How to Invest in GLD, GDX and other Gold ETFs
Buying gold in the stock market through an ETF is easier than you think. We've reviewed the 5 best gold ETFs, including GLD and GDX.
By Stefan on 29/09/2023
First, you may be tempted to invested in a gold ETF whose shares are physically-backed by gold bars. Investing in a gold ETF like GLD will give you direct exposure to the price of the precious metal, less any of the fund's management fees. It's also cheaper and easier to buy and sell than physical gold. Open an account with FPMarkets.com to buy CFDs on GLD.
Some investors are drawn to gold miners because they represent a leveraged play on the precious metal. In a gold bull market, their profits usually rise more than the price of gold because miners have high fixed costs (this is known as operating leverage). However, a miner's stock market performance will also be affected by operational issues (such as strikes or natural disasters), their financial standing and political risks in the countries in which they operate.
You could also turn to a leveraged ETF if you're a gambler at heart. A leveraged ETF will seek to replicate two or even three times the daily change in a reference index. Importantly, leveraged ETFs aren't designed for long term investors, as they tend to experience big moves up or down. They also trend towards zero over time.
Physical Gold ETFs
- GLD: the SPDR Gold Shares ETF, also known as GLD, is the world's largest gold ETF. The Trust owns gold bullion stored in secure vaults. Each share represents one-tenth of an ounce of gold, less a 0.40% annual management fee(5). Its shares are listed on the New York Stock Exchange and available to trade through FP Markets.
Gold miners ETFs
- GDX: the VanEck Vectors Gold Miners ETF invests in the largest gold mining companies in the world. Its 10 largest holdings, which include stakes in Newmont Corporation and Barrick Gold Corporation, account for 64% of assets under management. GDX has $17.4 billion of assets under management and a 0.53% expense ratio(1).
- GDXJ: the VanEck Junior Gold Miners ETF tracks the performance of the most liquid junior gold and silver miners. It invests in 100 such companies and its 10 largest holdings account for 37% of assets under management(2). Junior mining companies are early-stage miners, often in the exploration and development phases. They are riskier investments because they could be years away from mining precious metals.
- NUGT: the NUGT ETF seeks daily investment results (before fees and expenses) of 200% of the performance of the NYSE Arca Gold Miners Index, also known as GDX(3).
- JNUG: the JNUG ETF seeks to replicate twice that of the MVIS Global Junior Gold Miners Index, also known as GDXJ.(4)
Physical gold ETFs like GLD are best suited for buy-and-hold investors or those with medium- to long-term investment horizons. As gold is an excellent store of wealth over long periods of time, it is a good investment to "dollar cost average" into through regular purchases.
Gold mining stocks, including leveraged ETFs, are best suited to day traders, or those with a short investment horizon. They are incredibly volatile, even more so than broad market indices. Few investors will find the strength of character to hold them in bear markets. Use leverage with caution to avoid being stopped out and crystallising unrealised losses.
If you're ready to take the plunge, open an account in minutes with FPMarkets.com. This broker allows you to trade CFDs on major gold ETFs, whether you want to invest in GLD, GDX or GDXJ. It also gives you access to over 1,000 financial instruments, including currencies, stocks, and much more. We were impressed by the quality of its execution and customer service.
- 1. VanEck. (2023). GDX: VanEck Gold Miners ETF. https://www.vaneck.com/us/en/investments/gold-miners-etf-gdx-fact-sheet.pdf
- 2. VanEck. (2023). GDXJ: VanEck Junior Gold Miners ETF. https://www.vaneck.com/us/en/investments/junior-gold-miners-etf-gdxj-fact-sheet.pdf
- 3. Direxion. (2023). NUGT DUST. https://www.direxion.com/uploads/NUGT-DUST-Fact-Sheet.pdf
- 4. Direxion. (2023). JNUG JDST. https://www.direxion.com/uploads/JNUG-JDST-Fact-Sheet.pdf
- 5. State Street Global Investor. (2021). SPDR® Gold Shares. https://www.spdrgoldshares.com/media/GLD/file/ETF-GLD_20210930.pdf
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