Are Gold ETFs Safe?

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Investing in gold can be achieved through a wide variety of methods. Some prefer to buy the physical or digital metal itself, whereas others prefer different investment vehicles. Gold ETFs, for example, have proven to be of great interest to traders all over the world. 

Why Gold ETFs Make Sense

At its core, a gold ETF is not all that different from looking at the value of this precious metal directly. These exchange-traded funds are designed to track the gold price and provide investors with exposure to its fluctuations. Every gold ETF has assets backed by the commodity, but investors will never own the precious metal directly. This option removes some logistical hassle from the equation, but it doesn’t provide “true” exposure to this precious metal either. 

For both novice and advanced investors, gold ETFs can prove worthwhile. They will still provide exposure to the gold price in a hassle-free manner. That in itself is well worth taking note of at all times. Although gold is a long-term investment first and foremost, a lot of traders want to get in and out of positions at their own leisure. 

Different ETF Types

Exploring the world of gold ETFs will often yield some rather surprising information. Whereas some investors simply want exposure to the price itself, others don’t mind going one step further.

Anyone looking to invest in gold companies can often do so through ETFs as well. More specifically, seeking exposure to gold-mining stocks and precious metal indexes can prove worthwhile. Exploring all of the different options will help diversify one’s portfolio even when sticking to one broader industry at all times.

Another somewhat hidden benefit of these ETFs is how they provide foreign exposure. For example, investors with assets in their portfolio having risk in specific gold-dependent countries can opt for shorting a gold ETF as protection. This is a powerful tool for diversified and advanced investors. 

Don’t Overlook the Downsides

As appealing as gold ETFs may sound, they don’t always offer advantages.  For those who absolutely want to own physical bullion, a gold ETF simply isn’t an option whatsoever. Investors will never be able to obtain a gold bar, coin, or other physical asset by exploring this particular option.

Another aspect to take into account is the potential tax implications. In most countries, ETFs give the investors several tax benefits. That situation can differ from one region to the next. A local tax agency can label specific gold as “collectible”, which can have very different consequences  for those seeking exposure to these investment vehicles altogether. 

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