SPDR Gold shares is the largest Gold ETF, with the highest holding of physical gold at 975 tons . SPDR gold shares account for 27% of all gold holdings by ETFs. iShares Gold Trust with 491 tons of gold is the second largest gold ETF with the highest amount of physical gold held in its asset. Currently $209 billion is invested in physical gold by Gold ETFs with a holding of 3,570 tons of gold.
Exchange Traded Funds (ETF) are one of the most popular indirect methods to invest in gold. As a commodity and an asset, gold provides diversification to investments and it is a proven hedge against inflation. Most advisors recommend maintaining some portion of every portfolio to be invested in gold. The question is about how much gold should be in a portfolio and what is the best way to include gold in your portfolio? There are active methods of investing in gold as well as passive methods of investing.
Buying gold jewelry, gold bullions & coins are direct ways of investing in gold and the return on investment will be based on price appreciation minus cost of buying, selling and storage cost. Although gold investment through buying physical gold is an excellent way to get exposure to gold, it is generally not a convenient method. It requires a large sum of money and incur storage costs and suffers from the risk of theft. Considering this, ETFs are an efficient and convenient way of getting exposure to gold.
There are two types of gold ETFs, the one which invests in physical gold or directly investing in gold and the other investing in gold mining companies. The gold ETFs which directly invest in gold have the highest correlation with the gold prices. While ETFs which invest in gold mining companies have a positive correlation with the gold prices, the return on investment is based on the financial performance of the gold mining company. So ETFs investing in mining companies is not a perfect hedge against financial market risks.
This article explores the world of gold ETFs in detail. Identifies the largest gold ETFs and gold holdings of each of the ETFs. It explores how gold investment through ETFs is growing and how much of gold is currently invested through gold ETFs.
1. What is the amount of physical gold invested by Gold ETFs?
Investment in physical gold by Exchange Traded Funds have grown significantly over the last 20 years. Currently 3,570 tons of physical gold is invested by gold ETFs. ETFs started investing in gold from the beginning of 21st century. In 2003 only 42 tons of gold was physically held by ETFs. Along with the increase in gold prices between 2003 to 2012, physical holding of gold by ETFs grown significantly to reach total gold holdings of 2,759 tons.
Following the decline in gold prices in 2013, ETFs have readjusted their portfolios and reduced some of their investment until 2015. Gold buying activity of ETFs spiked again from 2016 to 2019 and it accelerated further in 2020 the year of pandemic. Since the turn of 2021, uncertainty and volatility in the financial markets reduced and gold holding lowered by 5%. Still the combined holding of gold by ETFs is at a high level at 3,570 tons.
2. What is the value of gold invested by Gold ETFs?
Total value of gold holdings by ETFs reached 209 billion US dollars in 2021. The increase in gold prices and increase in the quantity of holdings of gold by ETFs have increased the amount of dollars invested in gold. The below graph shows the significance and growth of gold ETFs in the last 10 to 12 years.
Before the great recession in 2008, only $34 billion was invested in gold through ETFs. As volatility and risk in the financial system increased, investment in gold grew with increase in price of gold. Amount of investment through ETFs has spiked from 34 billion to 148 billion in 2012. Since gold prices reduced in 2013, the gold holdings of ETFs reduced and total assets under management of ETFs dropped to 50 billion. But in the last 5 years, the dollar investment in gold through ETFs has more than quadrupled to reach 209 billion. Currently with 209 billion invested in Gold ETF, ETFs became a significant route to invest in gold and this trend is expected to continue.
3. Which is the largest gold ETF backed by physical gold?
SPDR Gold shares is the largest Gold ETF, with the highest holding of physical gold at 975 tons of gold at the end of 2021. SPDR gold shares account for 27% of all gold holdings by ETFs. By far SPDR gold shares is the largest ETF in the world. iShares Gold Trust with 491 tons of gold is the second largest gold ETF with the highest amount of physical gold held in its asset. The below graph summarizes the holdings of top 10 ETFs.
- SPDR gold shares– 975 tons
- iShares Gold Trust ETF– 491 tons
- Invesco physical gold ETC– 243 tons
- Xetra Gold ETF– 238 tons
- Ishares physical gold ETC– 220 tons
- Wisdom Tree Physical Gold ETC– 96 tons
- Sprott physical gold trust– 85 tons
- SPDR Gold MiniShares trust– 74 tons
- ZKB Gold ETF– 71 tons
- Amundi Physical Gold ETC– 68 tons
1. SPDR gold shares
SPDR Gold Shares ETF holds the highest amount of physical gold in its portfolio, with 975 tons of gold currently. Issued by State Street Global Advisors in 2004, the fund invests directly in gold bullion and tracks the performance of gold prices. From 94 tons of gold in 2004, SPDR Gold Shares have consistently grown to become the highest and the largest holder of gold and the largest gold ETF in the world. Currently SPDR gold shares account for 27% of total gold holdings by ETFs. SPDR gold shares is an actively managed ETF which continuously readjust its gold holdings.
