However, with gold ETFs, you'll be charged fees throughout the life of your investment. Marketing and management fees are ongoing expenses that you'll have to face. However, you'll also have to pay taxes when you decide to sell your fund. If you really want to own a gold asset, you can't do it through a gold ETF.
For more information on how to invest in gold, you can check out our Free Gold IRA guide. In reality, you never own a gold ingot, ingots or coins. Gold ETFs consist of gold contracts and derivatives and can only be redeemed for cash, never for gold itself. There is a wide variety of other gold and precious metals ETFs, if you decide to look for additional gold ETF options. Before you begin, ask a certified public accountant (CPA) how buying gold ETFs will affect your particular tax situation.
Or if, after extensive research, an experienced investor decides to short sell gold, trading a reverse gold ETF can be a simple way to benefit from falling gold prices. However, since the banking system is also at risk during periods of stress, so are gold ETFs, since they are part of that same system, writes Business Insider. If a given country depends solely on gold as its main source of income, an investor with risky portfolio assets in that country can sell or short sell a gold ETF as protection. You can explore many types of gold ETFs, but before including them in your investment strategy, consider looking at the performance of some of the most popular funds.
Even central banks buy gold coins and ingots, not gold ETFs, to manage risk, promote stability and protect against inflation and the fall of the dollar. In theory, you can receive gold from your ETF stocks, but it's not as simple as buying physical gold directly. Gold tends to rise when the dollar is weak, so if your investment portfolio contains assets that are exposed to downward dollar risk, buying a gold ETF can help you cover that exposure. While physical gold can be bought, sold and stored outside the banking system, gold ETFs and the gold associated with them cannot.
Gold ETFs offer some of the same asset class defensive traits as bonds, and many investors use them to protect themselves from economic and political shocks, as well as currency degradation. While ETFs generally have many tax benefits, the IRS can classify gold as a collector's item, which can have tax consequences. While the fund's assets are backed by the commodity, the intention is not for an investor to own gold. However, as with any commodity, the price of gold can rise or fall for several reasons in the short term.