7 Best Gold ETFs in Canada

Best Gold ETFs in Canada
Last updated Sep 11, 2020

Recessions and market crashes are very potent in driving investors towards gold. And some investors have an inherent affinity towards the shiny metal. 

Gold is an effective hedge against potential market downturns and a weakening currency. 

The other side of the coin is that stocks and US bonds (including US, EAFE, and EM stocks) are key price drivers of gold.

If buying the metal itself is not viable, gold stocks and ETFs are a natural solution. I personally find gold a bit too “steady” as a long-term holding, but golden stocks and ETFs can be powerful investments. If you are on the quest to find the best gold ETF Canada, this article can be your map.

Be Aware of the Risks

Before we delve into the ETFs, you must understand that gold ETFs are not like most other equity ETFs you might be familiar with. 

They are very volatile, especially during and around recessions, because gold tends to run opposite to the market trends. I caution against holding too much of your portfolio into gold, and a good range is between 2-8%, depending on your risk tolerance and strategy.

7 Best Gold ETFs in Canada

1. Horizons Enhanced Income Gold Producers ETF

horizons logo

Ticker: HEP
Fees: 0.65% + Sales Tax
Dividend Yield: 4.55 %
Assets Under Management (12-month trailing):: $167.6 million
Convertible to Physical Gold: No 

The first ETF is from Horizons, and one of the reasons to consider this stock (apart from its holdings being the golden companies), is its generous monthly dividends. Many of its main holdings aren’t pure gold mining company. 

Many work with precious metals, especially silver, as well as gold. The three most prominent holdings are Pan American Silver Corp (9.7%), Endeavour Mining Corp (7.8%), and Wheaton Precious Metals Corp (7.2%). When it comes to gold, geographical distribution is also important. It’s mostly about the location of the mines, and an off chance that the country, region become too politically unstable to mine. 

In this area, the HEP ETF gets a pass, since the bulk of its assets are allocated in Canada (73.7%). The rest are in the US (12.4%), Burkina Faso (7.7%), and South Africa (6%). 

The monthly distribution per unit isn’t uniform. This year, the lowest monthly distribution was $0.128 per share (in January), and the highest was $0.2 per share (in April). In contrast, last year, no distribution went over $0.134 per share. For gold dividend ETFs like this, you may want to consider another yield, the estimated annualized yield. 

2. Horizons Gold Yield ETF

horizons logo

Ticker: HGY
Fees: 0.60% + Tax
Dividend Yield (12-month trailing): 4.26 %
Assets Under Management: $53.6 million
Convertible to Physical Gold: No 

Another stock from Horizon and the reason is its dividends and a decent yield. The stock doesn’t have a very consistent (or considerable) growth history. Though, if we consider its growth from 2019, the rate is decent enough. The stock raised its market value by about 29% since Jan 2019. It’s an actively managed ETF, hence the relatively high fee and even higher MER of 1.09%. 

Unlike the previous ETF, this one isn’t made up of individual gold stocks. The bulk of the ETF comprises Graniteshares Gold Trust (60.39%), an ETF that tracks the price of gold. Another significant portion is occupied by SPDR Gold Shares (38%), which is the largest (physical) gold-backed ETF in the world. The rest is cash. 

It also distributes dividends monthly, and the progression is a bit more linear compared to the previous ETF, at least for this year. In 2020, the smallest distribution was in January ($0.018 per share), and the most significant one was recently in September ($0.036 per share). The estimated annualized yield is 7.27%, and it might overshoot its prediction if the stock market drops again.

3. iShares S&P/TSX Global Gold Index ETF

ishares logo

Ticker: XGD
Fees: 0.55%
Dividend Yield (12-month trailing): 0.13 %
Assets Under Management: $1.6 billion
Convertible to Physical Gold: No 

Compared to the two ETFs before on this list, this one from BlackRock is massive. The Fund has over $1.6 billion in assets under management, and 40 holdings. The three most significant holdings are Newmont (17.6%), Barrick Gold (17%), and Franco Nevada Corp (9.3%). The geographical distribution of assets is also Canada-heavy, with the country making up 66% weight of the total holding’s portfolio. US (21.3%), South Africa (11.4%), and Peru (1%) make up the rest. 

Another difference is that this Fund pays quarterly dividends. The distributions range over a widespread. The most recent quarter distribution was $0.016 per share, and the highest one in recent years was in June 2019, when the Fund gave out $0.046 in dividends per share. 

As is the case with most other gold ETFs, this one is rated High risk, which is ironic considering that gold is regarded as the ultimate hedge against market volatility. While the dividends are not a very attractive feature of this Fund, its capital growth is. It’s also an old fund and was created in March 2001.

4. BMO Equal Weight Global Gold Index ETF

Ticker: ZGD
Fees: 0.55%
Dividend Yield (12-month trailing): N/A
Assets Under Management: $285 million
Convertible to Physical Gold: No 

Out of the big-six, the bank of Montreal has the most comprehensive collection of ETFs, including two specifically related to gold. Out of the two, BMO equal weight global gold index seems relatively more stable. The ETF tracks the progress of the Solactive Equal Weight Global Gold Index – an index that tracks global gold securities. 

