Is investing in gold ETFs worth it in 2024? Revealing the 6 most popular gold ETF products

Why Gold Still Remains a Safe Haven for Investors

Gold has long been regarded as a symbol of wealth. Its appeal lies in its scarcity and its hedging properties during times of economic uncertainty. Unlike other assets, gold often performs steadily amid market volatility, making it a popular tool for capital preservation among many investors.

Investing through gold ETFs has become the best way to access this market. Compared to directly holding physical gold, these funds are not only low-cost and affordable per share but also eliminate concerns about secure storage.

What Is a Gold ETF? A Basic Overview

A gold ETF is an investment instrument that tracks the price of gold. Unlike traditional physical gold, these funds mainly fall into two categories:

Physically-backed ETFs directly hold gold bars stored in secure vaults at financial institutions. Each share of the fund represents a proportional ownership of the gold. This approach allows investors to gain exposure to gold without bearing the costs and risks associated with physical storage.

Synthetic ETFs track gold prices indirectly through derivatives such as futures and options. While these products may have cost advantages, investor returns depend on the issuer’s creditworthiness, introducing counterparty risk.

Core Advantages of Gold ETFs

Liquidity is a standout feature of gold ETFs. Investors can buy and sell at any time during trading hours, just like stocks. Compared to actively managed gold funds, these ETFs typically have lower management fees.

The costs associated with gold ETFs mainly include two parts: the annual expense ratio and brokerage commissions. These costs are transparent and manageable, making them a preferred choice for cost-conscious investors.

Key Trends in the Gold Market for 2024

Geopolitical Tensions Boost Gold Demand

In 2024, interest in gold ETFs has surged significantly, driven by multiple factors. Ongoing conflicts in Ukraine and Gaza, along with tense relations between the US, China, Russia, and Iran, have heightened demand for safe-haven assets. As a classic safe-haven, gold naturally benefits from these adverse conditions.

Additionally, expectations that Trump may return to the White House in 2025 have raised concerns about increased market volatility, further encouraging allocations to stable assets like gold.

The Inverse Relationship Between Interest Rate Expectations and the US Dollar

Historical data shows that gold prices tend to move inversely to the US dollar. As the Federal Reserve may initiate a rate-cut cycle, the dollar is expected to weaken, making international gold trading cheaper and stimulating global demand.

Meanwhile, falling interest rates diminish the appeal of fixed-income assets, prompting investors to shift toward gold, cryptocurrencies, and stocks as alternatives.

Capital Flows in Gold ETFs: An Interesting Contradiction

According to the World Gold Council, there has been a net outflow of funds from gold ETFs over the past nine months. In February 2024 alone, $29 billion was withdrawn from global gold ETFs, with North America accounting for $24 billion, Europe $7 billion, and only Asia recording a net inflow of $2 billion.

This may seem puzzling, but it actually reflects a healthy market dynamic: many investors took profits after substantial gains in gold, reallocating funds into booming tech stocks and emerging assets like Bitcoin. Despite ETF outflows, gold prices have continued to rise since October 2022, supported by central bank purchases and geopolitical factors.

Central Banks Worldwide Increasing Gold Reserves

A 2023 survey by the World Gold Council of 57 central banks worldwide shows that 71% plan to increase their gold reserves in the next 12 months. This is up 10 percentage points from 61% in 2022, highlighting gold’s strategic importance for central banks.

The share of US dollars in global foreign exchange reserves has been declining annually, with gold filling this gap. Given gold’s safety, liquidity, stability, and tangible value, this trend indicates a solid long-term demand foundation. Major holders include the US, Germany, Italy, France, Russia, China, Switzerland, India, and the Netherlands, underscoring gold’s significance to the global economy.

Diverse and Stable Gold Demand Sources

Another major advantage of gold ETFs is the diversity of their underlying demand sources. According to the World Gold Council, global gold demand in Q4 2023 reached 1,149.8 tons, from:

• Jewelry demand: 581.5 tons
• Investment demand: 258.3 tons (primarily driven by physical gold-backed ETFs)
• Central bank demand: 229.4 tons
• Industrial use: 80.6 tons

Over the past 14 years, annual gold demand has rarely fallen below 1,000 tons, indicating considerable market stability. Gold supply mainly comes from mining and recycling, which are unlikely to change drastically in the short term, maintaining a relatively balanced supply and demand landscape.

Practical Considerations for Investing in Gold ETFs in 2024

Should You Invest in Gold ETFs?

Deciding whether to invest in gold ETFs should be based on your personal financial goals and risk tolerance. High-risk investors might prefer focusing on assets with higher return potential. However, for those with moderate or lower risk appetite, gold ETFs can serve as an important component of a diversified portfolio, especially for hedging against market downturns.

Key factors to evaluate include:

Portfolio Diversification: Gold ETFs add a layer of protection, providing a buffer during declines in other asset classes.

