Gold ETFs provide a simple and effective way to gain exposure to gold or gold mining companies. Gold can provide a hedge against inflation over the long term. However, in the shorter term, moves in the gold price can be quite volatile.
Warren Buffett has historically been critical of gold, but his investment company Berkshire Hathaway purchased shares in gold mining giant Barrick Gold Corporation in August 2020.
Below is a list of my 3 favourite Gold ETFs in Australia.
3 Gold ETFs to consider buying for 2021
PMGold (ASX: PMGOLD)
The Perth Mind Gold (ASX: PMGOLD) ETF gives holders a right to gold forged by The Perth Mint. Perhaps the strongest argument for purchasing shares in Perth Mint Gold is that you can redeem shares for physical bullion bars produced by the Perth Mint. The liabilities of PMGOLD are guaranteed by the Western Australian government, which makes the PMGOLD ETF less risky (in theory) than other gold ETFs which do not carry this guarantee.
As of 12 October, PMGOLD held 279,092.743 ounces of gold with a market value of US$514,744,700.55. PMGOLD also has one of, or perhaps the, lowest management fee for a gold ETF, with a management fee of just 0.15% p.a.
Check out the Best ETFs PMGOLD ETF report here.
VanEck Vectors Gold Miners ETF AUD (ASX: GDX)
The VanEck Vectors Gold Miners ETF AUD (ASX: GDX) provides exposure to shares in some of the worlds largest and most profitable gold mining companies. GDX aims to track before fees and other costs, the NYSE Arca Gold Miners Index (AUD) and is up 15% in the last 12 months.
Currently, the GDX ETF has 52 holdings, with the top 5 holdings making up 39.9% of the portfolio. These include Newmont Corp, Barrick Gold Corp, Franco-Nevada Corp, Newcrest Mining Ltd (ASX: NCM), Agnico Eagle Mines Ltd.
GDX pays dividends once a year and has a trailing dividend yield of 0.50%. In the last year, the dividend yield was sufficient to cover GDX’s management fee of 0.53% p.a.
You can view the Best ETFs GDX report here.
BetaShares Global Gold Miners ETF – Currency Hedged (ASX: MNRS)
The BetaShares Global Gold Miners ETF – Currency Hedged (ASX: MNRS) aims to track the returns of the Nasdaq Global ex-Australia Gold Miners Hedged AUD Index (before fees and expenses) which comprises the worlds largest gold mining companies (ex-Australia) hedged into Australian dollars.
MNRS has 59 holdings, with the top 5 making up 37.5% of the portfolio. The top 5 holdings are the same as GDX’s, with the exception of Newcrest, which is replaced by Wheaton Precious Metals Corp.
At the time of writing, MNRS is up about 25% over the last 12 months. One of the main reasons MNRS has outperformed GDX in the last year is because MNRS is hedged into Australian Dollars. As GDX is unhedged, it was weighed down by the rising AUD against the USD. Clearly, if the AUD/USD exchange rate moved in the other direction it would have benefited GDX.
The MNRS ETF has a management fee of 0.57% per year and has a 12-month distribution yield of 2.5%. The management fee may be higher than GDX’s to cover hedging costs. It is important to note that while MNRS paid a distribution in July this year, it was the first distribution paid since January 2018.