10 Best Gold ETFs in Canada To Buy In December 2023

Looking for an easy way to invest in gold? Investing in gold ETFs is an increasingly popular strategy for Canadians and can serve as a hedge against economic uncertainty.

Gold ETFs offer you exposure to the gold market without the need to physically own or store the precious metal.

Buying gold through an ETF removes the risk of buying low-purity bars, as 99.5% purity is the standard for gold ETFs.

We’ll cover the best gold ETFs in Canada below and discuss some of their features in more detail.

Factors to Consider Before Selecting a Gold ETF

Before jumping in and buying a gold ETF, here are some key factors to consider:

1. Expense Ratio: The expense ratio represents the annual fee that the fund charges its shareholders. Compare the expense ratios of several gold ETFs to ensure you’re not overpaying.
2. Liquidity: Check the average trading volume of the ETF. A higher volume typically means better liquidity, which can lead to narrower bid-ask spreads and easier entry and exit.
3. Physical Backing: Some gold ETFs hold actual physical gold in vaults, while others use derivatives or other financial instruments. Ideally, for direct exposure, you’d want an ETF that has physical gold backing.
4. Storage and Custodian Details: If the ETF holds physical gold, understanding where and how the gold is stored and who the custodian is can be important.
5. Tax Implications: Depending on your jurisdiction, the way gold ETFs are taxed might differ from other investment vehicles.
6. Historical Performance: While past performance is no guarantee of future results, examining an ETF’s historical performance can give you an idea of its volatility and how it has reacted to past market conditions.
7. Investment Strategy: See if the ETF’s strategy aligns with your investment goals. Some ETFs might focus on gold bullion, while others might focus on gold futures or a mix of physical and derivative instruments.

Pros and Cons of Investing in Gold ETFs

Gold ETFs have their advantages and disadvantages, similar to all investments, so be aware before investing. 

how should you incorporate gold ETFs into your portfolio

Incorporating gold ETFs into your portfolio begins with understanding your investment objective. Are you seeking diversification, a hedge against inflation, or a safe haven during economic downturns? Your reason will guide your allocation.

Traditionally, financial advisors have often recommended allocating 5-10% of a portfolio to gold, but this isn’t a one-size-fits-all rule.

When you look at your current portfolio, assess how gold ETFs complement your existing assets and whether they provide the diversification or protection you’re seeking.

The economic landscape can also be an influential factor. If you foresee economic turbulence or inflationary pressures, you might want to lean toward increasing your gold exposure.

10 Best Gold ETFs in Canada

• CI Gold Bullion Fund (VALT.TO)
• Purpose Gold Bullion Fund (KILO.TO)
• iShares S&P/TSX Global Gold Index ETF (XGD.TO)
• Horizons Gold ETF (HUG.TO)
• iShares Gold Bullion ETF (CGL.TO)
• BMO Equal Weight Global Gold Index ETF (ZGD.TO)
• BMO Junior Gold Index ETF (ZJG.TO)
• Harvest Global Gold Giants Index ETF (HGGG.TO)
• CI Gold+ Giants Covered Call ETF (CGXF.TO)
• Horizons Gold Producer Equity Covered Call ETF (GLCC.TO)

1. CI Gold Bullion Fund

CI offers a fairly standard gold bullion fund through both currency-hedged and currency-unhedged ETFs.

VALT comes with a very short performance track record and is a small ETF by assets under management. It comes with one of the lowest gold ETF MERs in Canada. The ETF holds underlying gold bullion and aims to return physical gold’s price performance less any fees.

Despite the short track record and small size, VALT is an excellent choice to consider because of its low fees and physical gold backing.

2. Purpose Gold Bullion Fund

Another gold bullion ETF to consider is KILO, offered by Purpose Investments. It is available both in currency-hedged and unhedged options.

The ETF comes with a short performance track record and is a large ETF by assets under management. It comes with a very low MER for a gold ETF. The fund invests primarily in gold bullion but may also have minor exposure to gold certificates.

Although not the absolute most inexpensive option on our list, KILO is a great choice for adding gold bullion exposure to your portfolio.

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

iShares’s XGD is a global gold miner stock ETF in Canada. It is also a passive strategy that follows the S&P/TSX Global Gold Index.

By investing in global gold mining companies, the ETF is riskier than investing in gold bullion but less risky than investing in junior miners. Gold miner performance is closely tied to the price of gold as well as their own underlying fundamentals and future prospects.

