Investing in Gold Exchange Traded Funds is a worthwhile investment as it guarantees you money. From the time of its launch, precious metal EFTs have been accorded high amounts of capital by the gold investment community. The trade of EFTs is less the same feeling and trading of usual stocks with a tight bid-asks spreads, making it commonly speculated by investors within a short time frame.
Since the introduction of GLD to the market in 2004, it has become one of the common gold that is backed up by EFT in the market. The stock trades at an average worth of $670m shares on a daily basis.
The trading of EFTs is of a matter of convenience as seen in a trading view, however, some of the EFTs elements are seen with caution: in most cases the EFTs signify unallocated claim on investing in gold conflicting with direct ownership. This statement is always overridden by most investors, but in reality it can go out of hand, leading to the systemic crisis in any financial system.
There are some unclear clarifications as to how successful will the EFTs systems be if there was to be a competition for the basic physical commodities.
Advantages of Investing in Gold ETFs:
Gold ETFs are easy to trade, no need of storage space as they are not invested in a “physical gold” form.
Cons of Investing in Gold ETFs:
Gold EFTs do not offer any protection in any case if there is a systemic collapse, lack of physical ownership of the physical metals, and they are not backed by real gold.
Investing in Gold Mining Stocks
The most common way used by investors in buying stocks listed on the stock exchange by miners is buying direct equity stakes. This also is a way of gaining exposure to the gold by investors. Accessing and buying gold mining activities through listed stock exchange allows an investor to take the advantage of the gold mining activities arising from the companies and any other future reserve upgrade in the course of exploration activities.
Investing on equity assures an investor of capital appreciation and dividend payout. Those investors with a comprehensive brokerage account have the advantage of buying gold from any gold related company in the world. Investing in gold mining stocks attracts a significant risk as compared to physical gold, thus investors should be smart when handling this form of investment.
In most cases, mining companies are not obliged to track gold prices; this means that when the gold prices begin to fluctuate, there is no assurance that the gold mining stocks will follow suit. The mining activities are highly volatile; they face many regulatory procedures and the ever-changing input costs.
Pros of Investing in Gold Mining Stocks:
They are traded easily; lack the need to store as they are not invested in physical gold.
Cons of Investing in Gold Mining Stocks:
Gold does not link perfectly with the stock market as compared with gold mining stocks. Yale conducted a study on “The Pros and Cons of Gold Mining Stocks”; (57% of stock market with 40% of gold, you will all the details as you study here.) Stock guarantees no security or protection if the systemic collapse occurs and there is the lack of physical ownership of the metals.