Best Gold ETFs in December 2024 – 5Y CAGR Basis – Nippon India ETF Gold BeES, SBI Gold ETF and More

Gold has always been preferred for those seeking stability and protection against market volatility. With its ability to hedge against inflation and economic uncertainties, gold remains a timeless asset. In December 2024, Gold Exchange-Traded Funds (ETFs) remain attractive for investors looking to diversify their portfolios.

Gold ETFs combine the allure of gold with the convenience of stock market investing. These funds track the price of gold and are traded on exchanges, making them a cost-effective and liquid way to invest in the precious metal without the hassle of buying, storing, or insuring physical gold.

Best Gold ETFs in December 2024 – 5Y CAGR Basis

Note: The best gold ETFs list provided here is as of December 9, 2024. The ETFs are sorted based on the 5-year CAGR.

Overview of the Best Gold ETFs

1. Nippon India ETF Gold BeES

This ETF aims to closely track the domestic price of physical gold by investing in gold bullion. With a market cap of approximately ₹5,168.88 crore, it stands as one of the largest gold ETFs in India. The fund has an expense ratio of 0.81%, which is slightly higher than some of its peers.

Over the past five years, it has delivered a Compound Annual Growth Rate (CAGR) of 13.75%. As of December 9, 2024, it’s trading about 5.61% below its 52-week high, indicating potential room for growth. Investors appreciate its liquidity and the convenience it offers for portfolio diversification.

Key Metrics:

• 1 Year Return (%): 21.26

• Alpha: 9.52

2. SBI Gold ETF

Managed by SBI Mutual Fund, this ETF invests in physical gold to mirror its domestic prices. It has a market cap of ₹2,644.09 crore. The fund boasts a lower expense ratio of 0.65%, making it a cost-effective option for investors.

Its 5-year CAGR stands at 13.97%, reflecting consistent performance. As of December 9, 2024, it’s trading about 7.35% below its 52-week high. The SBI Gold ETF is known for its transparency and ease of trading on stock exchanges.

Key Metrics:

• 1 Year Return (%): 21.25

• Alpha: 9.91

3. Kotak Gold ETF

Offered by Kotak Mahindra Mutual Fund, this ETF seeks to provide returns that closely correspond to the returns provided by the price of gold. It has a market cap of ₹1,984.14 crore. With an expense ratio of 0.55%, it is among the more cost-efficient gold ETFs available.

The fund has achieved a 5-year CAGR of 13.85% and is trading about 6.17% below its 52-week high as of December 9, 2024. Investors value its low costs and the credibility associated with the Kotak brand.

Key Metrics:

• 1 Year Return (%): 21.37

• Alpha: 10.41

4. HDFC Gold Exchange Traded Fund

Managed by HDFC Mutual Fund, this ETF invests in physical gold to provide investment returns that closely track the performance of gold. It has a market cap of ₹1,906.09 crore. The fund’s expense ratio is 0.59%, balancing cost and performance. Its 5-year CAGR is 13.97%, indicating steady growth. As of December 9, 2024, it’s trading about 7.78% below its 52-week high. The HDFC Gold ETF is appreciated for its reliability and ease of access for investors.

Key Metrics:

• 1 Year Return (%): 21.34

• Alpha: 9.87

5. ICICI Prudential Gold ETF

This ETF aims to provide returns that closely correspond to the returns provided by the price of gold through investment in physical gold. It has a market cap of ₹1,905.05 crore. With a low expense ratio of 0.50%, it is a cost-effective choice for investors. The fund has delivered a 5-year CAGR of 13.96% and is trading about 6.20% below its 52-week high, December 9, 2024. Investors are drawn to its low costs and ICICI Prudential’s strong reputation in the financial sector.

Key Metrics:

• 1 Year Return (%): 21.52

• Alpha: 10.04

How to Choose the Right Gold ETF?

Selecting the appropriate Gold ETF involves considering several key factors:

1. Expense Ratio: This represents the annual fee charged by the fund, expressed as a percentage of your investment. Lower expense ratios are generally preferable, as high fees can erode your returns over time.
2. Liquidity: ETFs with higher trading volumes are typically more liquid, making buying and selling shares easier without significantly affecting the price. Greater liquidity also tends to result in narrower bid-ask spreads, reducing transaction costs.
3. Tracking Error: This measures how closely the ETF follows the performance of the underlying gold price. A lower tracking error indicates that the ETF reflects gold’s market movements more accurately.
4. Custodian and Storage Practices: Understanding where and how the ETF’s gold is stored can provide insights into the security and authenticity of the holdings. Some funds store gold in specific locations or with particular custodians, which may be important to you.
5. Tax Implications: Be aware of the tax treatment of Gold ETFs in your jurisdiction, as it can affect your net returns. Some regions may tax gains from Gold ETFs differently than other investments.
6. Fund Reputation: Research the fund provider’s history and reputation. Established providers with a solid track record may offer more reliability and better management practices.

Pros of Gold ETFs

1. Convenience: Gold ETFs allow you to invest in gold without dealing with the challenges of storing and securing physical gold. They can be bought and sold easily through your brokerage account during trading hours.
2. Cost-Effectiveness: Investing in Gold ETFs eliminates costs associated with physical gold, such as storage and insurance. While ETFs have management fees, they are often lower than the expenses of holding physical gold.
3. Liquidity: Gold ETFs are traded on stock exchanges, providing high liquidity. You can quickly enter or exit positions, which is beneficial during market volatility.
4. Transparency: Most Gold ETFs disclose their holdings regularly, allowing you to know exactly what you’re investing in. This transparency helps in making informed investment decisions.
5. Accessibility: With Gold ETFs, you can invest in small amounts, making gold investment accessible without a significant capital outlay.

Cons of Gold ETFs

1. Management Fees: Although generally lower than the costs of physical gold storage, management fees can still impact returns over time.
2. No Physical Possession: Investing in Gold ETFs doesn’t provide tangible assets, which some investors prefer for security and personal satisfaction.
3. Market Risk: The value of Gold ETFs can fluctuate with market conditions, and due to tracking errors, they may not perfectly track the price of physical gold.
4. Tax Considerations: Depending on your jurisdiction, gains from Gold ETFs may be taxed differently than physical gold or other investments. It’s essential to understand the tax implications before investing.
5. Counterparty Risk: Investing in Gold ETFs involves relying on the fund provider and custodian. Any issues with these entities could potentially affect your investment.

The Final Word

Gold ETFs offer a practical and efficient way to gain exposure to gold, combining the benefits of liquidity, convenience, and cost-effectiveness. However, they also come with certain risks and considerations, such as management fees and the absence of physical possession. 

You can choose a Gold ETF that aligns with your investment objectives by carefully assessing factors like expense ratios, liquidity, tracking error, and tax implications. As with any investment, conducting thorough research or consulting with a financial advisor is advisable to ensure that investing in Gold ETFs fits your overall financial strategy.

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Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.