Physical gold ETFs backed by bullion have become popular tools for investors seeking an inflation hedge and insurance against major global events. However, gold ETFs vary in their fees and where the bullion is stored, for example.
From a technical perspective, gold ETFs are trading right around the 200-day simple moving average. Gold prices have also fallen below $1,700 an ounce heading into year-end.
“Investing in gold is not necessarily a priority for everyone, but it has some valuable uses in a dollar-based portfolio. Gold is a limited commodity that retains purchasing power even under strong inflationary pressures. On the other hand, increased dollar strength will detract from gold’s value as investors are able to buy more metal with each bill. Unlike paper currencies, gold is not at the mercy of government policy,” Abraham Bailin wrote for Morningstar.
As the fiscal cliff approaches, gold is in focus since it is exempt of government policy and retains value. Those that have not yet invested in gold could consider a physically-backed ETF. These are different from a futures-based fund and follow the spot price. Most of the physical gold funds are the same, but expense and method of storage have an impact upon returns. [Ten Things You Need to Know About Gold ETFs]
SPDR Gold Shares (NYSEArca: GLD) has over $70 billion in assets. The ETF costs 0.40%. Due to the size, the fund is attractive to institutional investors and active traders. There is about $1 billion traded per day in and out of the ETF. As for vaulting, GLD’s gold is vaulted in London and constitutes one of the largest gold hoards in the world, let alone the gold ETF segment, reports Paul Baiocchi for Index Universe. Active traders love this fund for the liquidity. [Tom Lydon Outlines the Case for Holding Gold ETFs]
Buy-and-hold investors could take a look at iShares COMEX Gold Trust (NYSEArca: IAU) because it costs the least at 0.25%. The bullion is vaulted around the globe, and there is $11.4 billion in assets. [How to Use Gold ETFs]