The Best Gold ETFs for Canadians
For Canadian investors interested in adding gold to their investment portfolios, Exchange-Traded Funds (ETFs) offer a convenient and cost-effective avenue. Gold ETFs allow you to gain exposure to this precious metal without the need for physical ownership. In this post, we’ll explore the top gold ETFs available to Canadian investors, considering factors such as expense ratios, liquidity, and the question of hedging. Whether you’re a beginner or experienced investor, this article will help you make informed decisions when venturing into the world of gold ETFs.
iShares Gold Bullion ETF (TSX: CGL-C)
The iShares Gold Bullion ETF is a popular choice among Canadian investors seeking exposure to physical gold, here is a breakdown:
Expense Ratio: 0.55%
Ticker Symbol: CGL-C
Physical Gold Holdings: The ETF aims to provide returns based on the performance of physical gold bullion held in a secure vault.
Liquidity: CGL-C is highly liquid, with ample trading volume and tight bid-ask spreads.
Accessibility: It can be traded on the Toronto Stock Exchange (TSX), making it easily accessible to Canadian investors.
Currency Hedging: The ETF is unhedged, which means its returns are not subject to currency fluctuations between the Canadian dollar and the US dollar. There is a hedged version however, which is simply CGL without the ‘-C’.
Sprott Physical Gold Trust (NYSE: PHYS)
Like CGL-C, the Sprott Physical Gold Trust allows investors to gain exposure to physical gold bullion stored in secure vaults. The breakdown:
Expense Ratio: 0.41%
Ticker Symbol: PHYS
Physical Gold Holdings: The ETF directly holds physical gold bullion, providing investors with direct ownership of the metal.
Liquidity: PHYS is traded on the New York Stock Exchange (NYSE), hence the currency is USD, and offers robust liquidity.
Currency Hedging: Because PHYS is bought and sold in USD, investors are exposed to currency fluctuations between the Canadian dollar and the US dollar.
iShares S&P/TSX Global Gold Index ETF (TSX: XGD)
The iShares S&P/TSX Global Gold Index ETF offers exposure to global gold mining companies. Key notes on this ETF include:
Expense Ratio: 0.61%
Ticker Symbol: XGD
Portfolio Composition: The ETF tracks an index that includes gold mining companies from around the world, providing broad exposure to the gold sector.
Liquidity: XGD is liquid and can be easily traded on the TSX.
Currency Hedging: XGD is unhedged, which means its returns are influenced by currency fluctuations.
Horizons Gold ETF (TSX: HUG)
The Horizons Gold ETF is designed to replicate the performance of the COMEX gold futures contract. Here’s the skinny:
Expense Ratio: 0.29%
Ticker Symbol: HUG
Portfolio Composition: The ETF aims to track the spot price of gold through gold futures contracts.
Liquidity: HUG offers sufficient liquidity for trading purposes.
Currency Hedging: HUG is hedged, thus not exposing investors to currency fluctuations between the Canadian dollar and the US dollar.
Royal Canadian Mint Gold Reserves ETF (TSX: MNT)
The Royal Canadian Mint Gold Reserves ETF provides investors with exposure to physical gold stored at the Royal Canadian Mint. And the downlow:
Expense Ratio: 0.35%
Ticker Symbol: MNT
Physical Gold Holdings: The ETF directly holds physical gold bullion stored in a secure vault.
Liquidity: MNT offers reasonable liquidity for trading purposes.
Currency Hedging: MNT is unhedged, which means its returns are subject to currency fluctuations. For a hedged version check out MNT.U.
Purpose Physical Gold Bullion Fund (TSX: KILO)
The Purpose Physical Gold Bullion Fund offers direct exposure to physical gold bullion held in a secure vault. The breakdown is as follows:
Expense Ratio: 0.26%
Ticker Symbol: KILO
Physical Gold Holdings: The ETF directly holds physical gold bullion, providing investors with direct ownership of the metal.
Liquidity: KILO offers adequate liquidity for trading purposes.
Currency Hedging: KILO is unhedged, exposing investors to currency fluctuations.
Should Canadians Purchase Hedged ETFs?
The decision to invest in hedged or unhedged gold ETFs depends on various factors. Hedging can protect investors from currency fluctuations, which can impact returns when investing in foreign assets. However, it’s essential to consider the potential costs associated with hedging, as it can result in slightly higher expense ratios. Additionally, if you have a positive outlook on the Canadian dollar or believe that fluctuations in currency will balance out over the long term, investing in unhedged ETFs may be more suitable. Finally, exposure to the US dollar has shown to reduce volatility in Canadian investment portfolios (in some studies), so that can be a consideration when deciding as well.
Summary:
When considering gold ETFs, Canadian investors have a range of options to choose from, each with its unique features. By carefully evaluating expense ratios, liquidity, and portfolio composition, investors can select the gold ETF that aligns best with their investment goals. Remember to conduct thorough research, and consider a consultation with a financial advisor, before making any investment decisions.
