The rise in gold prices is one of the investment stories of 2024 so far. The yellow metal has reached a new record high in recent days, approaching $2,800 per ounce. It has increased by 35% since the beginning of the year.

Such an increase in any stock, commodity or financial asset could lead to a sharp correction. This can lead to fears of overvaluation and a possible increase in the number of sellers looking to make a profit.

However, when it comes to gold, I think there is a good chance that prices will continue to rise. This was thanks to many important factors, including rising inflation expectations due to central banks lowering interest rates, intensifying conflict in the Middle East, and concerns about the economic and political situation in the United States.

Therefore, I think investing in a gold-backed asset is worth serious consideration today. One of my favorites right now iShares Gold Producers ETF (LSE:SPGP).

Best ETF

This exchange-traded fund (ETF) It provides investors with indirect exposure to the rising gold price. In total, it owns shares in 61 different miners, and the majority (65.4%) are industry giants. market values $10 billion or more.

Such a composition helps give me peace. Spreading my money across a few dozen companies means less risk than investing in one or two miners. This is important to me, given the high likelihood of operational issues that could reduce revenues and send costs through the roof.

I also like the idea of ​​owning shares in industry giants Barrick Gold, Newmont, Wheaton Precious MetalsAnd Agnico Eagle. These miners have a long track record of operational excellence and if they continue they could give me a better return than buying an ETF that tracks the gold price.

However, keep in mind that such superior performance is by no means guaranteed.

The fund has delivered a healthy average annual return of 7.6% over the past decade. However, this is slightly lower than the 7.8% return achieved by tracking bullion. iShares Physical Gold The funds were delivered within this period.

Dividend reinvestment

A miner-focused ETF has another big advantage over a simple gold-tracking fund: dividends.

While dividends are never guaranteed, the iShares Gold Producers ETF includes many companies that have and continue to pay regular dividends on their shares.

These cash rewards are reinvested to increase the value of the fund over time.

Since gold itself does not generate dividends or interest, an ETF that only tracks bullion prices lacks this growth potential from dividend reinvestment.

cost effective

As with any ETF, investors pay an ongoing fee to hold this iShares product. This currently stands at 0.55%.

Fees like this obviously take a bite out of the return. But by purchasing multiple individual gold shares for their portfolio, investors will potentially pay much more in transaction fees and other costs (such as stamp duty).

Moreover, I still believe the fund can deliver healthy returns given the strong outlook for gold prices. Precious metal prices can of course rise or fall. But right now I think this fund is worth looking at closely.