With a total value of $73 billion and holding nearly 40 million ounces of bullion, the world’s largest gold exchange traded fund hoards more of the precious metal than many of the world’s richest countries.
SPDR Gold Shares (NYSEArca: GLD) is the largest physically-backed gold ETF. The fund holds gold bullion stored in London vaults and tries to reflect the price movements of gold spot prices. Each share of GLD is equivalent to a tenth of an ounce of gold.
CNBC’s Bob Pisani was recently allowed to visit the vaults where the huge ETF stores its gold. The fund holds more than 1,230 metric tons of the shiny stuff.
Morningstar analyst Abraham Bailin cautions that investing in gold is highly speculative, but he also believes that the fund may serve as a reliable investment vehicle for the average investor to access the gold market.
Gold is seen as a safe haven in times of economic uncertainty. It should be noted that a stronger dollar will diminish gold’s value since gold is priced in dollars and traders won’t able to buy as much if the dollar rises. [Gold ETFs Rise as Focus Turns to Rates, U.S. Economy]
The metal is also viewed as an inflation hedge. While inflation is not a pressing matter now, the Fed’s loose monetary policy could eventually lead to a rise in inflation.
“Bernanke has made it clear that to preserve the stability of our financial markets, he will hold interest rates at historic lows for at least the next couple of years,” said Bailin. “On this basis, we believe a small position in gold should be considered as an insurance policy.”
“For their ability to better manage geopolitical, currency, and operation-specific risks, we continue to favor gold-related exchange-traded funds and mutual funds over individual mining company stocks,” Bailin added.