There are 28 underlying holdings in the Fund. The three most prominent ones are almost equally weighted: Hecla mining co (5.6%), Gold Fields (5.28%), and COEUR Mining (5.24%). Geographical allocation mimics the other two funds on this list. With Canadian holdings at the top (48.37%), US (19.86%) and South Africa (9.26%) in second and third position. The rest is divided amongst Burkina Faso, Kyrgyzstan, Tanzania, and Brazil.

The Fund doesn’t offer any dividends, which isn’t unusual for gold ETFs. In fact, relatively fewer gold ETFs pay any dividends. Any distribution that’s due is usually reinvested back in the Fund. 

5. Harvest Global Gold Giants Index ETF 

Harvest Global logo

Ticker: HGGG
Fees: 0.40%
Dividend Yield (12-month trailing): N/A
Assets Under Management: $6.9 million
Convertible to Physical Gold: No 

This is both the youngest and the smallest ETF on this list. It was created in 2019 and has performed brilliantly since. It doesn’t pay any dividends, and the distributions (if there are any), are reinvested. Since Jan 2019, the Fund has returned almost 94% to its investors. It means that it has the potential of doubling up your investment if it continues to grow at this pace.

It follows the Solactive Gold Giants Index, aimed at tracking 20 of the largest gold companies in the world. It’s equally weighted, passively managed (hence the low fee), and has a “High” risk rating. 

The three largest equities on the Fund are Fresnillo PLC (6.9%), Kirkland Lake Gold (5.5%), and Alamos Gold (5.4%). The geographical distribution is also a bit different: Canada (54%), Australia (19%), UK (17%), and US (9%). 

It’s a relatively lightweight fund, with a low fee, and it tracks a strong index. But since it’s so young, it’s yet to be seen how it will hold up against other gold ETFs that have been trading for years on TSX.

6. Royal Canadian Mint – Canadian Gold Reserves ETF

royal canadian mint logo

Ticker: MNT
Fees: 0.35%
Dividend Yield (12-month trailing): N/A
Assets Under Management: $676 million
Convertible to Physical Gold: Yes (Only if you have at least 10,000 shares of the Fund to redeem)

First of all, the royal gold reserves ETF isn’t an ETF at all; it’s an ETR. It’s an Exchange Traded “Receipt,” not an Exchange Traded Fund. What this means is that each ETR represents undivided gold bullion, which will be held by the mint, which charges a small fee. 

Now, of course, each ETR  doesn’t get you a shiny little bullion of gold (which would be too small to hold, if it’s equivalent to the mass of gold you can buy with this amount). It’s basically a fraction of the bullion, calculated based on one fine troy ounce of gold.

If the explanation is too complicated, just consider it equivalent to buying gold. This is why it’s the first “ETR” on the list that can be converted to or redeemed for actual gold. But honestly, it would be a very tricky affair if you go and ask for 100 shares worth of gold. 

So the company has placed a 10,000 ETR threshold for gold redemption, which at the current price would be around $305,000. Therefore, while redeeming the shares for actual gold sounds fun in theory, it’s not actually feasible for most investors

7. Sprott Physical Gold and Silver Trust ETF

Sprott logo

Ticker: CEF
Fees: 0.4% of NAV
Dividend Yield (12-month trailing): N/A
Assets Under Management: $4.34 billion
Convertible to Physical Gold: Yes (Only if you have at least 100,000 shares of the Fund to redeem)

The closing Fund is, again, different from others. For one, it has the actual metal backing it up, and not gold equities, and two, it holds gold and silver, and three, it’s a trust, not exactly an ETF, but it can be traded just like one, and it’s very similar in nature to the Royal Mint ETR. 

It holds 1.4 million ounces of gold and 60.3 million ounces of silver. The metals and held and protected by the Royal Canadian Mint. This dependency on both gold and silver, where distributes the risk on two metals instead of one, also adds silver’s volatility to the trust. One of the reasons to consider this Fund is its tax advantages.

Like most other gold ETFs, it doesn’t pay any dividends. As for capital growth, it’s progress is a bit different from gold-only ETFs. Its five years returns are about 88%. The trust was created by Sprott, a global asset management company based in Toronto.

How to Buy Gold ETFs in Canada

There are many ways to buy gold ETFs in Canada, but the cheapest way is by using a discount broker.

I use the discount broker Questrade for all my stock and ETF trading. You can buy all Canadian gold ETFs like the ones mentioned in this article for free on the platform. Be aware that there is a fee to sell them though.

Get $50 in free stock trades with this offer when you open an account at Questrade.

Conclusion

Finding and investing in the best gold ETFs Canada can provide your portfolio with a safe hedge, especially during volatile markets. 

Dividend offering gold ETFs might have an erratic distribution model, but they can be very generous when the market is low, and gold is soaring high. 

Best Gold ETFs in Canada

If you liked this article…

<a href="https://wealthawesome.com/author/christopher-liew/" target="_self">Christopher Liew, CFA</a>

Christopher Liew, CFA

Creator of Wealth Awesome

A Canadian CFA Charterholder with 11 years of finance experience and the creator of Wealthawesome.com. Read about how he quit his 6-figure salary career to travel the world here.

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