5 Top Canadian Gold ETFs for December 2024 and Beyond

ByMathieu Litalien Published On:

Canadian exchange-traded funds (ETFs) revolutionized passive investing in Canada. Forget about the hassle of picking individual stocks. Now, a laid-back strategy with ETFs works wonders.

ETFs are also an excellent way to gain exposure to particular industries without having to pick individual stocks.

A piece of investment advice we often give (an investment strategy used at your discretion) is that every portfolio should have some exposure to gold. Gold has long been considered a defensive investment and helps insulate your portfolio against various market conditions, potential bear markets, or market volatility.

Some investors buy bonds, or even Canadian bond ETFs, for stability, which isn’t a wrong decision either. But in a rocky market in terms of interest rates, bonds will be more volatile.

With that being said, stocks that rely on a commodity, like oil, gold, or even other precious metals like cobalt, pose more risk. And our stock exchange here in Canada, the TSX, is loaded with these types of stocks.

So what is the best gold etf in Canada moving forward in 2024?

  • iShares Gold Bullion ETF (CAD-Hedged) (TSX:CGL)
  • iShares Gold Bullion ETF (Non-Hedged) (TSX:CGL.C)
  • iShares S&P/TSX Global Gold Index ETF (TSX:XGD)
  • BMO Junior Gold Index ETF (TSX:ZJG)
  • Horizons Gold Yield ETF (TSX:HGY)

iShares Gold Bullion ETF (CAD-Hedged) (TSX:CGL)

iShares Gold Bullion ETF (Non-Hedged) (TSX:CGL.C)

Interested in physical gold?

iShares Gold Bullion ETF is the closest thing investors will get to owning physical gold without having to buy, hold, and store it. There are no gold mining companies in this ETF. There are two funds – the one that is hedged to the Canadian dollar (TSX:CGL) and the non-hedged version (TSX:CGL.C).

The fund’s objective is to replicate the performance of the price of gold bullion for investors, less expenses and fees.

This Canadian ETF has $763M in assets and a share price of $22. The fund’s MER expenses are 0.55%, equal to $5.50 for every $1,000 invested.

Over the last half-decade, the price of gold bullion has gained 59%, whereas the iShares non-hedged ETF has gained 57%, and the hedged version has gained 51%. So, there are some varying performances here. Interestingly, the performance is even less stable when you look further out.

The non-hedged version has outperformed the gold bullion in a big way, while the hedged version has underperformed slightly. This is due in large part to the strength of the USD in comparison to the CAD.

Overall, if you’re interested in physical gold but don’t want to go through the hassle, these gold ETFs provide an excellent alternative for long-term investments.

iShares S&P/TSX Global Gold Index ETF (TSX:XGD)

The S&P/TSX Global Gold Index (TSX:XGD) is the most popular in terms of tracking the performance of the entire gold industry.

It includes producers of gold bullion and gold-related products and streaming companies. At the time of update, the fund holds 44 positions.

The iShare’s XGD product aims to replicate the S&P/TSX Global Gold Index. It has a relatively high-risk profile and has MER fees of 0.61%. This equals $6.10 for every $1,000 invested.

It is one of Canada’s most liquid gold ETFs with $1B~ in assets and a current price of around $18 per unit. The fund also yields a small distribution of 1.8% and pays on a quarterly basis.

Since this is an ETF focused on producers, it has a much higher risk profile than gold bullion. Investors can expect this ETF to outperform in a gold bull market, much as it did in 2020, and underperform in the bear market we’re seeing right now.

The top 10 holdings account for 75% of assets, and the three largest positions include Newmont Corp (TSX:NEM), Barrick Gold (TSX:ABX) and Franco-Nevada Corp (TSX:FNV).

This is the best ETF to own if you want high exposure to the major producers and streamers in the industry.

BMO Junior Gold Index ETF (TSX:ZJG)

In the mood for a little more risk? Consider the BMO Junior Gold Index ETF (TSX:ZJG).

The fund is focused on the smaller industry players and seeks to replicate, net of expenses, the Dow Jones North American Select Junior Gold Index. The Index contains junior gold exploration, development and mining stocks.

The fund has an MER ratio of 0.61% and, at the time of update, has $67M in assets under management. The fund has 39 holdings, 80%+ of which are Canadian-listed junior minors.

At 61%, the top 10 holdings are less concentrated than other funds on this list.

As we witnessed with the soaring price of gold in 2020 this gold ETF dominated because of its junior miner exposure. However, it has suffered significantly if you fast forward to today. This is the nature of junior producers in almost any cyclical environment.

You’ll likely need to trade this fund actively, buying the troughs and selling the peaks, to outperform. So keep in mind, although this has the most upside potential, without question, this is the riskiest fund on the list.

Horizons Gold Yield ETF (TSX:HGY)

The Horizons Gold Yield ETF (TSX:HGY) employs a covered call strategy to give investors exposure to gold hedged to the CAD and tax-efficient distributions.

As of writing, Horizons currently yields an attractive 6%~ and has $64M in assets under management.

Unfortunately, this ETFs MER fee of 0.90%, equal to $9.00 for every $1,000 invested, is quite expensive. Of all those on this list, HGY is the one that tracks the price of gold the closest – if you include the distribution. If you strip out the yield, it has underperformed.

The fund is a unique product in that it holds gold ETFs as opposed to the physical metal or companies in the industry. SPDR Gold Shares (GLD) is the primary holding, making up over 96% of assets.

This fund is not for everyone. If all you want to do is increase your exposure to gold, then the other options on this list may be better. This is especially true because of the high MER fees.

On the other hand, it is a unique product that allows you to increase exposure to gold and generate income.

HGY invests in funds that hold physical gold instead of companies that produce physical gold.

As we’ve seen, the ETFs whose primary holdings are gold producers tend to be more volatile. These ETFs tend to outperform in a gold bull market and can significantly underperform when gold struggles.

The economic downfall from COVID-19 has presented investors with a massive opportunity with gold stocks

Before the COVID-19 pandemic, gold had fallen out of favour, trading in a 5+ year bear market with prices hovering anywhere from $1000-1200 USD an ounce. Now? The pandemic caused a surge in the popularity of gold, and prices now sit in the $1700-$2000 range. This is ultimately a tailwind for gold producers.

So where should one invest? Investing in individual gold producers can be difficult, risky, and not suggested for those with a low-risk tolerance. But purchasing physical gold has been underwhelming in terms of returns for some time now.

There are a plethora of small, mid, and large-sized gold stocks, and it’s not easy picking the winners.

As we’ve seen in the past, investors who buy the wrong gold producer or explorer can lead to significant losses. Gold companies set up for long-term success are a rarity, and most investors lose money when they get into precious metals or the companies that mine them.

Investing in a Canadian gold ETF greatly increases your exposure to the precious metal while minimizing your risk.

Ultimately, the performance of these ETFs will depend on the price of gold, but for investors looking for lower risk, an ETF inherently won’t be as volatile as buying individual stocks on the stock market.

Keep in mind, however, that with any ETF, you should be looking for a blend of low cost and high returns. Mediocre ETFs with high expense fees can eat into returns over the long term and cause you to underperform the market significantly.