Due to this negative correlation, large downturns in the broad market may not affect commodities. By investing in a gold ETF versus actual gold, investors can also reap the benefits of an ETF like its tax efficiency.
Gold ETFs can be bought and sold freely via an exchange when compared to physical gold. As such, investors can utilize the hedging properties of gold without having to actually own and store the asset like they would with physical gold.
A gold ETF is also less susceptible to the price fluctuations compared to owning gold itself. Furthermore, an inverse ETF in gold gives investors more flexibility if they think the price of gold will go down.
What Types of Gold ETFs are Available?
Not all gold ETFs are similar as each can employ a different strategy. For example, some ETFs may participate in gold mining as opposed to simply investing in the asset itself.
Some ETFs derive their value from owning the physical gold itself and others have forward contracts based on the prices of spot gold. Investors should understand the strategy of the fund prior to allocating capital into a gold ETF.
Examples of Gold ETFs:
- SPDR Gold Shares (NYSEArca: GLD)
- iShares Gold Trust (NYSEArca: IAU)
- Aberdeen Standard Physical Swiss Gold Shares ETF (NYSEArca: SGOL)
- SPDR Gold MiniShares Trust (NYSEArca: GLDM)
- GraniteShares Gold Trust (NYSEArca: BAR)
For more educational information on ETFs, click here for Education Central.