Buying Gold With Gold ETF’s
Most people think that gold is only bought at the jewelry shop or by the big commodity traders in Chicago or on Wall Street, but the fact is that buying gold is easy using a gold ETF, also known as a gold exchange traded fund.
An ETF is like a mutual fund, but it is traded on the exchanges and can be bought or sold at will and can be shorted. When buying gold through an ETF, the purchaser is buying shares of a trust equivalent to a certain amount of gold for each share (usually 1/10 of an ounce). The advantage is that the buyer does not have to take physical possession of the gold, store it, or protect it because the gold is held in trust. This means the gold can be bought and held for a long period of time with at very low cost.
Here are a few options for buying or selling gold with ETFs.
GLD – State Street SPDR Gold Trust – This is the most popular and reputed best gold ETF to buy. It is very liquid, regularly exceeding 10-million shares traded per day. A share of GLD is equivalent to 1/10 of an ounce of gold. In addition to brokerage fees, the cost of owning GLD is 0.4% per year.
IAU – Barclays iShares COMEX Gold Trust – This ETF is less liquid than GLD, averaging 400k-500k shares traded daily. The expense ratio for IAU is 0.4% per year.
UGL & GLL – Ultra Gold ProShares and Ultrashort ProShares – UGL aims to return twice the daily performance of gold. GLL shoots for twice the inverse daily return. These gold ETFs are strictly designed for traders because they do not track the longterm price of gold, only the intraday price. They are also more expensive to own with a 0.95% expense ratio.
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