Investors interested in gaining exposure to gold bullion moves do not need a commodities account to trade the hard asset. Instead, more are turning to exchange traded funds to easily access the precious metal.
Gold traders contend that the Federal Reserve’s money-printing spree will eventually lead to a decline in the U.S. dollar, but foreign central banks, notably the European Central Bank and Bank of Japan, are flooding the markets with their own currencies, strengthening the U.S. dollar for now, writes Dan Moskowitz for Investopedia. [U.S. Dollar Takes Gold ETFs For A Ride]
Nevertheless, some maintain that the U.S. dollar will eventually depreciate when organic growth takes hold and inflation begins to rise in an expanding economy, which would help gold become a safer store of wealth in the long run.
Consequently, if an investor is concerned about the markets and wants an alternative asset that provides a lower correlation to traditional stocks and bonds, one can take a look at gold ETFs that are physically backed by gold bullion stored in bank vaults.
For starters, the SPDR Gold Shares (NYSEArca: GLD), the world’s largest ETF backed by physical holdings of gold, has been a go-to option for large traders, hedge funds and institutional investors seeking to capitalize on its large pool of liquidity and tight bid-ask spreads. GLD has $28.5 billion in assets under management and an average volume of 6.8 million shares.
Similarly, the iShares Gold Trust (NYSEArca: IAU) is another large option with a lot of active trading. IAU has $6.3 billion in assets under management and an average volume of 3.2 million shares. Additionally, IAU is the cheapest of the gold ETF options with a 0.25% expense ratio.