Gold commodity exchange-traded funds are a simple way to gain exposure to gold without buying real gold. There are many types of gold ETFs. Some of them consist of futures and derivatives contracts that track the price of gold and gold-related indices, while others consist of gold assets held in a trust. Investors can invest in gold through exchange-traded funds (ETFs), buy shares in gold miners and partner companies, and purchase a physical product.
These investors have as many reasons to invest in metal as there are methods to make those investments. There are many ways to invest in gold. You can buy physical gold in the form of jewelry, bullion and coins; buy shares in a gold mining company or other gold-related investment; or buy something that derives its value from gold. Each method has its advantages and disadvantages.
This can make it overwhelming for beginner investors to know the best way to expose themselves to this precious metal. You can invest in gold without touching an iota by buying shares in gold mining companies. And, if you like to keep your investments in Canada, this country has many firms to choose from. Investing in gold stocks, ETFs, or mutual funds is often the best way to expose yourself to gold in your portfolio.
However, investing in gold and other precious metals, and particularly in physical precious metals, carries risks, including the risk of loss. While gold is often seen as a safe haven investment, gold and other metals are not immune to price drops. Know the risks associated with trading these types of products. The SPDR Gold Shares ETF (GLD), for example, holds physical gold and deposit receipts, and its price follows the price of physical bullion.
Investing in physical precious metals carries the risk of encountering high-pressure sales tactics and even fraud. Investing in physical gold can be a challenge for investors more accustomed to trading stocks and bonds online. Even so, if an investor wants to own gold stocks to diversify a stock portfolio, they may want to consider a gold mining ETF such as Market Vectors Gold Miners (GDX). Even those investors focused primarily on growth rather than stable income can benefit from choosing gold stocks that demonstrate historically strong dividend yields.
While it may seem like a good way to gain indirect exposure to gold, owning the shares of companies that mine and sell gold, such as Barrick Gold (ABX) or Kinross Gold (KGC), may not give the investor the exposure to the precious metal they wanted. These funds, which are traded as stocks, pool investors' capital and pour it into a variety of mining and gold companies. If you decide that investing in physical gold is the right thing for you, here are some things to keep in mind. When investors realize that their money is losing value, they will begin to position their investments in a strong asset that has traditionally held its value.
Collector coins, such as South African Krugerrands, Canadian Maple Leaves and American Gold Eagles, are the most widely available gold coins. These include the demand for metal for jewelry making, for some technological applications and for investment purposes. The advantage here is that if the price of gold falls, mining companies can often shift the focus to another metal. Alternatives to investing in gold include buying shares of gold mining companies or gold exchange-traded funds (ETFs).
This makes gold ETFs and mutual funds the safest option for most investors looking to add some stability and shine to gold to their portfolios. In exchange, gold depositors would receive a paper receipt that could be exchanged for their gold at some point in the future. .