Gold ETFs - This Is The Right Time To Invest In Them!

Gold prices breached the historical barrier of $1,200 per ounce in December last year. They are hovering around something like $1,000 per ounce. But experts are of the opinion that the long term trend in the gold market points towards a price of $2,000, $3,000 or even $5,000 per ounce in the coming months and years.

This long term trend in the gold market is being fueled by the geopolitical uncertainity, weakness in the US Dollar, supply constraints, growing demand for gold by investors and hedgers and a host of other factors! What this means is that gold market is in a long term bull market due to multiple factors.

Generally in times of political and financial uncertainity, investors tend to seek refuge in safe haven assets like gold. Throughout human history, gold has been considered to be the ultimate investment. Even today, in modern times when we deal with paper currencies, gold is the ultimate currency. It is something that is still considered to the ultimate store of wealth. The last bull market in gold had lasted for ten years. It started in 1970 and ended in 1980. This is the best time to invest in gold as a long term investor.

But how to invest in gold? Some five to ten years back, it was difficult to invest directly in gold. Either you had to buy gold bullions or trade gold futures. But this changed altogether with the introduction of Exchange Traded Funds (ETFs).

Now, Gold ETFs is one of the easiest ways to invest in gold. These ETFs trade just like a stock. You can go long or short anytime you want. These get traded on all the major exchanges in the world like New York, London, Frankfurt, Tokyo, Hong Kong, Sydney, Dubai and others.

Different Gold ETFs may have different investment strategy. Some Gold ETFs buy and hold gold bullions physically. On the other hand, others invest in gold futures. Now those ETFs that are backed by the physical possession tend to follow spot gold prices very closely while those that invest in the futures also follow gold prices closely but sometimes this may deviate due to backwardation and contango.

Now when you invest in these ETFs, you will be charged a small fee as commission as well as a small annual expense. These fees are not much as compared to investing in mutual funds. A second way to invest in these commodities.

Author: Ahmad Hassam