An exchange-traded fund (ETF) is a basket of securities that tracks an underlying index. Tax treatment also varies depending on the investment approach. For example, collectibles such as precious metals are subject to a maximum long-term capital gains tax of 28%. This tax rate also applies to ETFs that are physically backed by gold and other collectibles
.
Gold mining ETFs, on the other hand, hold company shares and are subject to a maximum long-term capital gains rate of 20%. Examples of stocks include Eldorado Gold Corporation (EGO) and Agnico-Eagle Mines Limited (AEM), both Canada-based gold producers. For investors interested in adding an environmental, social and governance (ESG) component to their gold investments, the Sprott ESG Gold ETF (SESG) offers this feature and is the world’s first ETF to source and refine gold exclusively from recognized leading ESG mining companies. It tries to replicate as accurately as possible the price and return performance of the NYSE Arca Gold Miners Index (GDMNTR), a pure, global index that tracks the performance of the largest publicly traded companies in the gold mining industry, before fees
and expenses.
Investors seeking exposure to gold can find stock-based alternatives such as the Veneck Gold Miners ETF () and the VanEck Junior Gold Miners ETF (), for example. The term “Sprott ESG Approved Gold” refers to gold that is physically indistinguishable from other gold, but that has been procured and produced in a manner that meets the ESG standards and criteria used by the sponsor (the “ESG Criteria”), which are intended to provide investors with a higher level of ESG verification, disclosure of the origin of the recovered metal and includes an assessment of mining companies and mines. The MVIS Global Junior Gold Miners Index comprises a focused group of small-cap companies, many of which are involved in exploring and developing new sources of gold, either by exploring new fields or by using new geological models to search for gold in overlooked or abandoned properties. This ETF differs from the usual ETF in that when Sprott ESG Approved Gold is founded, the fund is fully allocated and the gold is stored outside the financial system
.
Investors typically consider allocations to gold or gold mining companies for portfolio diversification and inflation protection. This leveraged exposure to gold prices can make them attractive under various market conditions. However, investors should consider the increased risk and remember that gold mining companies may not always offer an investment experience that is highly correlated with that of gold. In addition, they can also be significantly affected by political and economic conditions in gold-producing and consuming countries, as well as by gold production levels and production costs. Gold has long been considered a solid investment and is often held physically in the form of jewelry, coins, or gold bars
. The
NYSE Arca Gold Miners Index is a service mark of ICE Data Indices, LLC or its affiliates (“ICE Data”) and has been licensed for use by the VanEck ETF Trust (the “Trust”) in connection with the VanEck Gold Miners ETF (the “Fund”). Precious metals ETFs include the physically secured and heavily traded SPDR Gold Trust ETF (GLD), the VanEck Vectors Junior Gold Miners ETF (GDXJ) and the iShares Silver Trust ETF (SLV). The NYSE Arca Gold Miners Index includes publicly traded companies that are engaged in gold and silver
mining.
