Two Canadian Gold ETFs I Like Better Than the Sprott Physical Gold Trust (PHYS)

Gold prices are once again hitting all-time highs—a sign of the times given central bank hoarding, geopolitical instability, and persistent concerns about the weakening U.S. dollar and ballooning government debt across most Western economies.

But as an ETF proponent, it pains me to see new investors still flocking to closed-end funds (CEFs) for their gold exposure. I’ll admit my bias here: with very few exceptions, CEFs are outdated, overpriced, and often erode shareholder value through inflated return-of-capital distributions.

I mention this because there’s been renewed interest in the Sprott Physical Gold Trust (PHYS). While I respect many of Sprott’s newer ETF offerings, PHYS isn’t one of them.

Sure, it’s popular, with over $15 billion in assets, but a 0.39% expense ratio and the ability to trade at a premium or discount to its net asset value—currently around -2.63%—make it hard to justify in 2025.

For Canadian investors looking for spot gold price exposure in a brokerage account, there are far better options. Here are two I particularly like for their simplicity, tight spreads, and low fees from BMO Global Asset Management and Purpose Investments.

BMO Gold Bullion ETF (ZGLD)

ZGLD is one of BMO’s most successful recent ETF launches. It began trading in March 2024 and has already passed $1 billion in assets under management—no small feat in Canada, where most ETFs operate on a smaller scale than their U.S. peers.

The ETF aims to replicate the price of gold bullion, net of fees, by directly holding physical gold bars in BMO’s vaults, rather than using futures or derivatives. This matters because derivatives introduce counterparty and rollover risks that can distort performance over time.

Each bar held by the fund weighs 400 troy ounces—the standard size used in global bullion markets. A troy ounce is slightly heavier than a regular ounce (31.1 grams versus 28.3 grams), and it’s the unit used to price precious metals worldwide.

The bars are unencumbered, meaning they aren’t borrowed, lent, or pledged as collateral anywhere else. In plain language, they’re fully owned by the fund and held exclusively for investors’ benefit.

ZGLD is denominated in Canadian dollars, but since gold prices are quoted in U.S. dollars, it’s unhedged. That means shifts in the CAD-USD exchange rate can either amplify or dampen your returns depending on which way the dollar moves.

For investors who want to manage that currency exposure, BMO also offers two companion funds: a U.S.-dollar version (ZGLD.U) and a CAD-hedged version (ZGLH).

At a 0.23% expense ratio, ZGLD is highly competitive. On a $10,000 investment, you’re paying roughly $23 a year in fees, compared with about $39 for PHYS. Gold doesn’t generate income, so every dollar you save on costs is a dollar that stays in your pocket.

Purpose Gold Bullion Fund (KILO)

Before ZGLD came along, my personal favourite was KILO—and I still have a soft spot for it. It launched in October 2018 and now manages just over $1.1 billion, still putting it among Canada’s largest physically backed gold funds.

KILO works much the same way as ZGLD in that it holds real, physical gold bullion, not futures or derivatives. The main difference is that it holds one-kilogram gold bars instead of 400-troy-ounce ones, and the gold is stored not in a bank vault but at the Royal Canadian Mint.

That’s a distinction worth noting. As Canada’s official mint, it’s a Crown corporation known for its top-tier security protocols. Independent auditors even visit the vaults in person to verify holdings.

One feature I’ve always liked is that investors holding denominations of one kilogram or more can request in-kind redemption, meaning their gold can be physically shipped and securely delivered. Outside of KILO, the only other Canadian security that offers that capability is the Canadian Gold Reserves (MNT), which is actually an exchange-traded receipt (ETR).

KILO charges a 0.28% MER—technically higher than ZGLD’s 0.23% but still far cheaper than closed-end funds like PHYS. The base version of KILO is currency-hedged, but for those who prefer to accept U.S. dollar exposure, there’s an unhedged option (KILO.B) and a U.S.-dollar-denominated version (KILO.U).