A gold ETF is another good alternative for those interesting in investing or trading gold. An ETF (Exchange Traded Fund) is traded on stock exchanges similar to stocks. Most ETF’s are designed to replicate the movements of market indices such as the Dow Jones Industrial Average, etc.
Gold ETF’s can be especially useful to those who are already comfortable with trading stocks. One of the most popular gold ETF’s is the SPDR Gold Shares, ticker symbol GLD. This ETF is also referred to as the SPDR Gold Trust. The SPDR Gold Trust trades roughly at the price of 1/10 ounce of gold and is one of the largest gold ETF’s. The SPDR Gold Trust is different than other ETF’s in that it represents ownership of actually gold bullion which the Trust keeps in reserves held for shareholders.
One of the best things about ETF’s, especially a gold ETF such as the SPDR Gold Trust is its liquidity. This makes it easier to enter and exit positions close to your desired price. Typically ETFs which have great liquidity also have options on them that also have great liquidity. Have readily available, liquid put and call options available gives an investor a great deal of additional flexibility such as that of selling covered calls, etc.
As stated previously, for those already familiar with trading and investing in stocks you can use the some of the same trading strategies currently at your disposal to effectively trade a gold ETF. The SPDR Gold Trust trends in the same way that the price of gold trends giving you the same opportunity to get onboard gold’s huge trending moves. In addition, you can also hedge your ETF trades by purchasing put options on the SPDR Gold Trust.
Because they are similar to stocks in so many ways, gold ETF’s can take a lot of the mystery out of investing in gold. Naturally the same rules apply to gold ETF’s as with any investment vehicle in that you must always be mindful of the risks involved as compared to the potential reward.