These Is What A Gold Exchange Traded Fund Entails
A gold exchange traded fund is also known as gold ETF or gold fund. It refers to a fund that invests primarily in gold-trading or gold-producing companies. The prices of these investments greatly correspond to the value of gold in the market at any one particular time. The fund is normally backed by gold which is both deposited and insured. This tells you how expensive the investment normally is.
Gold ETF has a very long history, but its introduction paved way for the launch of other investments that are associated with it. These include the GBS- Gold Bullion Securities, the SPDR Gold Trust and the New Gold Issuer. These are all sponsored by the World Gold Council which oversees the prices and control of supply of this precious commodity. The gold ETFs are traded in a majority of the stock markets in many countries including New York, Paris and Mumbai.
One disadvantage with this type of investment is that it attracts a lot of fees in the form of commissions for the broker. The commission is usually charged at a rate of 0.4%. This is on the lower side, meaning that it defers depending on countries. Other expenses that an investor must be prepared to meet are the insurance, management and storage fees. Each certificate that represents some given shares must cater fro all these costs, meaning that the more certificates one has, the more he is bound to pay. These are payable per annum.
Since the payments are not done in cash, the amount of gold on each certificate keeps reducing over years. This is because some gold has to be sold every year to meet these expenses. The biggest advantage with the ETFs is that an investor does not have to hold gold in its physical form, which is actually risky. The disadvantage is that speculation almost always affects the prices.
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