Gold ETFs are the exchange-traded funds that invest in gold and gold derivative contracts backed by gold. Investors do not get physical ownership of gold by investing in or redeeming gold ETFs; instead, they only get access to the cash equivalent of the transaction.
Thus, gold ETFs provide investors with the opportunity to gain exposure to the price and performance of gold without investing in physical gold. Also, gold ETFs are inversely related to the dollar price movements. Therefore, they are also extensively used to hedge against negative economic and political scenarios and the devaluation of the currency.
Factors to Consider Before Investing in Gold ETFs
Gold ETFs provide investors with ample flexibility, liquidity, affordability, and ease of participation in gold as an asset class. It is considered to be a low-risk and cost-effective investment, with moderate returns.
Investors must consider the tracking error and expense ratio of gold ETFs to determine the most suitable ones to invest in. The gold ETFs with low tracking error, low expense ratios, high margins, and high volumes are considered to be the most valuable additions to the investment portfolio. Additionally, the net asset value and assets under management of the funds also need to be considered before investing in gold ETFs.
Which Gold ETFs Should I Buy?
A wide variety of exchange-traded funds, exchange-traded notes, and trusts backed by gold trade on the US stock exchanges. We have compiled a list of the best gold ETFs that we found to be most suitable for investors to add to their investment portfolios.
Investors must select gold ETFs that incur low expenses, provide maximum diversification to the portfolio, are liquid, safe and secure, and serve as a hedging mechanism against currency fluctuations and inflation. The ability to add tax efficiency to the investment portfolio should also be considered as a significant parameter.