An ETF is an exchange-traded fund , a mutual fund that is traded on the stock exchange within certain countries. It is a collection of stocks bought and also sold as one package and it tracks an index. ETFs are most often found on the American Stock Exchange and they can sometimes also be found on the New York Stock Exchange, NASDAQ, and CBOE.
The ETF allows individuals to invest in items like gold and silver in a manner similar to investing in stocks. A gold ETF is an exchange-traded fund that tracks the price of gold and is traded on the large worldwide stock exchanges such as New York, London, Zurich, and Paris. The fund may or may not hold physical gold and it carries risks beyond those inherent to the precious metal.
Gold ETFs are a relatively new investment vehicle, launched in March 2003 on the Australian Stock Exchange. ETFs relevant to this precious metal held approximately 1,750 tons of gold for investors as of October 2009. Benchmark Gold BeES, Central Fund of Canada/Central Gold Trust, and iShares COMEX Gold Trust are several popular gold ETFs.
A typical commission for non-U.S. gold ETF trading is 0.4 percent and there is also an annual storage fee. Most U.S. brokers charge only a portion of this commission fee and the annual fund expenses are wrapped into the cost of the certificate. Each certificate represents a small amount of gold that will decline gradually over the years. Gold ETFs sold within the U.S. are taxed at a 28 percent capital gains rate because they are treated as sales of physical gold.
Ownership in a gold or silver ETF is a way to participate in the precious metals industry without having to hold any physical products. ETFs are sold on the large stock exchanges throughout the world and carry a different commission depending on the country in which they are purchased. Some represent ownership of physical gold, while others do not.