Gold ETF – A Great Alternative To Physical Gold

gold ETF
Gold ETF

Owning physical gold, although a recommended way to invest in gold, has its problems which can be overcome by investing in a gold ETF. The issues associated with owning physical gold include storage, security, insurance and reselling.

A gold ETF can overcome these issues.

An ETF is an Exchange Traded Fund and, as its name implies, it is a fund traded on major stock exchanges, such as the New York Stock Exchange (NYSE), the NASDAQ and the American Stock Exchange (AMEX). The ETF itself normally invests in a number of different companies, so that an investment in the ETF gives you exposure to a range of businesses.

Gold ETF – An Investment in Physical Gold

A gold ETF is an exchange traded fund that invests in the gold metal. The gold ETF purchases physical metal which it holds in storage. It then issues shares to the value of the physical gold held, with an expectation that the price of the ETF shares will increase if the price of gold goes up.

Advantages Of A Gold ETF Over Physical Gold

The advantages of investing in a gold ETF rather than physical gold are:

1. Trading can be undertaken during stock market hours using your online brokerage account

2. Whilst there is a minimum investment in a gold ETF, it represents a fraction of an ounce of gold. Consequently, you can buy smaller amounts of gold through the ETF than by buying gold coins or bullion. With gold at $1,900/oz, not everyone can afford to buy by the ounce these days!

3. No need to store or insure the gold or worry about somebody stealing it from you.

4. An easy exit mechanism for your gold investment – just sell it on market like any share.

Popular Gold ETFs

Some of the more popular gold ETFs are:

  • SPDR Gold Trust (GLD)
  • Proshares Ultra Gold (UGL)

These funds invest in physical gold and hence track the gold price.

Other gold ETFs invest in gold mining companies rather than physical gold. The most well known is:

  • Market Vectors Gold Miners ETF (GDX)

which invests in a portfolio of gold mining companies, and tracks the gold stock index.

All three of these ETFs trade on AMEX. If you are interested in investing in gold ETFs, sign up to a reputable ETF-issuer newsletter, where you can access the experience of professional gold traders. This will help you to maximize your profits and reduce your risk from investing in a gold ETF.

Related articles:

Gold Funds

Investing in Gold

Speak Your Mind