It is important to note that these ETFs hold gold derivative contracts that are backed by the precious metal, meaning that investing in a gold ETF does not result in ownership of the commodity. Thus, when an investor redeems a gold ETF, they do not receive the precious metal, but rather the cash equivalent.
Gold ETFs can be accumulated in small amounts and are fairly liquid, meaning they can be easily sold. Additionally, theft is not a matter of concern in the case of gold ETFs, as investors do not need to incur storage charges, such as bank locker fees.
For more information on the gold market, visit our gold category.
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