XGD has a very long performance track record and is a massive ETF by AUM. The ETF has a relatively high MER when compared to gold bullion ETFs. 

If you are looking for exposure to global gold miners as opposed to just gold bullion, XGD is a great option to consider for your portfolio.

4. Horizons Gold ETF

Horizons offers a gold futures fund in Canada through its HUG ETF. HUG invests in gold futures (not physical gold) and is currency hedged to the Canadian dollar.

HUG tracks the performance of the Solactive Gold Front Month MD Rolling Futures Index ER.

The ETF comes with a very long performance track record and is a very small ETF by assets under management. It comes with a low MER for a gold ETF. Since the ETF invests in futures, it does not hold physical gold bullion in a vault.

If physical backing is not important to you when investing in gold, HUG is a great option to consider.

5. iShares Gold Bullion ETF

Blackrock’s iShares lineup offers Canadian both a hedged and unhedged version of its gold bullion ETF.

CGL has a very long performance track record and is a massive gold ETF by assets under management. It comes with a relatively high MER for a gold bullion ETF. The ETF holds underlying gold bullion and aims to return physical gold’s price performance less any fees.

With a long track record and large asset size, CGL is a good option to consider for adding exposure to gold bullion to your accounts.

6. BMO Equal Weight Global Gold Index ETF

ZGD is a global gold miner stock ETF offered by BMO on the ETF shelf here in Canada. It is a passive strategy that follows the Solactive Equal Weight Global Gold Index.

Since the ETF invests in gold mining companies, the risk profile of this fund is higher than most gold bullion ETFs. This is because mining stocks typically amplify both your gains and losses when there is a movement in the price of gold.

ZGD comes with a long performance track record and is a very small ETF by assets under management. It comes with a relatively high MER for a gold ETF. 

If you are looking for higher-risk exposure to gold prices, a gold miner ETF like BMO’s ZGD may be a great option to consider.

7. BMO Junior Gold Index ETF

One of the highest risk options when investing in gold is to purchase shares in junior mining companies. These companies are usually less established and provide investors with much higher volatility that is usually tied to the price of gold.

ZJG tracks the Dow Jones North America Select Junior Gold Index.

BMO’s ZJG ETF has a long performance track record and is a small ETF by assets under management. It comes with a relatively high MER for a gold ETF. The fund invests in junior gold miners in North America.

If you are looking for a high-risk, high-reward approach to investing in gold, ZJG is a great ETF to consider for your portfolio.

8. Harvest Global Gold Giants Index ETF

Harvest Portfolios Group is another investment firm that offers a gold ETF in Canada. The strategy is passively managed and invests in large global gold miner stocks.

HGGG passively tracks the Solactive Global Gold Giants Index TR.

The ETF comes with a short performance track record and is a tiny ETF by assets under management. Due to its small size, HGGG is at risk of closing down early in the future if it isn’t able to attract more capital from investors.

HGGG comes with a relatively higher MER than gold bullion ETFs in Canada. 

If you are looking to invest in mature global gold companies, this ETF is a great strategy to keep an eye on going forward, especially if it attracts more capital. 

9. CI Gold+ Giants Covered Call ETF

Although gold does not pay interest for holding it, a covered call strategy added to a gold fund can provide a steady stream of high income. CI’s CGXF ETF invests in North American gold miner stocks while also implementing covered calls for income.

The ETF comes with a long performance track record and is a fairly large ETF by assets under management. It comes with a high MER for a gold ETF, but it is actively managed over time. 

CGXF pays distributions to investors on a quarterly basis and has an annualized distribution yield of over 9%. Although the yield is incredibly high, the covered call strategy limits upside potential over time.

If you are looking to add gold exposure to your portfolio while also valuing a high-income stream, CGXF is a great ETF to consider.

10. Horizons Gold Producer Equity Covered Call ETF

Horizons offers a covered call gold ETF in Canada designed to provide investors with a high-income stream. GLCC invests in North American gold miner stocks.

The ETF comes with a long performance track record and is a fairly large ETF by assets under management. It comes with the highest MER on our list of gold ETFs available in Canada. 

GLCC pays distributions on a monthly basis and has an astronomical yield of just under 10%. The covered call strategy does limit the growth potential of the fund over time.

If you are looking for a high monthly income stream from your gold investment, GLCC is a great choice.

