Invest in Gold by Investing in Gold ETFs

To invest in gold by investing in gold ETFs is a viable option to the investment mechanism of physically purchasing gold by investors. This type of investment is also referred to as paper gold, since all the investor owns is a piece of paper that has the value and no physical gold at all.

With gold prices closing in New York at $1334.50 on January 24, 2011, this is a very lucrative type of investment. What an investor must keep in mind is that the value of their ETF is not solely supported by the spot gold price in most cases, but some do exist.

The ETFS Physical Swiss Gold Shares (SGOL) is an ETF that has 100% of its assets in physical gold. This ETF’s value will fluctuate with the spot price of gold. The iShares Gold Trust (IAU) is another ETF that has all of its assets in physical gold. If you wish to own a share of physical gold, these two are a perfect choice.

For the investor that wishes to diversify their risk a little more, there are other options with gold ETFs. This is the ETF that not only hold a portion of the assets in physical gold, but also in the mines that produce the gold and the refineries that purify the gold, that is then placed on the market. The value of these ETFs is then judged by the known and unknown reserves of the mines and the process capacities of the facilities where the investments are made.  A good example of this is the Market Vectors Gold Miners ETF (GDX).

The reason the gold ETFs are so attractive is the fact that you are not holding gold physically. This paper gold is more easily traded on the open market like any other stock or mutual funds. The downside is that the investment firms gets a cut of the profits for making the transaction, just like any other broker.

To invest in gold by investing in gold ETFs is an attractive way to make an investment that is more liquid than investing in physical gold itself.

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