SPDR Gold Shares Trade in New York Stock Exchange with a market capitalization of $62 billion, It is the biggest Gold ETF in terms of market capitalization. The fund currently holds $57 Billion worth physical gold. The fund is highly liquid and actively traded with $2.3 billions worth of funds trading hands every day. SPDR Gold Shares is not a Dividend Paying ETF and the Gross expenses ratio of the fund is 0.40%.
SPDR Gold Shares have grown in a short period from 2004 to 2012 and acquired 1,350 tons of gold by 2012. These holdings drastically reduced from 2013 to 2015, a common theme across most gold ETFs along with the price of the gold. As gold prices started increasing from 2016. SPDR gold shares also increased its holding of gold. In 2020, the ETF increased its holding to 1170 tons of gold. In 2021 the gold holdings have readjusted to a level of 975 tons of gold.
2. iShares Gold Trust ETF
Ishares Gold trust ETF is the second largest ETFs with a gold holding of 491 tons. Started with 22 tons of gold in 2005, Ishares Gold Trust ETF has consistently grown over the last 18 years to become the second largest gold ETF in the world. Ishares Gold Trust is an Exchange Traded Fund issued and managed by iShares Delaware Trust Sponsors LLC, to track the daily price movement of gold bullion.
iShares Gold Trust ETF is listed in New York Stock exchange, currently with market capitalization of $31.5 billion, it is the second largest Gold ETF on market capitalization. This gold ETF is highly liquid with approximately 590 million dollars exchanged daily. iShares Gold Trust ETF is not a Dividend Paying fund and the Gross expenses ratio of the fund is 0.25%.
While most other ETFs reduced holding of gold from 2012, iShares Gold Trust ETC did not reduce gold holdings significantly. The gold holdings more than trippilled from 2015 as the gold prices increased along with the demand from investors to gold ETFs. As with other ETFs holding of gold of Ishares Gold Trust ETF also reduced from 525 tons of gold in 2020 to 491 tons in 2021.
3. Invesco physical gold ETC
Invesco Fiscal Gold ETC is the largest Sharia compliant gold ETF and the third largest gold ETF based on holding of physical gold. Launched by Deutsche Bank in London in 2009, this ETF continues to increase holding of gold since inception and currently accounts for 7% of all gold held by ETFs. Currently Invesco Physical Gold ETC holds 243 tons of gold in its assets. Invesco Physical ETF has one of the lowest expense ratio at 0.12%.
This is the one of the largest ETFs which increased its holding of gold from 2020 to 2021 as it rose from 230 tons to 243 tons. Started with 6 tons of gold in 2009, Invesco Physical Gold consistently increased its gold holding to become one of the largest gold ETF companies in the world.
4. Xetra Gold ETF
Xetra Gold ETF is the fourth largest gold ETF with a gold holding of 238 tons. Like Invesco Physical Gold the quantity of gold with Xetra Gold ETF also raised to 238 tons from 217 tons in 2020. Xetra Gold ETF is issued by Duetsche Borse Commodities Gmbh and trades in Euros per gram. The issuer claims that the ETF is 100% backed by physical gold and each note grants the investor rights to deliver 1 gram of gold from the issuer. Xetra Gold ETF trades on the Frankfurt Stock Exchange.
Started in 2008 with 22 tons of gold in portfolio, Xetra Gold ETFs holding of gold increased consistently to reach 238 tons of gold in 2021. The growth in the amount of gold held by the ETF accelerated from 2015 as the holdings more than quadrupled in the last 6 years. Since the gold buying pattern of Xetra Gold ETF follows the investor flows to the fund, increase in gold holdings by the ETF shows the increase in appetite for investors to invest in gold through ETFs.
5. Ishares physical gold ETC
Ishares physical gold ETC targets exposure to gold spot prices and is benchmarked to LBMA gold prices. Issued by BlackRock advisors in 2011, iShares physical Gold ETC’s gold holdings have increased to 220 tons in 2021. iShares physical gold ETC, trades in London stock exchange with a total Net asset value of 17 billion. The expense ratio of the fund is 0.12%. This ETF also claims to have physical replication of its assets under management to the amount of gold it holds.
Currently Ishares physical gold ETC accounts for 6% of all gold holdings by ETFs. Over the period of 10 years assets under management and gold holdings of the ETF have grown from 6 tons of gold in 2011 to the current rate of 220 tons of gold. As with other ETFs, gold holdings of iShares physical gold ETF also declined from a higher level of 235 tons of gold in 2020 to current level. The gold holdings were consistently growing, but 2015-16 was the breakout year as gold holdings have grown significantly from 12 tons of gold in 2015, to 220 tons of gold now.
