Precious metal ETFs, for example, are considered the simplest options when considering investing in gold. Its main attribute is that it does not own real physical gold, but only a percentage of what the shares represent in the market.

Before you understand what gold ETFs are, you need to know what an ETF is.

Exchange-traded funds were listed on the Toronto Stock Exchange in the early 1990s. An ETF has funds and stocks in a product and the trade is done in that ETF. The use of ETFs is to be able to invest in the growth of the entire industry rather than just one product. Each gold ETF has a different structure described in its prospectus. For example, when you buy an ETF, you can invest in a conglomerate of companies rather than a single corporation.

Best gold ETF allow investors to gain exposure to gold in real-time, at a lower cost than many other forms of investment.

They allow investors to buy, participate in the gold bullion market, and sell it if they wish on the stock exchange. Gold ETFs are a passive investment, when the price of gold goes up, ETFs gain value, and when the ETF goes down, it follows.

Gold ETF tracks the performance of gold bars. Each ETF unit equals approximately 1 gram of gold, but they are units equal to ½ gram of gold.

It works like this; the gold ETF fund buys a large amount of gold and keeps it in physical storage. Then they will issue shares equivalent to the amount of gold stored; The idea here is that the value of a stock will increase with the increase in the price of gold bars. If the price of gold increases by 50%, individual stocks would increase in value by the same 50%.

The investor cannot redeem the property for physical gold, only cash.

Please note that there is a general annual charge of 0.4% for storage.

Advantages of gold ETFs

  • Fast and secure trading through the account - Flexibility at the time of purchases and sales.
  • The value of ETF is backed by real physical bullion; therefore, it allows you to gain exposure very close to what you get by investing in actual physical bullion.
  • No storage and safety concerns for investors
  • You don't have to buy a large amount to invest, it can be bought by practically anyone
  • Transparent pricing
  • It can be bought/sold on stock exchanges like any other stock.
  • Online availability

An advantage of an ETF over a mutual fund is that they are stocks, common stocks that are traded on exchanges. So you can log in right now and buy shares of your favorite gold ETF if the markets are open. Or you can upload them as easily as selling any other stock.

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