflation or as a portfolio diversifier.
CGL Key Facts
- Inception: May 28, 2009
- Net assets: CAD 730,798,606 (Mar 7, 2023)
- MER: 0.55%
- 5-year performance: 5.37%
5. BMO Equal Weight Global Gold Index ETF
The BMO Equal Weight Global Gold Index ETF (ZGD) invests in stocks of global gold mining companies from both developed and emerging markets.
ZGD tracks the Solactive Equal Weight Global Gold Index, an equal-weight globally diversified gold index.
That means ZGD’s holdings are equally weighted regardless of the size or market capitalization of each company, ensuring exposure across all market caps and geographies.
The fund’s top holdings are Agnico Eagle Mines Ltd, Gold Fields Ltd, AngloGold Ashanti Ltd, and Harmony Gold Mining Co. Ltd, with Barrick Gold and Newmont Mining also in the mix.
The BMO Equal Weight Global Gold Index has a high-risk rating. You can use both registered and unregistered accounts on the fund.
ZGD Key Facts
- Inception: November 14, 2012
- Net assets: CAD 45 95 million (Mar 7, 2023)
- MER: 0.60%
- 5-year performance: 3.82%
6. Horizons Enhanced Income Gold Producers ETF
The Horizons Enhanced Income Gold Producers ETF (HEP) is also a great option for investors looking to invest in gold.
It focuses on reducing risk by using covered call options. As far as diversification with the sector goes, HEP is well balanced across the gold mining industry with exposure to mid-cap stocks.
HEP charges a 0.65% management fee, which is slightly higher than other gold ETFs but it’s still low compared to mutual funds and hedge funds that charge around 2%.
Additionally, there are no restrictions on the type of accounts you can use to hold the gold ETF.
HEP Key Facts
- Inception: April 11, 2011
- Net assets: $235,359,570 (Mar 6, 2023)
- MER: 0.80%
- 5-year performance: 7.29%
7. Sprott Physical Gold Trust
Sprott Physical Gold Trust (PHYS) is a trust and not an ETF. It is the largest fund on this ranking of the best gold ETFs in Canada with almost $6 billion in net assets.
The fund’s investment objective is to replicate the performance of the gold bullion by holding physical gold that is held with The Royal Canadian Mint.
With an MER of just 0.41%, PHYS is a lower cost fund compared to many of the other gold ETFs available in Canada. It also trades on the TSX in both CAD and USD.
PHYS Key Facts
- Inception: February 25, 2010
- Net assets: $5.67 billion (Mar 7, 2023)
- MER: 0.41%
- 5-year performance: 6.79%
8. Harvest Global Gold Giants Index ETF
Harvest Global Gold Giants Index ETF (HGGG) is a relatively newer gold ETF that was introduced in 2019.
It tracks the Solactive Global Gold Giants Index that invests in the top 20 large-capitalized gold companies around the world.
The best part is that it has a management fee of 0.40%, which is one of the lowest in the industry, making it a great option for those looking to invest in Gold ETFs.
HGGG is a passively managed ETF that holds its constituent companies in equal weight. If you’re looking for a low-cost, passively managed gold ETF fund that invests in gold companies with track record of performance, HGGG is a top contender.
HGGG Key Facts
- Inception: January 10, 2019
- Net assets: $14.99 million (Net AUM as of Mar 7, 2023)
- Management fee: 0.40%
- 4-year performance: 5 92%
- Number of Equity Securities: 20
9. Royal Canadian Mint – Canadian Gold Reserves
The Royal Canadian Mint Canadian Gold Reserves (MNT) is another great way to get exposure to the value of gold, without having to own the metal itself.
Unlike the other gold ETFs profiled above, MNT is an Exchange-Traded Receipt (ETR). That means, you can technically redeem your investment for physical gold – but a minimum of 10,000 ETRs apply.
MNT trades on the TSX in both CAD and USD. This fund has a great reputation and low management fees of 0.35%.
MNT Key Facts
- Inception: November 29, 2011
- Net assets: –
- MER: 0.35%
10. CI First Assets Gold+ Giants Covered Call ETF
The CI First Asset Gold + Giants Covered Call ETF (CGXF) is one of the best gold ETFs in Canada for investors who want to invest in large North American gold companies, but also want to earn some income from their investments.
The fund invests primarily in securities of issuers located in North America that are involved in the business of mining, processing or dealing in gold or gold-related products.
The CI First Asset Gold+ Giants Covered Call ETF has been active for ten years and pays quarterly distributions. It uses covered call options to generate modest income while limiting the downside risk of your portfolio.
CGXF has a 12-month trailing distribution yield of 9.02% as of March 6, 2023 and a MER of 0.71%, which is about average compared to some of the other ETFs in the industry.
CGXF Key Facts
- Inception: June 1, 2011
- Net assets: $191.50 million (Mar 7, 2023)
- MER: 0.71%
- 5-year performance: 1.7%
Best Performing Gold ETFs
The following gold ETFs have been the best performers in Canada over the past few years, ranked by their 5-year performance.
| Name | 5-Year Returns (%) | MER (%) |
|---|---|---|
| XGD | 9.18 | 0.61 |
| HEP | 7.29 | 0.80 |
| ZGD | 3.82 | 0.60 |
| PHYS | 6.79 | 0.41 |
| CGL | 5.37 | 0.55 |
| ZJG | 0.54 | 0.61 |
| HGY | 3.94 | 0.90 |
| CGXY | 1.73 | 0.71 |
How to Choose Canada Gold ETF
There are a few factors you need to consider when choosing the best gold ETF. Here are some of the factors:
- Evaluate if the ETF invests in gold mining firms or gold bullion
- Select a gold ETF with a proven track record of success
- Check to see if the ETF is secured by actual gold
- Investigate the ETF’s underlying benchmark and other important details.