6. Wisdom Tree Physical Gold ETC
Wisdom tree physical gold ETC is claimed to be a 100% physical gold backed ETF with LBMA gold stored in allocated volts in HSBC London. The security is classified like a debt instrument which can be redeemed or traded in an active stock exchange. The participants in the security can redeem the security by taking delivery of gold bullion. Wisdom tree physical gold as an expense ratio of 0.39%.
Started in 2007 with 19 tons of gold, the assets grew to 159 tons in a short span of 5 years until 2012. The gold holdings were reduced until 2015 and again increased to 162 tons of gold until 2018. Since 2018, the holding of gold by Wisdom Tree Gold ETC has declined drastically year after year to reach only 96 tons of gold in 2021. Wisdom tree physical gold ETC is the largest gold ETF which has reduced its gold holding consistently from 2018.
7. Sprott physical gold trust
Domiciled in Canada and started in 2010 Sprott Physical Gold Trust was created to invest in Gold and holds substantially all its assets in gold bullion. Sprott physical gold trust is the issuer of the fund and is managed by sprott Asset Manager LP. This ETF is backed by fully allocated gold which is redeemable. The management expense ratio is 0.42%. Every unit holder in sprott physical gold trust meeting a minimum redemption amount has the right to redeem and take delivery of physical gold. This is a secure and trustworthy method to investing in physical gold as all of its Gold are LBMA standard delivery gold. With over 60 million dollars traded on an average day sprott Physical gold trust is a highly liquid investment. Current market value of the gold held by the trustees is 5.9 billion which is 99.7% of the net value of the trust.
Gold holding of sport physical gold Trust increased to 85 tons of gold in 2021, this is one of the ETFs which have increased the holding of gold from 2020 to meet the demand from investors. Started with 26 tons of gold in 2010, the ETF has consistently readjusted the portfolio with the price of gold.
8. SPDR Gold MiniShares trust
SPDR Gold MiniShares trust has 74 tons of gold in its holdings. Started in 2018 with 10 tons of gold, gold holdings of SPDR mini have grown consistently over the last 4 years to 74 tons. Gold holdings of SPDR mini have risen from 66 tons in 2020 to 74 tons in 2021.
SPDR Gold MiniShares trust offers one of the lowest expense ratios in the US with 0.18%. This ETF provides fractional ownership in physical gold through its trust. It is marketed as an efficient and beneficial way for individual investors to have long term exposure to gold. The trust only invests in gold and maintains some amount of cash for adjustment of its portfolio. Traded on the New York stock exchange and SPDR Gold MiniShares is a fairly liquid ETF. And the ETF increases purchase of gold as new funds comes to the ETF.
9. ZKB Gold ETF
ZKB Gold ETF is listed in Switzerland and claims to hold 100% of its investment in physical gold. This ETF provides the investors the option to take delivery of gold bars of 12.5 kg per unit and it is available for exchange for money in various currencies.
ZKB Gold ETF started in 2006 with 17 tons of gold in its holding. The gold holdings steadily increased to 117 tons in 2010. However, gold holdings of ZKB gold ETF have reduced steadily until 2015. By the end of 2021, gold holdings of ZKB Gold ETF is at 71 tons. The expense ratio of ZKB Gold ETF 0.40%
10. Amundi Physical Gold ETC
Amundi Physical Gold ETC, issued by Amundi Physical Metals PLC and managed by Amundi Asset Management, offers investors a flexible and cost-efficient method of investing in gold. Benchmarked against the daily price updates of physical gold, the manager of the fund claims that the fund is 100% backed by physical gold investments; each physical bar is segregated, individually identified and allocated. With 5.1 billion assets under management, the fund is fairly liquid. Expense ratio of Amundi Physical Gold ETC is at 0.12%.
Amundi Physical Gold ETC is a new gold ETF investing in physical gold. This ETF started its operation in 2019 with 22 tons of gold. Gold purchases of Amundi Physical Gold ETC have increased consistently over the last 2 years to reach 68 tons of gold in its holding in 2021. With the fast-growing assets under management and corresponding Gold purchases, gold holding of Amundi Physical Gold ETC is expected to increase.
Size of the funds and Assets invested in physical gold is not the only criteria to be evaluated while deciding on the ETF to invest with. Choice ETF to be decided only after careful analysis of the the fund and in consultation with a qualified investment advisor.
To know about largest Gold ETFs in Europe continue reading- Gold ETFs in Europe
Further reading -How to invest in Gold-https://moneygraphit.com/2021/09/10/8-ways-to-invest-in-gold/
Further reading -How to invest in Gold-https://moneygraphit.com/2021/07/31/gold-price-forecasts/
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