A gold ETF is a special type of exchange traded fund that is designed to track the price of gold. Gold ETFs are open ended mutual funds fully backed by insured physical gold bullions. They are traded on the major stock exchanges including London, New York and Singapore.
Gold ETFs allow investors to own gold and gain exposure to its price without the inconvenience (and risk) of storing physical gold bars or coins. Each certificate or share entitles the holder an ownership to a specific amount of gold.
To pay for management fees and also for the storage and insurance of the physical gold, a small amount of gold is sold periodically. Hence, the amount of gold represented by each certificate decline over time.
Investors can own gold that is insured and kept in a secure vault by buying gold ETFs.
Gold ETFs or GETFs are grouped under the name Exchange Traded Gold.
- Streettracks Gold Shares (NYSE: GLD and SGX: GLD 10US$ )
- Gold Bullion Securities (ASX: GOLD)
- Lyxor Gold Bullion Securities (LSE: GBS and Euronext: GBS)
Like all securities, there is a commission (typically around 0.4%) for buying or selling gold ETFs. In some countries, investing in gold ETFs is a way to avoid the sales tax or the VAT which would apply when buying physical gold coins and bars.
How to Start Trading Gold ETFs
To buy or sell gold ETFs, you need to open a trading account with an online stock brokerage such as TD Ameritrade. We recommend TD Ameritrade as they provide a virtual trading platform where beginners can try out stock trading in real market conditions without using real money.