Exchange-traded commodities (ETCs) are investment vehicles that allow investors to gain exposure to commodities — like gold — without directly purchasing physical goods or investing in futures contracts. ETCs are traded on stock exchanges, similar to stocks and exchange-traded funds (ETFs), meaning they can be bought in most Stocks and Shares ISAs or SIPPS.
Invesco Physical Gold ETC
What it does: Aims to track gold’s spot price, backed up by physical gold bullion held by JPMorgan in secure vaults.
By Gordon Best. The Invesco Physical Gold ETC stands out as a substantial player in the precious metals market, boasting £13bn in assets. It offers investors a fairly straightforward way to gain exposure to gold, which has historically been a safe haven during periods of negative market performance. With a competitive 0.12% expense ratio, it provides a cost-effective entry to noteworthy performance, where investors saw a robust 23.77% return over the past year, and 49.18% over five years.
However, it’s worth being mindful of the inherent risks. Gold’s price can be pretty volatile. The fund has experienced a maximum decline of 41.78% since inception, underscoring the potential for significant declines during market turbulence. With one eye on the US election, and the expected cut in interest rates in many countries over the coming months, there’s no shortage of catalysts. Despite these challenges, I think it remains an attractive option for those seeking portfolio diversification.
Gordon Best owns shares in JPMorgan Chase & Co.
iShares Gold Producers ETF
What it does: Aims to track the performance of an index of companies related to the exploration and production of gold.
By Mark David Hartley. iShares Gold Producers ETF (LSE: SPGP) is a UK-listed fund that gives shareholders exposure to 61 companies in the global gold industry. Top holdings include Newmont Corp, Barrick Gold, Agnico Eagle Mines and Wheaton Precious Metals. The fund’s benchmark index is the S&P Commodity Producers Gold Index. The ETF gives additional exposure to the broader market for those already invested in physical gold.
It has a price-to-earnings (P/E) ratio of 24 and a price-to-book (P/B) ratio of 2.1. The standard deviation is quite high, at 31.13%, reflecting its high volatility. The total expense ratio is 0.55%, slightly below the average for gold ETFs. The price is up 25.3% this year, slightly below the SPDR Gold Trust, which closely tracks the price of physical gold. Since it’s more volatile than gold, it could result in better returns but at the risk of higher losses.
Mark David Hartley does not own shares in any companies mentioned.
iShares Physical Gold ETC
What it does: The iShares Physical Gold ETC tracks the spot price of gold.
By Paul Summers. Having some exposure to gold is a great way of spreading risk within a portfolio, in my opinion. However, the issue with buying an ETF chock full of miners is that it behaves more like an equity fund rather than one in tune with the price of the shiny stuff. This could mean a rollercoaster ride for investors.
For this reason, my pick would be iShares Physical Gold ETC (LSE: SGLN). At just 0.12%, this ETC is one of the cheapest on the market. It’s also one of the largest. As I type, the price has climbed almost 50% in the last five years.
This is not to say that it won’t experience periods of unpopularity, such as when the appetite for glitzy growth stocks rises among investors.
On the other hand, it might just help to preserve wealth when the next market crash comes.
Paul Summers has no position in iShares Physical Gold ETC
VanEck Junior Gold Miners UCITS ETF
What it does: VanEck Junior Gold Miners UCITS ETF holds shares in 84 smaller mining companies from across the world.
By Royston Wild. Rather than simply investing in a gold-price-tracking ETF, one can profit from a rising bullion price by buying a fund that holds shares in gold mining companies.
ETFs that invest in world-class miners like the VanEck Gold Miners UCITS ETF are extremely popular. Investors seeking a better return might also want to check out the VanEck Junior Gold Miners UCITS ETF (LSE:GDXJ).
As its name implies, this fund invests in small companies that are at the early stage of their growth cycle. They have the potential to soar in value as they ramp up their operations. Such businesses could also become takeover targets for larger gold producers.
Some of the biggest holdings here include Kinross Gold, Alamos Gold and Pan American Silver. Around 43% of the fund is locked up in its 10 largest holdings.
Investing in junior miners is higher risk than gaining exposure to more established operators. These businesses often have limited cash reserves, while exploration projects also have a low success rate.
But for investors with a greater risk appetite, this could be a more lucrative way to consider playing the gold price.
Royston Wild does not own any of the financial securities described above.
VanEck Junior Gold Miners UCITS ETF
What it does: This is the only ETF in Europe providing exposure to small gold miners.
By James Fox. VanEck Junior Gold Miners UCITS ETF (LSE:GDXJ) is one of the best performing gold-mining ETFs over the past 12 months, with shares surging by 51% at the time of writing.
The fund invests in the stock of smaller gold miners – hence junior – some of which are in the earlier stages of exploration.
And because of their respective nascency, the stocks held in the fund tend to be more sensitive to underlying gold prices than their mature peers.
In other words, the fund can be more volatile than some of its peers.
So, if you’re bullish on gold, this is a great fund to own, but if you’re not, it’s one to avoid as it’s more sensitive to downward movements in gold prices.
While many investors may see this ETF as a complement to more traditional gold holdings, the fund offers the potential for much stronger growth driven by the aforementioned sensitivity and the possibility that these smaller companies will be premium takeover targets.
James Fox does not own shares in VanEck Junior Gold Miners UCITS ETF.
