What if I Want to Buy a Gold ETF?

From ETFs backed by bullion to miners with more upside potential - here's how to get yourself some gold

Ruth Saldanha 18 February, 2021 | 12:47PM
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This is a new video series that answers your 'What If...' questions

Narrator: With all the uncertainty around, you’d be forgiven for wanting to hold on to something safe to protect yourself and your family. I mean, stocks sound great and all, but they’re just numbers on a screen. Now gold, that’s something you can hold.

But if you’d rather not be pitched headfirst into a volcano, or pay storage and security costs to ensure Hobbit thieves don’t get their hands on your gold, you could hold paper gold – through an Exchange Traded fund.

What If You Want to Buy a Gold ETF?

The first thing to remember is you could get gold exposure in three ways. A bullion ETF, A gold-miner ETF, or a miner stock. They’re all different though. Here’s how. 

Kristoffer Inton: A bullion ETF buys and stores the gold for you, and trades on an exchange, which makes buying and selling your gold a lot easier. But you’ll have to pay a fee for the convenience. A gold-miner ETF gives you levered exposure to gold prices, so when gold prices rise, a miner should outperform bullion, all else equal. Plus, the nice thing about a miner ETF is that you diversify away some company-specific risk. Which brings us to miner stocks. Remember, company-specific risk can also be an opportunity. For example, if a miner boosted production or lowered costs, we’d expect to see that reflected in the stock, but it would be averaged away across the portfolio of miners in the ETF.

Narrator: That’s how you can have your gold – and hold it too!

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The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

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Ruth Saldanha

Ruth Saldanha  is Senior Editor, Morningstar.ca


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