iShares XGD ETF Review 2022: Invest in Gold Producers

If you want to invest in gold without lugging actual gold bars around, what should you buy?

Gold is well known as a time-tested investment and a potential hedge against the dollar and inflation. Gold has historically been a store of value since it is a rare and finite resource.

If you are interested in gold producers, ETFs are one option to consider to gain easy access to gold. Find out more in this iShares XGD ETF Review.

Our Verdict
iShares XGD ETF
8/10Our Score

iShares XGD ETF

Commodity Exchange-Traded Fund

BlackRock iShares XGD is an Exchange-Traded Fund (ETF) that provides you with exposure to the largest North American gold producers trading on the TSX.

Pros
  • High liquidity
  • Invests in large producers
  • Easy access to gold investments
Cons
  • High volatility
  • High-risk investment

What is the iShares S&P/TSX Global Gold Index ETF (XGD)?

XGD is a gold index ETF offered by Blackrock on the Canadian stock exchange TSE. The commodity investment tracks the S&P/TSX Global Gold Index.

XGD focuses primarily on gold producers, not gold itself, with a global perspective.

XGD.TO is currently trading at close to $17.53.

XGD Key Facts

As of June 30, 2022:

  • Ticker Symbol: XGD.TO
  • Exchange: Toronto Stock Exchange
  • Assets Under Management: $1 Billion
  • MER: 0.61%
  • 12-Month Trailing Yield: 1.57%
  • Currency Traded: CAD
  • Eligible Accounts: Most registered (TFSA, RRSP, etc) and non-registered available

iShares XGD ETF MER and Fees

The current management fee is 0.55%. The current Management Expense Ratio is 0.61%. While it may seem high, these fees are comparable to similar sector ETFs.

iShares XGD ETF Dividend Yield

iShares XGD’s dividend yield as of July 18, 2022:

  • 12-month trailing yield: 1.67%
  • Distribution yield: 3.70%
  • Dividend schedule: Semi-Annual

iShares XGD ETF Performance and Returns

Here is the growth of a hypothetical $10,000 in iShares XGD since inception:

 1y3y5y10yIncept.
Average Annual Return (%)-9.666.966.87-0.834.75
Benchmark (%) -9.167.667.56-0.235.34
Source: Blackrock.com

What does BlackRock iShares XGD ETF Invest in?

XGD provides exposure to producers of gold and relevant products at a global level.

XGD ETF’s asset allocation

The fund is nearly entirely invested in equities, with a majority of its focus on Canadian equities and smaller interests in the U.S and international equities.

As of July 18, 2022:

Asset ClassInvestmentCategory
Canadian Equity60.3163.95
U.S. Equity27.2614.04
International Equity12.3417.46
Fixed Income0.000.09
Other0.003.29
Cash0.092.60
Source: Morningstar.com

XGD ETF’s top holdings

As of July 19, 2022, Newmont is its most significant holding at 22.03%. It is followed closely by Barrick Gold Corp. at 14.48%. Franco Nevada Corp. is its third most significant holding at 12.04%

Newmont is one of the world’s largest gold miners, with operations worldwide. They are known for being the only gold company on the S&P 500.

Barrick Gold Corp produces gold and copper in 13 countries. They were the largest gold mining company in the world until Newmont bought Goldcorp in 2019. Their current CEO wishes to exchange their stock on the S&P 500 in the near future.

Franco Nevada Corp is a Canada-based company that is traded on the TSE and the NYSE. Newmont actually used to own Franco Nevada from 2002 to 2007.

TickerNameWeight (%)
NEMNEWMONT22.03
ABXBARRICK GOLD CORP14.48
FNVFRANCO NEVADA CORP12.04
AEMAGNICO EAGLE MINES LTD9.93
WPMWHEATON PRECIOUS METALS CORP7.78
GFIGOLD FIELDS ADR REPRESENTING LTD4.06
RGLDROYAL GOLD INC3.44
AUANGLOGOLD ASHANTI ADR REPTG LTD3.00
YRIYAMANA GOLD INC2.34
KKINROSS GOLD CORP2.16
Source: Blackrock.com

iShares XGD ETF Sector Weighing

XGD’s holdings are composed of stocks in the Materials sector:

SectorsInvestment %
 Basic Materials100.00
 Consumer Cyclical0.00
 Financial Services0.00
 Real Estate0.00
 Communication Services0.00
 Energy0.00
 Industrials0.00
 Technology0.00
 Consumer Defensive0.00
 Healthcare0.00
 Utilities0.00
Source: Morningstar.com

iShares XGD ETF Geographic Exposure

The fund’s geographic exposure is 65.29% in Canada and 25.95% in the United States.

As of July 18, 2022:

TypeFund
Canada65.29
United States25.95
South Africa7.94
Cash and/or Derivatives0.09
Other0.74
Source: Blackrock.com

iShares XGD Risk Indicator

Blackrock lists XGD as a high-risk indicator. This corroborates the high volatility noted by Morningstar.

Source: Blackrock.com

Is XGD a good gold investment?

XGD is a high-potential gold ETF. It’s a leading Canadian ETF with high growth potential as well. It could perform better than regular gold ETFs that focus on just holding gold.

