Trading Strategies  

Best performing Gold ETFs

Gold ETF are transparent vehicle providing effective and efficient platform for small investors to diversify into gold
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These days investing in gold or other precious metals are very popular. But investment in these precious metals requires special thought to the logistics of the purchase. The gold ETF funds provide a method for investing in gold that eliminates these issues. Gold ETFs are exchange traded funds that are meant to track closely the price of physical gold. Each unit of the ETF lets the investor own 1 gram of gold without physically owning it. Investing in gold ETF provides the benefit of liquidity and marketability which are a limitation of owning physical gold. The gold exchange-traded products are traded on major stock exchanges including Mumbai, London, Paris, Zurich, and New York.

Let’s take a look at the best performing gold ETF in India and abroad:

SPDR Gold Trust or GLD is one of the very first Gold ETF fund and still very popular. They purchase 400 ounce gold bars from London Good Delivery Bars and issues shares at one tenth of the price of an ounce of gold.

UTI Gold ETF is an open-ended exchange traded fund that aims to provide returns that closely track the performance and yield of gold. The advantage of investing in UTI Gold ETF is that there are no issues of safety, no resale concerns, quality assurance and no making charges.

Quantum Gold Fund ETF offers its investors an innovative and cost-efficient way to invest in gold.  The investment aim of the Quantum Gold Fund is to provide returns that closely correspond to the returns provided by the domestic price of gold.

iShares COMEX Gold Trust was founded by iShares in 2005. This type of gold ETF fund is listed on NYSE and TSX (Canada) and it meets the London Bullion Market Standards.

First Eagle Gold (SGGDX) is a company that mostly targets on gold compared to other ETFs where other broad based companies are also included like silver, aluminum and copper.

Market Vector Miners ETF (GDX) is traded on NYSE or New York Stock Exchange. This gold miner invests in diversified companies that are involved in gold mining. This type of ETF does not track the gold price but gold stock index as this ETF includes gold company stocks.

How to invest in Gold ETF

If one aims to invest in Gold ETF then you will need to have a demat account and a trading account with an online account for trading stock. After getting the account, one has to select the Gold ETF and place the order online from your broker’s trading portal. Then, the orders are routed to the exchange where the purchase order are matched with sell orders and executed band a confirmation will be sent back to you.

Other ways to invest in Gold ETF

Some of the other ways of investing in Gold ETF areas follows:

  • IPO: One can invest in gold ETF when the mutual fund company comes up with an IPO.
     
  • Stock Exchanges: Anyone can purchase Gold ETFs on stock exchanges. In India, you can buy gold ETF on NSE and BSE.
     
  • Directly from mutual fund Company: Even if the gold ETF is traded on stock exchanges one can buy gold ETF from the mutual fund company. To buy gold ETF units one has to purchase a minimum of 1,000 units in most ETFs.

Advantages, disadvantages of investing in Gold ETF

Advantages

  • No troubles with physical storage of gold: There is no stress or trouble with respect to physical storage of gold as the Gold ETF purchased by the investor are kept in his demat account.
     
  • Govt keeps a watch: Since Gold ETFs are purchased and sold online, the government keeps a strict eye on them. Thus, they are of highest purity.
     
  • Bought and sold at wholesale prices: Gold ETF is bought and sold at the wholesale price with good quality.
     
  • Capital gains taxes are deferred until sale of ETF: The capital gains taxes are postponed until the sale of ETF, which gives the funds a huge advantage over other investment products.
     
  • Simpler transactions: One good advantage is the simpler transaction and lower fees.

Disadvantages

  • If you are looking to own a gold asset, then you cannot do so through the gold ETF.
     
  • The internal fees can eat into the value of share holdings.
     
  • The investor only owns the gold certificate and not the asset itself.
     
  • Gold ETFs are taxed as collectibles at 28% as opposed to the capital gains tax rate.
     
  • The Gold ETFs are made up of gold contracts and derivatives and can only be redeemed for cash and not for gold itself.

Since the gold prices are sky shooting, investing in gold ETF for 2012 is a wise choice that can yield quick results.  The returns from the gold are good as the returns from shares given by well-performing companies. Invest in gold without buying physical gold and that’s what ETF does for you.

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