Gold exchange-traded funds (ETFs) are a good investment option if you find buying physical gold prices impractical or if you want to diversify your portfolio. Gold is considered a safe investment, which means that its prices are not usually very volatile. For some, buying exchange-traded gold funds (ETFs) can seem like a good deal. You get some insight into the value of gold, but without having to arrange for the receipt or storage of real gold.
How? A gold ETF is traded like a stock, generally tracks the price of gold and aims to track the performance of gold. iShares Gold Trust Micro ETF (IAUM). Vettai. abrdn Physical Gold Shares ETF (SGOL).
Abrdn. Owning shares in a gold ETF is not the same as owning physical gold, and ETFs cannot replicate the security that physical gold provides. Even central banks buy gold coins and bars, not gold ETFs, to manage risks, promote stability, and hedge against inflation and a falling dollar. Gold ETFs are exchange-traded funds that give investors exposure to gold without having to buy, store and resell the precious metal directly.
While physical gold can be bought, sold and stored outside the banking system, gold ETFs and the associated gold cannot. While gold reached near record levels in March following Russia’s invasion of Ukraine, the precious metal fell as interest rate hikes by the Federal Reserve to curb inflation brought two-year government bonds to their highest level in 15 years and attracted investors instead of gold. Most (but not all) gold ETFs are linked to the spot gold price, so returns should match gold price movements. There may be more effective ways to buy and hold gold than gold ETF methods, which do not involve major counterparty risk and do not operate within the limits of the banking system or stock market.
Some gold ETFs track the price of gold directly, while others invest in gold mining companies. These are the iShares Gold Trust Micro ETF, the GraniteShares Gold Trust and the abrdn Physical Gold Shares ETF, which surpassed the 7% drop in the Bloomberg Gold Subindex and the 19% drop in the S%26P 500 Index in November. In theory, you can accept gold from your ETF stocks, but that’s not as easy as buying physical gold directly. According to Chintan Haria, Head of Product Development %26 Strategy at ICICI Prudential AMC, investors considering buying gold for investment purposes on this Diwali can consider gold ETFs.
Gold ETFs “seek to combine the flexibility and ease of stock trading with the benefits of physical gold ownership, writes the World Gold Council. Gold ETFs may seem like a great option given the historical value that gold has had for over a century, but they’re actually not the best decision when it comes to using money to invest. This creates a scenario in which investors essentially hope that the statement they receive about their gold ETF investment is true, especially since they’ll never see any of the gold they supposedly invested in.