A Pair of ETF Nuggets for Riding the Gold Rally

Gold looks good—which of course some on Wall Street have been saying, uninterrupted, for decades. 

“Gold bugs” are all over the investment business. But as we approach the final third of 2024, with the largest pair of gold ETFs reaching all-time highs, we should take a serious look at the possibility that this could finally be that time where bullion returns to its status as the asset to own when uncertainty reigns. The “yellow metal” hit $2,500 an ounce for the first time Aug. 19.

But that doesn’t mean that advisors and investors need to get their gold exposure by simply defaulting to the $68 billion SPDR Gold Shares ETF (GLD) or the $29 billion iShares Gold Trust ETF (IAU). Those have been, pardon the pun, the gold standard in gold ETF investing for many years.  

But as is the case with many segments of the ETF market, there are funds that float under the radar, with relatively tiny asset bases, but potent ability to deliver on what an investor wants. For instance, if what they want is to have a stake in the future price appreciation of gold and/or gold stocks, here are a few that folks may consider.

Where Expense Ratio Matters in Gold ETFs

The $76 million Franklin Responsibly Sourced Gold ETF (FGLD) doesn’t come to mind as quickly as GLD and IAU. But simply put, its 0.15% expense ratio is about the only thing other than its small asset base that is starkly different from those two golden giants.

But as advisors and investors know, when the target investment allocation is commodity-like, and the ETF products are so similar, expense ratio can be a differentiating factor. That explains why unheralded FGDL has outperformed GLD and IAU this year. And last year. And since its inception date on June 30, 2022. The difference may be narrow to some investors, as FGDL’s since inception return is 38.75% through last Friday, 60 basis points and 104 basis points better than IAU and GLD respectively. But the fact is, FGDL is delivering what it aims to: gold metal exposure at a lower cost.

Mining for Gold in Small ETF Places

When it comes to the mining side of gold investing, whereby ETFs provide access to the stocks of companies hunting for gold, there are big miners and smaller, or “junior” miners. As with much of the stock market in recent years, big has outperformed small by a noticeable margin.  

However, there is a junior gold mining ETF that has kept pace with the gold mining ETF giant, the Van Eck Gold Miners ETF (GDX), including some periods of significant outperformance. That’s the $99 million US Global GO GOLD and Precious Metal Miners ETF (GOAU). GOAU might appeal to those investors looking for a more concentrated ETF than GDX. GOAU’s portfolio contains 27 stocks, but the top five account for nearly 40% of assets.  

Gold is showing signs of taking things to the next level. After more than a “lost decade” from late 2011 through November of last year, in which the total return of GLD was around zero, there’s life here. And while advisors and investors have several “usual” choices in this category, there are some smaller ones that also make a case for consideration.