Market Volatility Management: Gold often remains resilient during stock market turbulence, acting as a natural “safe harbor.”

Inflation Hedge: Historical data shows gold performs relatively well during periods of high inflation. Although current inflation is easing, cautious central bank policies on rate cuts suggest gold can still offer protection against potential inflation resurgence.

Global Debt Risks That Cannot Be Ignored

Since the 2008-2009 financial crisis, global debt levels have expanded sharply. For major economies: US public debt is 129% of GDP; Japan, the world’s largest debtor, at 263.9%; China and the EU, while more controlled, are experiencing significant growth.

Governments have borrowed extensively to stimulate growth, but results have been mixed. As a result, currencies are under pressure from declining purchasing power. Fed Chair Powell recently admitted on CBS News that “long-term, the US faces an unsustainable fiscal path.” This raises concerns about the long-term sustainability of the global financial system.

If the global financial system undergoes restructuring—such as a return to the gold standard instead of the dollar standard—gold ETFs will be among the most powerful tools for investors to hedge systemic risks.

Comparison of 6 Outstanding Gold ETF Products in June 2024

Choosing the most suitable gold ETF depends on your specific needs. Here are six top-performing products based on expense ratios, liquidity, and historical performance:

1. SPDR Gold Shares (NYSE: GLD)

This fund is a giant in the gold ETF space, offering unmatched liquidity. It directly tracks the price of London gold bars priced in USD, stored by HSBC New York. With $56 billion in assets and an average daily trading volume of 8 million shares, it’s highly liquid.

Its annual management fee is only 40 basis points (0.40%), with a current share price of $202.11, up 6.0% in 2024 so far.

2. iShares Gold Trust (NYSE: IAU)

IAU is another major player, known for low fees and steady performance. It tracks daily London gold prices, stored by JPMorgan London. The expense ratio is just 25 basis points (0.25%), with $25.4 billion in assets and an average daily volume of 6 million shares. Its share price is $41.27, with a 6.0% increase in 2024.

3. Aberdeen Physical Gold ETF (NYSE: SGOL)

This physically-backed gold ETF stores gold in secure vaults in Switzerland and the UK. It has $2.7 billion in assets, an average daily volume of 2.1 million shares, and an expense ratio of 17 basis points (0.17%). Its share price is $20.86, with a 6.0% rise in 2024.

4. Goldman Sachs Physical Gold ETF (NYSE: AAAU)

Supported by a reputable financial institution, this physical gold fund offers investors peace of mind and market access. Gold is stored by JPMorgan and held in UK vaults. It has $614 million in assets, an average daily volume of 2.7 million shares, and an expense ratio of 18 basis points (0.18%). Its share price is $21.60, up 6.0% in 2024.

5. SPDR Gold MiniShares (NYSE: GLDM)

As a lightweight alternative to the giant GLD, GLDM is a low-cost, physically-backed US-listed ETF with an expense ratio of just 10 basis points (0.10%). It manages $6.1 billion in assets, with an average daily volume of 2 million shares, and a share price of $43.28, rising 6.1% in 2024.

6. iShares Gold Micro Fund (NYSE: IAUM)

IAUM is the lowest-cost gold ETF on the market, with a fee of only 0.09%. It tracks daily London gold prices, has accumulated $1.2 billion in assets, and an average daily volume of 344,000 shares. Its share price is $21.73, also up 6.0% in 2024.

Long-term Performance Benchmark: 2009-2024

From early 2009 to now, spot gold prices have increased by 162.31%. Over this long-term wealth accumulation period, the performance of each gold ETF is as follows:

• IAU leads with a return of 151.19%
• GLD follows closely with 146.76%
• SGOL: 106.61%
• AAAU: 79.67%
• GLDM: 72.38%
• IAUM (since its launch in 2021): 22.82%

Practical Tips for Gold ETF Investors in 2024

Before allocating to gold ETFs, investors are advised to take the following steps:

Clarify your investment goals and risk appetite. Define your financial objectives and acceptable risk levels before adding gold ETFs to your portfolio.

Achieve genuine diversification. Avoid putting all your funds into a single asset. While gold ETFs offer stability, they should complement other asset classes for a balanced portfolio.

Adopt a long-term investment perspective. Gold prices can be volatile in the short term; view gold ETFs as long-term preservation tools rather than short-term trading instruments.

Conduct thorough market research before investing. Understand the current macroeconomic and geopolitical environment, especially the US economy. While gold is a safe-haven, timing your investment is equally important.

Final Thoughts

Investors now face a real choice: how to allocate capital to protect long-term wealth? Will governments continue to print money endlessly? Could a debt crisis similar to the 1980s erupt again?

One of the core advantages of gold ETF investing is its low entry barrier—retail investors with limited capital can participate. Now that you understand the features and costs of the six most prominent gold ETFs, the power to make an informed decision is in your hands.