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Sprott Gold Miners ETF (NYSEMKT:SGDM) targets the equity performance of gold-producing companies, whereas iShares Gold Trust (NYSEMKT:IAU) tracks the spot price movements of physical gold bullion.
These two funds serve the gold market through entirely different mechanisms. One relies on the operational efficiency and profitability of mining firms, while the other fluctuates purely with the spot price of the metal. This distinction makes them useful for different strategies, whether seeking a cleaner hedge against inflation or participating in the business side of extraction.
Beta measures price volatility relative to the S&P 500; beta is calculated from monthly returns over the available fund history (up to five years). The 1-yr return represents total return over the trailing 12 months. Dividend yield is the trailing-12-month distribution yield.
iShares Gold Trust is notably more affordable, with an expense ratio of 0.25% compared to 0.46% for Sprott Gold Miners ETF. This lower cost could make it more attractive for long-term commodity exposure.
iShares Gold Trust provides direct exposure to the commodity markets by tracking the daily spot price performance of gold bullion. It is categorized as Cash & Others at 100%, and its portfolio consists entirely of Physical Gold at 100%. Managed by iShares Delaware Trust Sponsor, it offers a way for investors to gain exposure to the precious metal without the logistical burden of holding physical bars and was launched in 2005.
Sprott Gold Miners ETF targets gold-producing companies in the U.S. and Canada, primarily those trading on major exchanges. It focuses on Basic Materials at 100%, and its largest positions include Agnico Eagle Mines at 10.04%, Newmont (NYSE:NEM) at 7.84%, and Barrick Mining at 7.38%. The fund usually invests 90% of its net assets in its underlying index and was launched in 2014.
For more guidance on ETF investing, check out the full guide at this link.
Gold peaked in January after a historic run, then pulled back sharply as interest rates and Treasury yields stayed high. Gold pays no interest, so higher yields make it less appealing next to bonds. Even so, long-term investors hold it as a hedge when stocks or the dollar wobble, and central banks and ETF buyers around the world have kept adding.
For long-term investors, the iShares Gold Trust (IAU) looks like the better way to own it. It holds physical gold, charges roughly half what Sprott's miners fund does, and is one of the largest gold funds around.
SGDM owns 43 gold miners, and when gold jumps, miners can jump more. That is why it has beaten gold at times and pays a small dividend. Miners also carry rising costs, and gold stocks have pulled back too. IAU pays no dividend, but it tracks gold without the bumpier ride.
Even after the pullback, IAU offers a simple, low-cost way to hold gold for the long haul without betting on mine managers or costs. SGDM works best as a small add-on for investors seeking additional gold risk.
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Which Gold ETF Is the Better Buy: iShares' Gold Trust IAU or Sprott's Gold Miners SGDM? was originally published by The Motley Fool
