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Physical gold isn't the only option. How ETFs, closed-end funds, and gold miners compare for Canadian investors.
Gold prices are flying. As of October 17, the spot price of gold is trading at $5,928 per ounce in Canadian dollars, or roughly $4,227 in U.S. dollars. The surge comes on the back of what Wall Street has dubbed “the debasement trade.” In simple terms, this refers to investors reacting to long-term macroeconomic trends such as loose monetary policy, ballooning U.S. debt, and erosion in the real value of paper currencies. When fiat money can be created endlessly, hard assets that cannot be debased—like gold—stand out as stores of value.
Images of people lining up at gold dealers around the world have become common again, and Canada is no exception. As early as September 2023, Global News reported a “gold rush” at Costco, where one-ounce gold bars were selling out within hours of being listed online.
But before giving in to the fear of missing out, it may be worth considering some alternatives to physical gold. Investment case aside, there are several practical reasons why owning bullion directly may not be the best approach for many investors.
This isn’t an argument against owning gold directly. I have a few Gold Maple Leaf coins myself and there’s something almost primal about holding them. The weight, the shine—it taps into an ancient fascination with the metal that no security can replicate.
But objectively, buying and storing physical bullion has never been the most seamless or efficient way to gain gold exposure.
The first issue is the bid-ask spread. When you buy from a dealer, you’re not transacting at the spot price you see quoted online. Dealers make their money on the spread between what they sell at and what they’ll buy back for. As of October 17, for example, Vancouver Bullion & Currency Exchange (VBCE) listed one-ounce Gold Maple Leaf coins as follows:
That’s a spread of $175, or about 3%. In other words, gold prices have to rise by at least that much just for you to break even.
Then there’s the matter of security. I keep mine in a heavy-duty, bolted-down, fireproof safe that wasn’t cheap. Hiding it under a mattress or burying it in the backyard isn’t advisable.
If you decide to store it at the bank, you’ll pay annual fees for a safety deposit box and, more importantly, reintroduce counterparty risk. The whole point of owning gold is to remove intermediaries, but as soon as it’s sitting in a bank vault, it’s no longer fully in your control.
If your top priority is to physically hold your wealth, to have it in your possession, then by all means, buy bullion. There’s nothing wrong with that. Just know it’s not as easy as clicking “buy” on a screen. You have to find a reputable dealer, pay a premium, arrange secure storage, and handle logistics that digital gold holders never have to think about. And since gold produces no income, every expense—from dealer spreads to storage—comes directly out of your total return.
If your main reason for owning gold is to diversify a portfolio or participate in its price rally—rather than to establish self-custodied reserves as a last-ditch store of value—it’s worth considering other vehicles. Exchange-traded funds (ETFs), closed-end funds (CEFs), and gold mining equities can all provide exposure without the friction, cost, and security headaches of physical bullion.
Gold exchange-traded funds (ETFs) are open-ended funds that correspond directly to custodied, audited reserves of gold. They benefit from the same in-kind creation and redemption structure used by all ETFs, meaning authorized participants can exchange shares for physical gold (and vice versa).
This arbitrage mechanism helps keep the ETF’s market price closely aligned with its net asset value (NAV), reducing the risk of persistent premiums or discounts.
There are plenty of choices from Canadian issuers. The main things to focus on are low management expense ratios (MERs) and tight bid-ask spreads, since both affect total return over time. A good example is the BMO Gold Bullion ETF (ZGLD), which carries a competitive 0.23% MER and holds unencumbered, 400-ounce gold bars in a local BMO vault that’s regularly audited.
For investors looking for a low-cost, liquid way to track gold’s spot price, ETFs like this tend to be the most straightforward and accessible route.
Before ETFs dominated the market, closed-end funds were the go-to security for gold exposure. Unlike ETFs, they don’t create or redeem shares on demand.
A CEF is issued with a fixed number of shares at its IPO, and afterward, trading takes place only among investors in the open market. Because of that, supply and demand can cause the market price to deviate from NAV, leading to either a discount or premium.
This structure has largely fallen out of favour, but it still endures in the precious metals space due to the longevity of certain funds. The best-known example is the Sprott Physical Gold Trust (PHYS), which has a 0.39% MER and currently trades at a 2.29% discount to NAV.
Generally, it’s preferable to buy a CEF at a discount rather than a premium, though there’s no guarantee that discount will ever close. The relative degree of discount can be assessed using a z-score, a measure of how far the current valuation deviates from historical averages. Various CEF-tracking sites publish this data for those who follow the space closely.
Canada sold off its official gold reserves in 2016, a decision often criticized in hindsight given the metal’s rally since. That said, Canada remains one of the world’s largest gold producers, which gives investors an indirect way to “own” national reserves through domestic mining stocks. Leading names include Barrick Gold and Agnico Eagle Mines, both global producers with multi-asset portfolios and high fixed operating costs that make profits highly sensitive to gold prices.
When prices rise, revenues increase while costs stay largely constant, causing margins to expand faster than the metal itself. But when prices fall, the same cost structure magnifies losses. These companies still face operational and market risks, though many pay regular dividends that provide modest income, a feature bullion and gold ETFs/CEFs lack.
Closely related are the gold streaming and royalty companies, such as Franco-Nevada and Wheaton Precious Metals. Unlike miners, they don’t extract gold directly. Instead, they provide up-front capital to producers in exchange for a share of future output at fixed, discounted prices. This structure makes them less leveraged to spot gold prices and typically gives them wider margins, steadier cash flows, and lighter capital requirements than traditional miners.
But keep in mind that if you already hold a broad Canadian equity ETF tracking the S&P/TSX Capped Composite Index or a similar benchmark, you likely have significant gold exposure already. The materials sector, which includes gold miners, makes up roughly 18% of the index, so adding more can quickly lead to unintended concentration risk.
Gold exploration companies—often called junior miners—are best avoided by most investors. These firms are typically unprofitable, rely heavily on external financing, and trade on speculation about future discoveries. Their share prices can swing wildly with commodity sentiment and drilling results, making them the biotech stocks of the mining world—high risk, low predictability, and rarely worth the gamble for long-term investors.
Finally, there’s the Canadian Gold Reserves (MNT), which sits somewhere between an ETF and a CEF but isn’t fully either. It’s technically an exchange-traded receipt (ETR) with a 0.35% sponsor fee.
The ETR is backed by the full faith and credit of the Government of Canada, with the Royal Canadian Mint acting as custodian. The Mint stores all bullion in secure, restricted facilities and assumes full liability for loss or damage, except under circumstances beyond its control. Uniquely, MNT holders can also redeem shares for physical gold on a monthly basis.
For investors who prioritize government backing, physical redemption rights, and direct custody by the Mint, MNT is appealing—but the bid-ask spread is noticeably wider than those of both ZGLD and PHYS, making it less attractive for active trading or tactical allocation.
If you still want gold despite its recent rally and crowded positioning, and you’ve decided physical bullion isn’t for you, we’ve looked at four key alternatives—ETFs, CEFs, ETRs, and gold miners or streamers. Each offers a different balance of cost, liquidity, and leverage.
Ultimately, the right choice depends on whether you want pure price exposure, government-backed security, or equity-linked upside. Just keep expectations grounded. Gold is a useful hedge and store of value, but it’s not a cure-all for market or currency risk.
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