Gold and Silver ETFs Explained

ETFs or exchange-traded funds are similar to mutual funds. They are pooled investment securities that allow investors to buy a chunk of the fund to diversify their investment portfolios. These types of funds track the prices of a particular index, sector, commodity, or other asset.

However, unlike mutual funds, you can trade ETFs on the stock market, and they’re also much more cost-effective and liquid. In this article, we will explore what gold and silver ETFs are and whether they’re similar to investing in physical precious metals.

Keep reading until the end, as we will also go over the best precious metals ETFs to invest in 2023.

What Are Precious Metal ETFs?

Precious metals ETFs allow investors to gain exposure to the precious metals market without directly purchasing, storing, or reselling the physical metals.

Some precious metals ETFs may directly track the price of gold, silver, platinum, and palladium, while others may invest in mining companies.

Gold and Silver ETFs Explained

Similar to precious metals ETFs, gold and silver ETFs allow investors to diversify their investment portfolio by adding gold or silver. The company that issues the ETF may purchase, store, and resell silver or gold bullion or invest in silver or gold-related companies.

When investors buy shares in a silver or gold ETF, they become part owners of the pooled fund. The value of their investment rises and falls depending on the underlying value of the precious metals or the company’s stock.

What Is GLD?

On the stock exchange, there are short forms given to stocks and ETFs. GLD represents the SPDR Gold Shares exchange-traded fund, which was once the largest physically backed gold ETF in the world.

The SPDR Gold Shares ETF began in 2004 and is worth more than $57 billion. Investors can invest in gold without actually buying, storing, and selling gold by purchasing GLD on the New York Stock Exchange Arca.

GLD ETF is designed to mimic the movement of gold prices. Investors can potentially make money as gold prices rise and lose out on their investment when the value of the precious metal drops.

By purchasing shares in the GLD ETF, investors get an undivided ownership interest in the SPDR gold trust. This exchange-traded fund makes investments in gold bullion and cash. It is a great investment vehicle for pension or retirement schemes that cannot directly invest in physical gold or precious metals.

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What Is SLV?

SLV is short for iShares Silver Trust ETF, an exchange-traded fund that reflects the performance of the price of silver. The fund began in 2006 and currently has over $11.35 billion in assets under management. It holds over 325 million ounces of silver in its trust.

Does Owning Shares of Precious Metals ETFs Equate to Owning Physical Gold or Silver?

There is a common misconception that owning shares of precious metal ETFs equates to owning physical gold, silver, or other precious metals. However, that is not the case.

It’s important for investors to understand that although a precious metals ETF may buy and hold precious metals, it does not give them access to physical gold, silver, platinum, or palladium in exchange for their shares.

However, investors can exchange their GLD or SLV shares for baskets of gold or silver through the Bank of New York Mellon (the fund’s trustee). To be eligible for delivery of physical gold or silver, the participant must have 100,000 share blocks of GLD or 50,000 share blocks of SLV, and they must make arrangements for the physical delivery by contacting their broker.

As of September 2023, the GLD ETF stands at $180, and the SLV ETF will cost an investor $22.17 per share. Investors must have either $18 million worth of GLD shares or roughly $1.1 million in SLV shares to be able to receive physical gold or silver.

With the eligibility requirements for the delivery of physical gold and silver at an all-time high, it can prevent most investors from holding precious metals in their homes when they invest in GLD or SLV ETF shares.

The Best Precious Metals ETFs to Invest in 2023

According to the S&P 500 and S&P GSCI precious metals indices, the US stock market outperformed the precious metals ETFs between 2019 and 2022.

However, as the global economy starts to slow down due to many different economic and geo-political factors, precious metals have started to regain their luster.

The following are the best precious metals ETFs to invest in 2023:

abrdn Physical Silver Shares ETF

  • Expense ratio: 0.30%
  • Assets under management: $1.17 billion

Issued by abrdn Silver ETF Trust, the abrdn Physical Silver Shares ETF reflects the performance of the value of silver minus the trust’s expenses. It is a cost-effective and convenient way for investors to invest in silver.

iShares Silver Trust

  • Expense ratio: 0.50%
  • Assets under management: $11.35 billion

Traded on the NYSE Arca, the iShares Silver Trust uses the London Bullion Market Association price of silver as a reference benchmark. As of July 2023, the ETF had an equity beta (three years) of 0.4 and a standard deviation of 29.33%.

SPDR Gold MiniShares Trust

  • Expense ratio: 0.10%
  • Assets under management: $6.2 billion

The key objective of SPDR Gold MiniShares Trust is to reflect the price of gold bullion minus the trust’s expenses. It is cheaper than opening a traditional gold bullion account where investors have to buy, store, and insure their physical gold.

SPDR Gold Shares

  • Expense ratio: 0.40%
  • Assets under management: $57.44 billion

Managed by State Street Global Advisors, the SPDR Gold Shares or GLD ETFs are traded on several exchanges across the world, including NYSE Arca, Singapore Stock Exchange, and Tokyo Stock Exchange, among many others.

Goldman Sachs Physical Gold ETF

  • Expense ratio: 0.18%
  • Assets under management: $631.1 million

The Goldman Sachs Physical Gold ETF reflects the current gold price minus the fund’s expenses. As of July 2023, this gold ETF has had a 9.68% Net Asset Value performance since its inception in 2018.

Honorable Mentions: Best Precious Metals ETFs to Invest in 2023

Besides the top 5 precious metals ETFs to invest in 2023, here are some of the honorable mentions that deserve your attention:

  • PICK: PICK ETF is an excellent alternative for investors who are looking to diversify their investments. It replicates the returns of MSCI ACWI Select Metals & Mining Producers Ex Gold & Silver Investable Market Index by investing in companies that engage in mining activities.
  • iShares Gold Trust Micro ETF (IAUM): The IAUM is one of the lowest-cost precious metals ETFs that issue shares on the NYSE Arca and allows investors to exchange 50,000 share blocks for the underlying gold.
  • abrdn Physical Precious Metals Basket Shares ETF (GLTR): Although the GLTR ETF has performed poorly in 2023 compared to gold ETFs, it has shown significant returns over the past five years.

Final Thoughts

Silver and Gold ETFs offer investors numerous benefits, including flexibility, portfolio diversification, and liquidity. However, these funds are subject to market volatility, tracking errors, and counterparty risks. It’s crucial for investors to do their own research and choose an ETF that aligns with their investment goals.

Tim Schmidt

About 

Tim Schmidt is an Entrepreneur who has covered retirement investing since 2012. He started IRA Investing to share his expertise in using his Self-Directed IRA for alternative investments. His views on retirement investing have been highlighted in USA Today, Business Insider, Tech Times, and more. He invested with Goldco.