Gold in Portfolio: Complete Guide to Selecting the Best Gold ETFs in 2024

The Renaissance of Gold Funds in Times of Uncertainty

The current geopolitical and economic context has revitalized interest in investment instruments based on precious metals. Unlike owning physical bars, exchange-traded funds tracking gold represent a modern and accessible alternative. During the first months of 2024, factors such as increasing international tensions and anticipation of interest rate cuts have once again driven demand for these defensive assets.

In particular, the conflict in Ukraine, tensions in Gaza, and the growing rivalry among global powers have reinforced gold’s position as a safe-haven asset. Simultaneously, potential changes in U.S. administration have generated expectations of greater volatility in the coming quarters.

Market Dynamics: What the Numbers Reveal

Although approximately $2.9 trillion exited global gold funds in February 2024 — with North America accounting for $2.4 trillion — the metal’s price has not only remained steady but has shown consistent recovery since October 2022. This apparent contradiction reflects that many investors have taken profits to reposition capital into higher-yield assets, such as technology stocks or cryptocurrencies.

Even more relevant is the stance of global central banks. According to surveys by the World Gold Council, 71% of 57 central institutions surveyed in 2023 plan to increase their gold reserves in the next 12 months, a figure that is 10 points higher than the previous year. This trend indicates the gradual decline of the U.S. dollar as a trust anchor in international reserves.

Demand Structure: A Pillar of Stability

Gold’s resilience as an investment asset rests on the diversity of its demand sources. During Q4 2023, global demand reached 1,149.8 tons distributed as follows:

• Jewelry: 581.5 tons
• Investment: 258.3 tons (with physically backed ETFs as protagonists)
• Central banks: 229.4 tons
• Industrial applications: 80.6 tons

This multichannel distribution has ensured that demand has not fallen below 1,000 tons in the last 14 years, while supply — coming from mining and recycling — remains relatively stable in the short term.

Understanding Investment Vehicles: Beyond the Basic Structure

A gold ETF operates in two fundamental ways. Funds backed by physical gold hold actual bars in secure vaults managed by recognized financial institutions, allowing each share to represent a fraction of ownership of that tangible gold. This structure eliminates security risks associated with personal storage.

Alternatively, there are instruments that use derivatives — futures and options — to replicate gold price movements without holding physical metal. While these may offer lower expense ratios, they introduce counterparty risks depending on the creditworthiness of the issuing entity.

Both categories share key advantages: high stock liquidity, significantly lower fees compared to actively managed mutual funds, and democratic access to precious metals with reduced initial capital requirements.

The Enigma of Global Fiscal Sustainability

Global debt levels have reached unprecedented heights since the 2008-2009 crisis. The United States maintains a debt-to-GDP ratio of 129%, while Japan leads with a concerning 263.9%. These figures have raised concerns even among monetary authorities: the U.S. Federal Reserve chairman has publicly acknowledged that the country is on an “unsustainable fiscal path” where debt grows faster than the economy.

In this scenario of eroding purchasing power in fiat currencies and questions about the international financial architecture, gold funds emerge as a mechanism for protection against potential systemic risks, including speculation about a possible return to gold-backed monetary standards.

Comparison of Major Gold Funds in 2024

Choosing the most suitable fund depends on the investor’s specific needs. Below are six prominent options based on expense ratios, trading volumes, and historical performance:

SPDR Gold Shares (GLD) is the largest by market capitalization with $56 billion in assets under management. It tracks bars stored in London under HSBC custody, charging 40 basis points annually. With over 8 million shares traded daily and a current price of $202.11, it offers unmatched liquidity in the segment.

iShares Gold Trust (IAU) complements the offering with $25.4 billion in assets and just 25 basis points annual fee. Its physical backing in London under JP Morgan Chase and a daily volume of 6 million shares position it as the second option in scale. The share price is around $41.27.

Aberdeen Standard Physical Swiss Gold (SGOL) differentiates by storing gold in Switzerland and the UK, with only 17 basis points of cost. Its $2.7 billion in assets and a quote of $20.86 make it attractive for investors with limited capital, though with a lower volume of 2.1 million shares daily.

Goldman Sachs Physical Gold (AAAU) offers custody options in British vaults via JPMorgan, with $614 million in assets and a competitive 18 basis points annual fee. At $21.60 per share and 2.7 million shares traded daily, it balances accessibility and institutional solidity.

SPDR Gold MiniShares (GLDM) is the lowest-cost option overall, with only 10 basis points annually, ideal for cost-sensitive investors. Its $6.1 billion in assets, a price of $43.28, and 2 million shares traded daily make it attractive for low-cost strategies.

iShares Gold Trust Micro (IAUM) leads the minimal expense category with 9 basis points, though with a smaller asset base ($1.2 billion) and a lower daily volume (344,000 shares). Trading at $21.73, it is the most economical option for retail access to gold.

All these instruments have recorded approximate increases of 6% during 2024, though with divergent historical trajectories since 2009: IAU has accumulated 151.19%, GLD 146.76%, SGOL 106.61%, AAAU 79.67%, GLDM 72.38%, while IAUM — being more recent (2021)— shows only 22.82%.

Is It Worth Positioning Now? Decision Factors

The advisability of allocating capital to these funds is anchored in three pillars:

Strategic diversification: Gold acts as a buffer in mixed portfolios, mitigating impacts when other asset classes face turbulence. Its uncorrelated behavior with stocks makes it complementary.

Interest rate cycle: The inverse relationship between rates and gold price is well documented. As central banks potentially cut rates, the relative profitability of non-income-generating assets like gold improves compared to fixed-income investments.

Inflation hedge: Although inflation moderates, historical data show that gold preserves value during periods of monetary erosion, a relevant aspect considering global debt and monetary issuance levels.

However, it is critical to remember that gold does not generate cash flows like stock dividends, can experience substantial short-term volatility, and requires a long-term horizon to justify its inclusion.

Entry Strategy: Practical Recommendations for 2024

Clarify objectives beforehand: Define whether you seek defensive coverage, diversification, or speculation, and align this intent with your risk tolerance before any move.

Size positions appropriately: Avoid excessive concentration. Experts suggest allocating between 5% and 15% of your portfolio to gold, depending on your risk profile.

Adopt long-term horizons: Avoid short-term arbitrage attempts. Gold funds tend to perform better in medium- to long-term strategies, especially during macroeconomic uncertainty cycles.

Synchronize with macroeconomic context: Monitor central bank rate decisions, geopolitical developments, and the U.S. dollar’s behavior as guiding variables for timing your entry.

The accessibility of these funds — requiring small capital amounts and trading as stocks on traditional exchanges — democratizes access to protection that was once reserved for large institutional investors. The question is not only whether it is advisable to invest in gold but also when and how much to allocate given your personal situation.