How Do I Invest in Gold?
There are various methods of investing in gold, including purchasing physical metal or shares of mining companies; or investing in GLD which offers investors a cost-efficient means to gain exposure.
GLD investments involve risk, as their price fluctuates, potentially altering an investor’s share value beyond or below its net asset value.
How does GLD work?
GLD provides investors and traders a way to invest in gold without the hassle of owning physical bullion themselves. The ETF stores actual gold bars in high-security vaults worldwide and issues shares that represent fractional ownership of these bullion bars.
Investors can purchase and sell GLD shares backed by actual physical gold bullion on global exchanges, much like buying stocks or other securities.
Authorized Participants, or APs, of GLD create and redeem shares in blocks of 100,000 shares known as baskets, which they sell back to other APs–usually brokerage firms–who then distribute them among individual investors.
GLD does not pay out dividends; rather, its returns are directly tied to gold prices in the market, making it an excellent way for investors looking for protection against inflation and economic uncertainty as well as short-term traders looking to profit from price fluctuations.
What is GLD?
GLD is one of the world’s largest ETFs, tracking an asset class long considered a safe haven from rising inflation and political unrest – gold. GLD provides an affordable means of getting exposed to this asset class.
As with other stocks and exchange-traded funds, GLD’s shares are subject to investment risk and may fluctuate in value over time. Furthermore, as the fund sells gold to cover expenses, the amount represented by each share could diminish with time.
Although GLD is physically backed, ordinary investors cannot redeem their shares in London for bullion; that privilege is reserved for “authorized participants,” typically major brokerage firms that have entered into agreements with its sponsor and trustee. Furthermore, as GLD is not registered as an investment company and thus lacks protections provided by the 1940 Act; therefore it should only be included as part of a well-diversified portfolio. GLD should serve as an excellent alternative to holding physical gold or purchasing futures contracts which often involve complex mechanics requiring substantial margin for purchases.
How can I buy GLD?
One of the simplest and least costly ways to invest in gold is through SPDR Gold Shares ETF (GLD). GLD trades on the New York Stock Exchange like any stock and can be bought or sold throughout the day; each share represents one-tenth of an ounce. Other funds may combine bullion with shares from companies that mine, refine, or produce gold; these provide more diverse exposure but require larger initial investments.
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