Contributor, Benzinga
August 24, 2023

Gold is a commodity that acts as an inflation hedge because of its limited supply. Gold has been around for a while, and the first discovery of gold took place thousands of years ago. Since gold’s humble beginnings, it has become a vital resource for society. Some investors buy and hold gold, hoping the asset will appreciate. Other investors accumulate shares in gold mining exchange-traded funds (ETFs) to get exposure to mining companies that search for the mineral.

5 Best Gold Mining ETFs

Investors looking to get exposure to gold through gold mining ETFs may want to consider these top picks.

1. iShares MSCI Global Gold Miners ETF

The iShares MSCI Global Gold Miners ETF (NASDAQ: RING) holds onto stocks of gold mining companies. The companies in this ETF depend on gold mining for the majority of their revenue. RING has a 0.39% expense ratio and an average annualized return of 7.44% over the past five years. RING uses the MSCI ACWI Select Gold Miners Investable Market Index as a benchmark. The fund has a 20.93 P/E ratio and a 12-month trailing dividend yield of 2.09%.

The fund has 36 holdings. Its top three holdings are Newmont (17.02%), Barrick Gold (15.40%) and Agnico Eagle Mines (12.75%).  

2. VanEck Gold Miners ETF 

The VanEck Gold Miners ETF (NYSEARCA: GDX) has over $11 billion in total net assets and has an average annualized return of 9.19% over the past five years. The fund has a 30-day SEC yield of 1.72% and is the nation’s first gold miners ETF. VanEck launched this fund on May 16, 2006.

GDX has a 0.51% expense ratio and holds 57 assets. The fund’s top three holdings are Newmont (10.11%), Barrick Gold (9.13%) and Franco-Nevada (8.67%). 

3. VanEck Junior Gold Miners ETF 

After experiencing success with GDX, VanEck launched another gold miners ETF that focuses on small-cap corporations. These smaller companies have higher betas and can achieve higher returns than large-cap gold miners. The VanEck Junior Gold Miners ETF (NYSEARCA: GDXJ) has over $3.5 billion in assets under management and a 0.52% net expense ratio. 

The fund has returned 12.58% over the past year and has 100 holdings. GDXJ’s top three holdings are Kinross Gold (7.73%), Pan American Silver (6.70%) and Alamos Gold (6.58%).

4. Direxion Daily Gold Miners Index Bull 2X ETF 

The Direxion Daily Gold Miners Index Bull 2X ETF (NYSEARCA: NUGT) is a high-risk leveraged fund that gives investors 2x the price movement of the NYSE Arca Gold Miners Index. The fund has a 1.19% net expense ratio. Direxion also offers an inverse fund of NUGT that trades under the ticker symbol DUST. 

The fund’s top three holdings are Newmont (10.37%), Barrick Gold (9.09%) and Franco-Nevada (8.37%). The fund includes small-cap companies and rebalances occasionally to ensure silver miners don’t take up more than 20% of the fund’s assets. The fund has returned 21.25% over the past year. While that is a good return, leveraged funds like NUGT are optimal for short-term trading. The long-term returns aren’t great for many of these funds. 

5. Sprott Gold Miners ETF 

The Sprott Gold Miners ETF (NYSEARCA: SGDM) uses the Solactive Gold Miners Custom Factors Index as its benchmark. The fund has over $200 million in assets under management and a net expense ratio of 0.54%. SGDM has generated an average annualized return of 8.35% over the past five years.

The fund has 31 holdings. Its top three stocks are Barrick Gold (11.50%), Franco-Nevada (11.00%) and Agnico Eagle Mines (9.92%).

What is a Gold Mining ETF?

A gold mining ETF is a fund that holds onto gold mining companies. These assets benefit when gold prices rise. However, the overall performance of the fund also depends on how individual miners perform. Gold mining ETFs can achieve similar returns to gold, but the miners’ business models and results will create some variances.

Benefits of Gold Mining ETFs

Gold mining ETFs give investors exposure to many gold mining companies. You don’t have to stay on top of gold miners and look for individual stocks. These ETFs offer a streamlined approach and give you exposure to an asset that could act as an inflation hedge.

Risks of Gold Mining ETFs

Investors have to consider a fund’s expense ratio and overall performance over several years. Gold mining ETFs can underperform gold if the mining companies do not report good earnings. Changes to gold’s value will impact these ETFs for better or for worse.

Where to Invest in Gold Mining ETFs

Investors can choose from several gold mining ETFs, but are you using the right broker? You may want to give some of these top brokers a try for your gold mining ETFs.

How to Choose Gold Mining ETFs

Investors can choose from several gold mining ETFs. You should use these criteria to determine if a gold mining ETF is right for you.

Evaluating Expense Ratios, Liquidity and Management Performance

The expense ratio indicates how much money you must pay the fund managers to oversee the investments. Since you will pay fund managers to look over the assets, you should look at their historical performance. Investors should also look for highly liquid gold miner ETFs in case they want to exit early.

Your Objectives and Risk Tolerance 

Investors should consider their financial goals and risk tolerances before choosing gold mining ETFs. Leveraged ETFs can offer higher returns in the short term, but these funds are extremely risky and aren’t for risk-averse investors. Knowing your finances will help you make better decisions for your portfolio.

Comparing Gold Mining ETFs in the market

Investors should compare multiple gold mining ETFs based on their asset allocation, performance, expense ratios and other factors. You don’t want to jump at the first gold mining ETF you find because there can be a better choice for your portfolio.

Thorough Research and Due Diligence

Investors should conduct thorough research and due diligence before investing their capital into a gold mining ETF. Investors should look at a fund’s historical performance and see which stocks the fund holds.

Diversifying Your Portfolio with Gold Mining ETFs

Gold mining ETFs can allow investors to diversify their portfolios across gold mining companies. These corporations may benefit from the rising price of gold and their ability to extract the mineral from mines. Gold mining companies can be a great addition to many portfolios. However, investors should consider their financial goals and risk tolerances before committing to these investments. 

Frequently Asked Questions 

Q

How gold is mined?

A

Miners have several choices to mine gold: placer mining, processing gold ore, hard rock mining and byproduct mining.

 

Q

Are gold ETFs worth it?

A

Gold ETFs can be worth it for investors who seek a possible hedge against inflation. It is important to consider your financial goals and risk tolerance before buying gold ETFs.

 

Q

Do gold ETFs pay dividends?

A

Many gold ETFs pay dividends, but you should check an ETF’s page to make sure.

About Marc Guberti

Marc Guberti is an investing writer passionate about helping people learn more about money management, investing and finance. He has more than 10 years of writing experience focused on finance and digital marketing. His work has been published in U.S. News & World Report, USA Today, InvestorPlace and other publications.