Gold has long been seen as a safe-haven asset and protection against inflation and economic decline, yet investing directly can present storage, security and liquidity concerns. Enter the world of exchange-traded funds (ETFs). They provide more convenient avenues for investing in this precious metal.
What Are Gold ETFs?
Gold Exchange Traded Funds, commonly referred to as ETFs, are investment vehicles traded on stock exchanges similar to stocks. Their purpose is to track the price of gold so as to give investors access to this market without needing to purchase, store or insure physical gold directly – each unit of an ETF represents some amount of physical gold holdings backed up with ownership certificates or pledged as security against loss in case it drops in price.
Advantages of Investing in Gold ETFs (Exchange Traded Funds)
Liquidity: Gold ETFs offer instant liquidity during market hours at market prices, offering diversification without handling physical gold and lower costs due to no storage fees, insurance requirements or security considerations.
Gold ETFs typically disclose daily their holdings, providing full transparency of holdings. Their gold backing usually ensures high purity levels as a backing asset for these ETFs.
Popular Gold ETFs
My knowledge is only up-to-date as of September 2021; here are a selection of prominent gold ETFs currently available until then:
SPDR Gold Shares (GLD): As one of the world’s largest and most-traded gold ETFs, GLD aims to track gold bullion price movements closely.
iShares Gold Trust (IAU): One of the more sought-after investments for investors is IAU, providing exposure to daily fluctuations of gold bullion price movements.
Aberdeen Standard Physical Swiss Gold Shares ETF (SGOL): This ETF attempts to reflect the price performance of gold bullion by having its gold stored in Switzerland.
VanEck Merk Gold Trust (OUNZ): OUNZ allows investors to purchase gold with physical delivery options available.
GraniteShares Gold Trust (BAR): GraniteShares Gold Trust offers an affordable way of investing in gold.
Invesco DB Gold Fund (DGL): DGL differs from traditional ETFs in that its investment objectives are achieved using futures contracts instead of physical gold holdings.
Note that while many Gold ETFs aim to mirror the price of gold closely, their actual results may not always meet expectations due to factors like management fees and potential market illiquidity affecting futures markets.
How to Invest in Gold ETFs Invest in gold ETFs without breaking the bank
Investing in Gold ETFs is similar to investing in stocks: first you require a brokerage account and once open you can buy shares of an ETF during trading hours. As is usually the case with gold price fluctuations, its price should reflect that as well. Before investing though it is wise to carefully research each ETF’s strategy, management fees, and any pertinent details before proceeding.
Gold ETFs provide investors with easy exposure to price movements of gold. While these investments offer several advantages, potential investors must understand which gold ETFs best align with their investment goals and risk tolerance before selecting an ETF for investment purposes. As with any financial decision, extensive research must first be performed or consult a financial adviser prior to investing.