Gold ETF investment is the topic of many finance talk shows, and the object of many commercials on TV. New gold investors often wonder “What is a gold ETF?” A physical gold ETF provides the average investor the ability to enjoy the advantages of investing in gold. For centuries, people have hoarded this precious metal for a wide variety of reasons.
Gold has a history of maintaining its value over time, unlike paper currency which is subject to all sorts of fluctuations. People view it as a way to protect their accumulation of wealth and pass it on to the next generation.
Since the US Dollar is one of the world’s major reserve currencies, a devaluation of the dollar against other world currencies increases the demand for gold. This devaluation trend is likely to continue as a result of increased US budget deficits, trade deficits, and increases in the money supply.
Gold provides a excellent hedge against inflation. History has shown that the price tends to follow the increase in cost of living. Since inflation can inflict serious erosion on an investment portfolio, a portion invested in gold will dampen this loss.
Gold ETF’s are a convenient vehicle by which to take advantage of gold investment. Their price will accurately track changes in the spot price of bullion and will therefore increase as the price goes up.
Shares of gold ETF’s are traded just like stocks on the world’s major stock exchanges. They can be bought and sold at any time during regular market hours.
Investing in a gold ETF involves lower fees than a mutual fund. The only fees you have with an ETF is the transaction cost for the purchase and sale of the share. This is unlike a mutual fund which has high management fees.
There is also no minimum investment amount for investing in a gold ETF. You can invest as much or as little as you want to get the desired diversification in your portfolio.