- Look for an ETF that has a low MER
- Be on the lookout for ETFs with a high AUM and decent liquidity.
Gold ETFs vs Physical Gold
Buying physical gold used to be the only way to invest in gold. But with the advent of gold ETFs, physical gold is no longer necessary.
With physical gold, investors need to deal with the hassle of storing and safeguarding their gold. This makes it illiquid, difficult to sell in a hurry, and less accessible to the average investor.
Gold ETFs, on the other hand, offer several advantages over purchasing physical gold because they:
- are more liquid, meaning they can be sold quickly if needed
- are less risky than owning physical gold
- provide exposure to the price of gold without having to store physical gold
- are a cost-effective way to invest in gold
Which one is right for you?
That depends on your personal circumstances and investment goals.
If you are looking for a convenient and cost-effective way to invest in gold, then Gold ETFs are the best option for you.
Why Invest in Gold?
Gold has been used as a form of currency and investment for centuries. Here are some reasons why investors might want to consider investing in gold:
- Gold is seen as a safe haven asset during times of economic uncertainty
- It is a store of value that can protect against inflation
- Gold is less correlated with other assets, making it a good diversification tool
- It is a tangible asset that can be easily stored and accessed
- Gold is easy to trade and has a global market
How to Buy Gold ETFs in Canada
Investors can purchase gold ETFs through a brokerage account. Many Canadian brokerages now offer commission-free trading for ETFs including gold ETFs.
The best places to buy gold ETFs in Canada are online brokerages or investment apps such as Wealthsimple Trade and Questrade.
Wealthsimple Trade
Wealthsimple Trade is a Canadian online brokerage that offers commission-free trading for ETFs and Stocks.
You can buy Gold ETFs on the app without worrying about any pesky commissions. Also, there is no minimum investment amount so you can start investing on the app with as low as $1.
But only RRSP, TFSA, and cash accounts are supported at the moment.
Get a $25 welcome bonus when you sign-up using this link and trade at least $150.
Questrade
Questrade is a popular Canadian online brokerage that offers commission-free purchases for ETFs. They also have a mobile app that makes investing in gold ETFs convenient and easy.
It supports several registered and non-registered account types including RESP, RRSP, TFSA, RRIF, and more.
However, it requires a $1,000 minimum to start trading. Get a $50 trade rebate using this Questrade Promo Code (WALLETBLISS) or by clicking here.
Related: Best Online Brokerages For ETFs In Canada
How to Invest in Gold
Investing in gold in Canada can be done in a few different ways. You can purchase physical gold, invest in gold mining companies, or invest in gold ETFs.
Obviously, each of these options has its own set of pros and cons. For example, buying physical gold means that you have to find a place to store it, and it can be difficult to sell if you need the cash in a hurry. In other words, it is not very liquid.
Gold mining companies are often high-risk, high-reward investments. They can be very volatile, and their share prices can be affected by changes in the gold price, as well as a variety of other factors.
Gold ETFs offer a more diversified and liquid way to invest in gold. They also tend to be much less risky than gold mining companies. For these reasons, we believe that gold ETFs are the best way to invest in gold for most people.
FAQs
Gold ETFs are an excellent investment option if you consider purchasing physical gold to be cumbersome or if you wish to diversify your investment portfolio. Gold is also regarded as a secure asset and a great store of value.
Gold exchange-traded funds (ETFs) helps their investors avoid any unnecessary expenditures, such as storage and carrying fees. Furthermore, it is more secure than purchasing physical gold.
Any returns on Gold ETFs are treated like that of any other ETF. When held in a non-registered account, any dividend or capital gains are taxed in the year they are earned. To avoid paying taxes on Gold ETFs, you should hold them in your TFSA.
To invest in gold ETFs, you need to open an account at a brokerage and buy them like you would buy any other stock or ETFs. To save cost, consider using an online brokerage like Questrade or an investment app like Wealthsimple Trade that allows commission-free ETF purchases.
The best Gold ETF for you depends on your objectives. Do you want an ETF that tracks gold mining stocks or one that holds physical gold. You may also go with one that pays regular high dividends if you want cash flow.
XGD is arguably the best Gold ETF in Canada with its better performance and lower fees compared to many of the other ETFs. Invetsors looking for regular income can also choose Horizons Gold Yield ETF, HGY.
Final Thought on the Best Gold ETFs in Canada
Now that you know the best gold ETFs in Canada, it’s time to start investing!
Remember, it’s always important to do your own research before making any investment decisions. Assess your unique financial situation to know how gold fits into your overall plan.
Hopefully, you now have all the information you need to choose one of the several Gold ETFs available in Canada. If you still have any questions, feel free to ask in the comment section below.
Happy Investing!
Learn more: Best Investments in Canada
