There’s an easy argument for investing in precious metals like gold or silver. If you think the value of the commodity is about to go up, you’ll make money.
But what’s the best way to play such a move?
Owning a gold miner is probably a better choice than the commodity itself because of operating leverage. If gold rises from $1,300 to $1,500 per ounce and a miner’s cost structure stays the same, that price increase flows straight to the bottom line.
Betting on one producer is risky. Owning an ETF is the safer choice.
One choice is the iShares S&P TSX Global Gold Index Fund (TSX:XGD), which owns 48 gold and silver miners from around the world. 69% of the portfolio is located in Canada, with 16.6% in the United States. Since the underlying companies own gold mines around the world, it’s a true worldwide ETF.
The iShares gold ETF is Canada’s largest precious metals ETF, with a market cap of $756 million. It has a management expense ratio of 0.61%.
BMO ETFs have a couple of interesting ways to get exposure to the gold market as well. The first is the BMO Equal Weight Global Gold Index ETF (TSX:ZGD), which has 38 different holdings, each consisting of around 3% of assets. These are medium or large-cap names.
There’s also the BMO Junior Gold ETF (TSX:ZJG), which holds shares of smaller companies. It’s much more concentrated with only 14 holdings, and it has a management fee of 0.60%, which is average for specialty ETFs.