Tax Implications of Gold ETFs

In Canada, gold ETFs are subject to different tax treatments depending on the type of ETF and the account in which they are held.

Gold ETFs can be structured either as a trust that holds physical gold bullion or as a fund that invests in gold mining stocks. The tax treatment varies for each type.

For gold bullion ETFs, the Canada Revenue Agency (CRA) treats them as a specified investment flow-through (SIFT) trust. This means that any income or capital gains generated within the ETF are passed onto you as the unitholder and are subject to tax.

In contrast, gold mining stock ETFs are treated as regular equity investments. The income derived from these investments, such as dividends, is subject to the dividend tax credit. Any capital gains realized upon selling the ETF units are only 50% taxable.

Gold ETFs Vs. Other Investment Options

Gold ETFs Vs. Gold Bullion or Gold Bars

Gold ETFs provide a much more convenient and liquid way for you to invest in gold. They can be traded like stocks on the stock exchange, making them more accessible compared to physical gold bullion or gold bars. When investing in gold bullion or gold bars, you face additional expenses, such as storage and insurance costs, as well as the potential risk of theft. The main positive of physical gold is it provides direct physical ownership which is beneficial in extreme situations.

Gold ETFs Vs. Gold Mutual Funds

Here’s a table that highlights the main differences between the two. I personally prefer ETFs to mutual funds in most cases, mainly due to the lower fees:

	Gold ETFs	Gold Mutual Funds
Tradeability	Traded on stock exchanges like stocks during market hours	Bought/sold based on end-of-day NAV
Pricing	Continuous throughout the day	Once a day after market close
Management Fees	Typically lower due to passive index tracking	Might be higher, especially if actively managed
Minimum Investment	Often no minimum; buy as little as one share	May have minimum requirements
Tax Efficiency	Might offer more tax efficiency in some jurisdictions	Can differ based on structure and trading frequency
Liquidity	Generally high for popular ETFs	Depends on fund size and redemption terms
Diversification	Direct exposure to gold or gold companies	Mix of bullion and gold mining stocks possible
Investment Plans	Usually manual investments	Often allow automatic investments/withdrawals

Gold ETFs and Inflation

In times of economic uncertainty, many investors turn to gold as a hedge against inflation. As you may know, inflation refers to the gradual rise in prices for goods and services over time, which erodes the purchasing power of currency.

Gold, as a tangible asset, tends to maintain its value during periods of inflation, making it an attractive investment option for those looking to protect their wealth.

It’s important to consider that gold will not be a perfect hedge against inflation. While gold has historically performed well during certain inflationary periods, there’s no guarantee it will always do so.

The relationship between inflation and gold prices can be influenced by numerous other factors, such as interest rates, geopolitical events, and mining supply issues.

Frequently Asked Questions

What are the top gold ETFs in Canada offering dividends?

One great option is the iShares S&P/TSX Global Gold Index ETF (XGD), which is a huge fund with a large AUM. This ETF is focused on global gold mining companies, so it could be a little riskier than investing in gold bullion, but less risky than investing in junior miners.

What are some popular precious metals ETFs in Canada?

In addition to gold, you may be interested in ETFs investing in other precious metals. The iShares Gold Bullion ETF (CGL) is a straightforward option, and invests directly in gold bullion.

What is the Safest Gold ETF in Canada?

The safest gold ETFs in Canada are those investing directly in gold bullion. Gold ETFs targeting miners or junior miners tend to be more volatile than movements in the price of gold.

How to Buy the Best Gold ETFs in Canada

The cheapest way to buy ETFs is from discount brokers. My top choices in Canada are:

To learn more, check out my full breakdown of the best trading platforms in Canada.

Conclusion

Investing in gold does not have to be difficult or require stockpiling a mountain of gold bars in a safe box. ETFs allow for an easy and liquid way to add gold exposure throughout your investment accounts. Here’s the ultimate list of the best ETFs in Canada.

Especially if you have room in accounts such as RRSPs or TFSAs, you could see significant tax benefits from investing in a gold ETF as opposed to buying physical gold.

The ETF shelf in Canada for gold strategies is diverse and comes with numerous great options.

Buying gold ETFs is just one way to access gold – make sure you are aware of all of your other options when it comes to investing in precious metal. You can also buy gold stocks individually instead if you like to be more hands-on in your investing.