Gold Futures vs. Gold ETF: Which One to Choose
Gold is often the go-to investment option for investors worldwide, typically when the economy hints at a potential fall. The recent surges in the value of gold amidst a declining economy have made this precious metal investment eye candy for seasoned investors. This is due to gold’s nature of acting inversely to the currency market.
Gold as an Asset
Gold is considered a valuable asset due to its high liquidity and an inadequate supply of physical gold to satisfy the demands of the reserves. This means that the physical asset can be traded instantly according to the market price. But what happens when an investor doesn’t want to invest in gold in its solid form?
This is where gold comes up with its extensive range of investment options other than gold bullion bars or coins. The investors may practice their convenience and affordability to choose from this range of investment options. Two of these many investments are gold futures and gold exchange-traded funds (ETF).
Gold Futures – what is it?
Gold futures are contracts that allow investors to own gold without handling the expenses of physical gold storage and maintenance. Gold futures allow investors to buy gold at a pre-determined price and deliver at a pre-determined date.
This is a highly profitable form of gold investment that allows investors and speculators to make big bucks in a short time. Investors read the market and deduce the future price of gold. If the prices are to be increased, they buy a certain amount of gold at the current prices.
However, they set the delivery date at some time in the future while getting the rights to trade that certain amount of gold. When the prices increase, they sell their gold and make a hefty profit.
Gold exchange-traded funds work like any other stock market. The investors buy shares in gold through brokerage or financial institutions and trade them over the market. It’s a flexible mode of trading that doesn’t involve gold’s physical presence. This flexibility is an easy way to diversify one’s portfolio as well.
Gold Futures vs. Gold ETFs
Following are some of the differences between gold futures and gold ETFs:
Gold ETF is a long-term investment and can yield high-profit margins over time, whereas gold futures are quick investments that can yield high profits or work inversely.
A large part of gold futures depends on the investor’s ability to predict the price correctly. This may work inversely, and the investor may lose a substantial amount of money. Since gold retains its value in the long run, ETFs rarely go in loss.
Futures investors and speculators spend hours examining the market, searching for an opportunity. This opportunity allows them to leverage their advantage in the market. ETFs are mostly static and don’t offer opportunities to leverage the market.
Orion metal exchange is one of the top gold investment companies in the United States, with a client base across the country and in Canada and Europe. We offer skilled consultation on how to invest in gold to attain maximum profits.