No, with a gold ETF, you don't own physical gold, but rather you buy a publicly traded debt security denominated in gold. If you want to own physical gold stored in reputable bullion vaults at comparable ETF prices, see our gold IRA comparison article above. Physically backed gold ETFs seek to track the spot price of gold. To do this, they physically store ingots, ingots and gold coins in a vault on behalf of investors. For the best gold IRA rollover options, consider investing in a physically backed gold ETF. Each share is worth a proportionate share of an ounce of gold.
The price of the ETF will fluctuate depending on the value of gold in the vault. The value of the shares fluctuates according to the price of gold held by the Trust. Fluctuations in the price of gold could significantly adversely affect investment in stocks. Investors should be warned that there is no guarantee that gold will maintain its long-term value in the future.
The lack of an active trading market for stocks may result in investment losses at the time the shares are disposed of. Since the Trust only invests in gold, an investment in the Trust can be more volatile than an investment in a more diversified portfolio. Substantial sales of gold by central banks, government agencies and multilateral institutions could adversely affect investment in equities. In addition, if the speculative community adopted a negative view of gold, this could cause global gold prices to fall, which would have a negative impact on the stock price.
Dhanteras, which marks the first day of Diwali in India, is considered conducive to buying gold and silver. Buying gold on auspicious occasions is part of Indian tradition. Investing in gold can be made in the form of physical gold, sovereign gold bonds, gold ETFs and gold funds. Gold ETFs are basically exchange-traded funds that invest in gold.
Each unit of a gold ETF represents one gram of gold and has a purity of 99.5%. This physical gold is stored in the vaults of custodian banks and functions as a base from which units derive value. Since the shares are intended to reflect the price of gold held by the Trust's depositary on behalf of the Trust, the market price of the shares is subject to fluctuations similar to those affecting gold prices. Chintan Haria, director of product development strategy & at ICICI Prudential AMC, said that investors considering buying gold for investment purposes this Diwali can consider gold ETFs.
The amount of gold represented by the shares will decrease over the life of the Trust due to the sales of gold needed to pay the sponsor's fees and trust expenses. Chintan Haria said that, from an allocation perspective, investors can consider allocating 5 to 10% to gold through gold ETFs or gold FoF in their portfolio.
