Among various exchange-traded funds (ETFs), I find gold to be one of the most interesting sectors available to investors. Well-known as a safety play and a hedge against inflation, your view on gold and owning it probably depends on what you think about the state of the global economy and inflation in general. One way to invest in gold with a fund that offers good liquidity for an ETF is through SPDR Gold Shares (GLD).
Specifically, GLD is an ETF that is pegged to the spot price of gold bullion. The fund allows investors to invest in physical gold bullion without the somewhat daunting responsibility of having to buy and sell it themselves.
Basically, this fund exists to purchase different types of gold bars and hold them in repositories, meaning that GLD???s assets are physically backed up. In terms of assets, GLD is the largest gold fund, with some $32 billion in assets.
In terms of performance, GLD tends to buck the trend of the market, giving it mixed returns over various periods of time. It currently is up nearly 17% year to date, as you can see below. GLD does not pay dividends, and its expense ratio sits at a modest 0.40%.
All of the fund???s top holdings are simply different types of gold bars, and an exhaustive list of precisely what it holds can be found here.
If you believe, as I do, that the world???s central banks are in an experimental monetary policy of epic proportions and the whole mess could come tumbling down, then your answer is that situation could be to own gold. On the other hand, if you believe all is right in the world, central banks take action with our best interest at heart and all of the bankers are good people, then you probably won???t want to bother.
So, if you???re with me, how do you own gold? The purest play possible on the yellow metal would be to go out and purchase physical gold. But, as our ancestors figured out, it is a lot easier to carry and store thin paper money rather than weighty blocks of precious metals.
If recent market turbulence has shaken your faith in the economy or you are worried about inflation, SPDR Gold Shares (GLD) could be a good contrarian play. From an investment point of view, in terms of liquidity and upside growth potential, I believe ETFs that feature precious metal investments make a lot of sense.
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As always, I am happy to answer any of your questions about ETFs, so do not hesitate to send me an e-mail. You just may see your question answered in a future ETF Talk.