Gold has always been viewed a great number of investors as a hedge against the effects of inflation and exchange rate or changing stock market sentiment.
The fact that the figures demonstrate gold is an ideal asset for diversification is not disputed and neither is the view that gold has a weak correlation with equities much to argue against, so more of a question is what is the best way to invest in gold?
The traditional investment in gold has always been of the physical kind with gold bars stored away in plenty of safety deposit boxes amongst other places, but with the introduction of Gold ETFs, is this now a better way to play gold?
You are of course still able to invest in physical gold through an ETF and each unit of an open-ended mutual fund is represented by one gram of gold. These units are subsequently tracked on the stock exchanges in just the same way that company shares are.
To decide whether gold ETFs are a suitable investment vehicle for you, you need to take a look at the pros and cons of investing this way.
With a gold ETF you get the chance to accumulate a gold holding over a period of time because it can be purchased in relatively small quantities and not just lump sums, if you were buying physical bullion.
The definite advantage of buying gold through an ETF is that there are no storage charges compared to holding physical gold yourself and buying and selling is often easier and often more tax-efficient (depending on your circumstances) than trading in gold bullion.
The disadvantages to consider are that brokerage fees and commissions can sometimes eat into your gains if the increases in price are minimal between buying and selling and another issue to be wary of is liquidity. Some Gold ETFs can be considered illiquid at times, which can impact on flexibility at times.
The primary purpose of a gold ETF is to track and reflect the current price of gold and therefore an ETF gives you a good opportunity to gain exposure to the performance of gold.
Top-Rated Gold ETFs
- VelocityShares 3x Inverse Gold ETN
2. DB Gold Double Short ETN
3. UltraShort Gold
4. DB Gold Short ETN
5. Gartman Gold/Euro ETF
6. X-Links Gold Shares Covered Call ETN
7. Gartman Gold/Yen ETF
8. COMEX Gold Trust
9. SPDR Gold Trust
10. Gold Trust