Gold Investment Surge: Top Mutual Funds and ETF Alternatives

Gold prices have reached unprecedented heights, breaking through the $2,000 per ounce mark in early 2024 and surpassing $4,000 in early 2025. This surge has prompted renewed interest in gold investments, particularly through mutual funds. Investors are drawn to gold’s historical role as a safe haven and its potential to diversify portfolios. However, while gold mutual funds offer a straightforward path to invest in the commodity, alternative options such as exchange-traded funds (ETFs) may also warrant consideration.

Gold has long been seen as a defensive investment for various reasons. It typically exhibits a low correlation to stock market performance, making it an effective tool for portfolio diversification. Financial experts generally recommend limiting gold investments to about 5% to 10% of total assets. Additionally, gold is often perceived as a hedge against inflation; as the value of the U.S. dollar decreases, gold prices tend to increase. Yet, as Dan Burrows, a contributor for Kiplinger, notes, gold has not consistently outperformed inflation in the long run, and its effectiveness as an inflation hedge varies significantly over shorter time frames.

Many investors prefer gold mutual funds over physical gold due to the complexities involved in purchasing and storing the metal. Acquiring physical gold requires sourcing a dealer, ensuring secure storage, and managing insurance—tasks that can be cumbersome and costly. In contrast, gold mutual funds are easily accessible through brokerage accounts, allowing investors to buy and sell shares with minimal effort.

For those considering gold mutual funds, here are three noteworthy options currently available:

Top Gold Mutual Funds

Fidelity Select Gold Portfolio
– **Category**: Equity precious metals
– **Assets Under Management**: $3.6 billion
– **Yield**: 1.6%
– **Expense Ratio**: 0.68%
– **Minimum Investment**: None

The Fidelity Select Gold Portfolio (FSAGX) invests primarily in over 50 gold-related stocks, including major players such as Agnico Eagle Mines and Franco-Nevada. Approximately 80% of its assets are allocated in Canadian mining companies. Its low fees and absence of a required minimum investment make it an attractive choice, although its historical returns have been average compared to peers and it has recently undergone management changes.

OCM Gold Fund Investor Shares
– **Category**: Equity precious metals
– **Assets Under Management**: $173.3 million
– **Yield**: 1.0%
– **Expense Ratio**: 2.38%
– **Minimum Investment**: $1,000

The OCM Gold Fund Investor Shares (OCMGX) focuses mainly on gold producer stocks and has delivered strong performance over the past decade, ranking within the top 3% of its category. While its management and investment process have garnered a Silver Medalist rating from Morningstar, its relatively high expense ratio and a sales charge of up to 4.5% may deter some investors.

First Eagle Gold Fund A Shares
– **Category**: Equity precious metals
– **Assets Under Management**: $4.9 billion
– **Yield**: 2.7%
– **Expense Ratio**: 1.16%
– **Minimum Investment**: $2,500

As the largest gold-specific mutual fund, the First Eagle Gold Fund A Shares (SGGDX) has a diversified portfolio, with over 75% of its assets invested in gold mining stocks. It also holds small allocations in gold bullion and cash. Although its performance has varied, it has received a Gold Medalist rating from Morningstar for its stability and high yield potential.

Considering Gold ETFs

While these mutual funds provide exposure to the gold market, they primarily invest in mining stocks, which can lead to greater volatility compared to gold prices themselves. As the price of gold rises, mining stocks often rise even more, and vice versa. Therefore, investors seeking direct exposure to gold might find ETFs to be a more suitable alternative.

Gold ETFs represent a broader array of strategies and typically come with lower expense ratios than mutual funds. They do not impose sales charges, making them potentially more cost-effective for investors. Moreover, the minimum investment for ETFs is generally just the price of one share, making them accessible to a wider range of investors.

In summary, while gold mutual funds can provide a straightforward route to invest in the precious metal’s rising value, investors should also consider the advantages of gold ETFs. The choice ultimately depends on individual investment goals, risk tolerance, and market conditions.