Posted on 16 August 2013.
In recent months the commodities market has seen it’s fair share of highs and lows. Gold in particular became victim to the Federal Reserve’s recent comments about tapering the stimulus. While many investors, agencies, and individuals are abandoning the gold ETF market, others see this as a great opportunity for long-term investments. Because of this, we wanted to bring you up to speed on what you can be possibly missing by not participating in buying a Gold Bullion ETF.
So what exactly is a Gold Bullion ETF? Can’t you just buy gold from commodities? We’ll get into the differences between the two shortly, but for now the answer is yes. You could just buy gold from commodities, but the Gold Bullion ETF has a different structure that can greatly benefit those interested in this rare precious metal.
A Gold Bullion ETF tracks the current market price of gold as it trades, and reflects one of the most accurate prices of gold today. Buying or trading Gold Bullion ETF can be accomplished as easily as a traditional stock trade. You simply use the appointed symbol for the particular Gold Bullion ETF you would like to trade with and just place a buy or sell order as you would with any other stock. You can even purchase or sell this commodity via online brokers.
Gold Bullion ETFs don’t mean that you physically own pieces of gold. Don’t expect any deliveries of bars, rounds (coins), ingots, or plates to be delivered to your home. Instead Gold Bullion ETF reflects the current valuation of the amount of gold that particular ETF holds within their own warehouse spacing. Though it is a direct investment in gold, you don’t have to worry about investing in secret, secured storage areas for this sought out commodities. That will definitely help you avoid becoming a victim of some elaborate heist like in “The Italian Job.”
There are many ways Gold Bullion ETF differ from trading gold ETF derived from futures and options. The biggest one is with Gold Bullion ETF, there is no price decay. This occurs in other gold markets when upcoming contracts are much higher than the current one. Unfortunately as you trade in gold ETF markets, you are forced to pay the higher commodity ETF contract which can cause your investment to lose it’s value. The other major difference between the two is how the value is determined. Unlike gold traded through options, futures or commodities, Gold ETF prices are determined by the measured weight and quantity of gold the Gold Bullion ETF actually possesses, rather than the current market price.
As we mentioned above, when trading Gold Bullion ETF you don’t have to worry about price decay. This provides you with a lot more potential to make money off of your investments. Though there are management fees associated with Gold Bullion ETF, they account for maybe 1% of gains accrued. Gold Bullion ETF can also serve as a great hedge investment when facing economic uncertainty and currency devaluation. Those who will benefit the most from trading Gold Bullion ETF are those who are looking for long-term investments. Especially right now, with so many selling their investments, you can stand to make quite a bit of money buying it low and waiting for the prices to rise.
One of the most popular Gold Bullion ETFs is SPDR Gold Trust ETF (GLD), though there are plenty of ones to choose from. A great site to use as reference would be the Definitive Gold Bullion ETF List. This provides you with current market prices from all of the available Gold Bullion ETF in addition to the other commodities available through exchange traded funds.
Like any investment, it’s important to understand what you are investing in and have taken the time to do the necessary amount of thorough research. For those of you looking to have physical position of gold, whether it’s gold bullion bars, coins, plates or ingots, should directly contact a dealer than can delivery physical gold bullion. Just remember, if this is the road you choose to pursue you must make sure you have the necessary space and security to store your investment. If you are simply looking to own an amount that a particular company stores and holds, trading Gold Bullion ETF would be a perfect investment for you. They hold many advantages over other gold investments you can make, and can greatly benefit you as a long-term investment. Make sure you take the time to identify which Gold Bullion ETF or any type of gold investment is right for you. Never make impulsive decisions while trading, as it could be the fastest way to lose thousands.
So what do you think? Are Gold Bullion ETF the right market for you? Or are you looking to physically own gold?
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