This is because, during 2020, gold had risen 35% from mid-March to early August. XGD rose over 85% in that same time period.

This suggests a high potential upside since the ETF is currently at a relatively low point from a 52-week perspective. That alone is a possible signal that it is a good buying opportunity since it is decently off its 52-week high.

Morningstar’s Factor Profile highlights the ETF’s current emphasis on lower yields, low momentum, high quality, high volatility, high liquidity and small size. These characteristics may not fit investors who are seeking high growth. Additionally, the high volatility indicates that the ETF may present more risk than what it’s worth.

Source: Morningstar.com

Morningstar also compares XGD against the category average and the index amid various Style Factors. Across the board, including Price/Earnings, Long Term Earnings, Price/Cash Flow and more, XGD performs very similarly to the category average and the index.

XGD’s dividend yield is notably higher than the category average but unremarkable compared to the index.

Value & Growth MeasuresInvestmentCat. AverageIndex
Price/Earnings15.6314.1513.88
Price/Book1.411.291.37
Price/Sales2.842.232.26
Price/Cash Flow7.286.146.43
Dividend Yield %3.802.723.83
Long-Term Earnings %13.169.9910.46
Historical Earnings %9.9011.6117.22
Sales Growth %7.808.849.85
Cash-Flow Growth %19.1223.0120.65
Book-Value Growth %7.069.359.84
Source: Morningstar.com

iShares XGD ETF vs. Other ETFs

XGD vs ZGD

ZGD is a global gold ETF offered by BMO. It closely replicates the Solactive Equal Weight Global Gold Index with less expense. Similar to XGD, ZGD focuses on global gold mining equities.

BMO has ZGD designated with a high-risk rating.

ZGD holds numerous equities. Its 35 assets are all roughly weighted equally. Some of their holdings include YRI, OGC, AGI, KNT and FNV.

Weight (%)NameBloomberg Ticker
4.15%YAMANA GOLD INCYRI
4.10%OCEANAGOLD CORPOGC
4.06%ALAMOS GOLD INCAGI
4.03%K92 MINING INCKNT
3.72%FRANCO-NEVADA CORPFNV
3.61%DUNDEE PRECIOUS METALS INCDPM
3.58%ROYAL GOLD INCRGLD
3.55%SSR MINING INCSSRM
3.53%ENDEAVOUR MINING PLCEDV
3.42%B2GOLD CORPBTO
Source: Bmogam.com

Nearly all of their holdings are materials, with 63% based in Canada, 12% from the US and the rest from various other countries.

Source: Bmogam.com

The maximum annual management fee is 0.55%. The management expense ratio is 0.61%. These are the same as XGD’s rates.

Maximum Annual Management Fee0.55%
Management Expense Ratio0.60%

Morningstar’s factor profile describes ZGD as a growth ETF with low yield, low momentum, high quality, high volatility, high liquidity and small size. It has similar style measures to its category average and the index, except for its historical earnings % and its book-value growth %.

It appears that ZGD is very similar to XGD overall, with high risk, a strong focus on materials and relatively low market prices. However, ZGD appears to be more highly diversified in terms of its holdings and, to some extent, in its geographic allocation.

Despite the heavy diversification in ZGD’s holdings, it is still considered to be a high-risk ETF by both BMO and Morningstar. It seems that Blackrock prefers to focus on the big players, as their biggest holdings coincide with the gold producers with the highest market caps. Newmont, Barrick Gold and Franco Nevada total to over $100 billion in market cap.

Is XGD a Better Investment or ZGD?

Both ETFs appear to be very similar to each other, so trying to decide between the two may not be necessary.

If one is chasing growth or high return in either ETF, it appears that one will have to properly predict gold’s trend to try to ride gold either down or up since the long-term returns of both ETFs are unremarkable.

In other words, the high volatility in both ETFs could present opportunities to the right investors who can take advantage when the volatilities are present.

How to Buy iShares XGD ETF in Canada?

My favourite and cheapest ways to buy iShares XGD ETF in Canada:

ImageProduct TitleFeaturesPrice
Editor's Choice
Wealthsimple Trade
Wealthsimple Trade
  • ETF buys and sells have $0 trading fees
  • Desktop and mobile trading
  • Reputable Brand
  • Beautiful Design
Get $25 Signup Bonus
Reliable Pick
Questrade
Questrade
  • ETF buys have $0 trading fees
  • Desktop and mobile trading
  • Most types of accounts available
Get $50 Free Stock Trades

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

Conclusion

In sum, XGD represents a possibly cheap ETF with material risk and high volatility. I am not sure it is wise to accept so much risk and so much volatility compared to possible non-gold investment options.

Granted, if you strongly believe in gold producers, this is a good way to gain exposure to them.

Overall, XGD is an easy and good way to gain exposure to gold producers in Canada. If your intention is to hedge against inflation, then it could be a good investment for you.

Be aware of its high-risk rating, and proceed cautiously by not investing a big proportion of your portfolio into it.

Learn more about the best gold ETFs in Canada here.

Photo of author
Author Bio - Christopher Liew is a 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.

Check Out These Posts:

Leave a Comment