Gold ETFS- All You Need To Know
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Usually when people talk about investing in gold, the first thing that comes to their mind is either gold bar or coins.
That’s natural since this is the form in which the majority of the people purchase gold. However, not everyone is comfortable with the idea of storing gold in their home or bank. This is where gold ETFs come in.
Gold exchange-traded fund is a commodity that’s traded on an exchange (like stocks). The only difference between stocks and EFTs is that these securities serve as substitutes for gold.
In simple terms, you wouldn’t own actual gold. Instead, when you redeem the certificate, you’ll receive a cash equivalent. Using these, investors are able to keep track of gold’s performance.
How Are EFTS Used
In a way, gold EFTs are like bonds. These are long-term securities that investors can use to hedge in case of unfavorable economic conditions, like a decline in currency value.
To get a better idea, just take a look at the following example; currently gold EFTs are available in the market at $100. You expect the prices to increase in the near future. What you can do is purchase a put option (the right to buy EFT in three months).
Using this option will allow you to purchase the gold EFT in the future at the current price. This way you’ll be able to save money and hence gain a profit.
Another reason gold investments are so appealing is that unlike currency, its value does not decline over time. With EFTs, you can diversify your portfolio. It’s an effective tactic, which helps ensure that your investments stay safe during financial crisis.
In addition to that, gold EFT also provides you with exposure to other gold related industries like gold mining. Furthermore, there are certain countries which rely entirely on gold for their finances. With gold EFTs, you can invest money in those markets as well.
Popular Gold EFTs
In 2018, investments in EFTs in USA have declined and this is largely because of decline in gold prices.
However, despite of the market conditions, GLD has continued to perform well. They currently have outflows of $1.7 billion.
Experts, too, have suggested that in the upcoming months gold market will show improvement. If you’re planning to invest to invest in gold, this is a good opportunity. Get in touch with us.