One of the most important ways to invest in gold for speculative investors is through the exchange-traded fund — or “ETF” for short.
A gold ETF allows you to invest in gold at roughly above current spot gold prices without needing to physically store or transport the gold — in other words, you can invest in gold without having to worry about where you’re going to put it all. This makes investing easier, more efficient and, in the long run, more potentially lucrative.
What is an ETF?
Basically, an ETF allows you to trade “shares” of something without having to buy the individual shares — you’re buying into the fundamentals. This is why it’s popular for commodities to have ETFs (these are also known as Exchange Traded Commodities), which is why there are many natural gas ETF and other commodity funds.
How Does a Gold ETF Work?
A gold ETF works the same way as other ETFs, like the natural gas ETF we mentioned earlier. Essentially, the fund purchases bullion and stores it for you, and you buy bits of the fund — bits of the gold. This way you can invest in gold without needing to worry about where you’re going to put it.
This is extremely simplified, of course, but it gets the general idea across.
Of course, of the best reasons for doing this is because it allows you to move quickly in your gold investments — something gold bars and gold coins don’t allow for. Rather than wait days or weeks for gold to be shipped to you, and then wait days or weeks to find people willing to buy your gold or gold coins at a fair price, you can just sell it quickly.
This provides your portfolio with the ability to easily liquidate from investments to cash. This is essential during volatile times, or if you’re interested in day trading on any level.
Should You Invest in Gold?
Whether or not you should invest in gold on any level completely depends on your understanding of economics. If you believe that inflation isn’t going to be a problem and that the government is doing a great job at ending the recession, don’t invest in gold — invest in stocks or something else.
Investing in gold is a security move. It’s where you show some sign of a lack of total faith in fiat money, economic recovery, or a belief that demand for gold will increase in the future and outstrip demand for some other reason.
Should you invest in gold? From my economic and political perspective, absolutely. I think gold is essential to any well balanced portfolio. But I’ve written about that before, obviously.
Tags: gold etf, gold funds