Despite their differences, both gold ETFs and gold futures offer investors the opportunity to diversify their positions in the metals asset class. The second structure for commodity ETFs is futures contracts. These are traded on stock exchanges, similar to stocks and bonds, and do not require storage like physical commodities. When a futures contract approaches the delivery date, the holder will usually conclude that contract in exchange for another contract for the same commodity
that will be delivered in the future.
The SPDR Gold Trust ETF was touted as a cost-effective alternative to owning physical gold or buying gold futures. Van Eck Securities Corporation, distributor of the VanEck International Investors Gold Fund, the VanEck Gold Miners ETF and the VanEck Junior Gold Miners ETF. The difference between gold ETFs and gold futures is that, on the one hand, gold ETFs offer investors a cost-effective, diversified alternative to investing in gold-backed assets rather than in physical commodities. Gold futures, on the other hand, are contracts between buyers and sellers that are traded on centralized exchanges, where the buyer agrees to buy a quantity of the metal at a fixed price at a fixed future date. While gold ETFs offer a flexible way to gain exposure to this asset class, buying gold ETFs comes with risks
.
Since the shares in the trust are intended to reflect the price of the gold held in the trust, the market price of the shares is subject to fluctuations similar to those that affect the price of gold. That’s because gold ETF managers don’t invest in gold because of its numismatic value, nor are they looking for collector coins. Since gold itself does not generate any income and there are still expenses that need to be covered, ETF management is allowed to sell gold to cover these expenses. Gold ETFs can expose investors to liquidity-related risks, i.e. risks associated with how easy gold ETFs are to be bought or sold on the market and converted into
cash.
According to the World Gold Council, it takes a long time for gold explorers to put new mines into production and find new gold deposits. Investors seeking exposure to gold can find stock-based alternatives such as the Veneck Gold Miners ETF () and the VanEck Junior Gold Miners ETF (), for example. Delivering physical gold to applicants can take a long time, and the delay in delivery could result in losses if the price of gold drops. By investing in gold ETFs, investors can invest their money in the gold market without having to invest in the physical commodity
.
Investments in silver and silver mining as well as in gold and the gold exploration industry involve additional risks. Other things being equal, an investor might prefer to buy a 10-year government bond as gold if the real yield on 10-year government bonds is 2% and the yield on gold or silver is zero
.
