How Do I Invest in the SPDR Gold Shares (GLD) ETF?
SPDR Gold Shares (GLD) are one of the most sought-after investments for gold investment, trading on New York Stock Exchange Arca and other major exchanges worldwide. GLD provides physical protection with trading occurring both domestically and abroad.
GLD appeals to investors for various reasons, including hedging against inflation or betting on alternative monetary assets and diversifying portfolios. But investors must be wary of potential risks related to GLD investments.
What is GLD?
GLD is one of the world’s most beloved exchange-traded funds (ETFs), providing investors with an ETF that physically backs gold investments. Recently, investors have taken an especially strong liking to gold as a safe haven amid fears of global financial crises and its perceived safety.
GLD holds physical gold bullion in its own dedicated account with HSBC, as well as permitting sub-custodians such as other banks to source and store its gold. On any given business day, this gold may move between allocated and unallocated accounts several times before eventually returning back into GLD’s ownership.
Investors purchase and sell shares of GLD similar to any stock, causing its market price to fluctuate with gold’s fluctuation in value. Since GLD regularly sells gold to cover expenses, its amount represented per share will decrease with time.
As with any investment, GLD should be evaluated against an investor’s personal goals in terms of both its risks and benefits before being purchased by any ETFs. Consultation with a financial advisor would also be advised prior to investing.
How does GLD work?
GLD is an exchange-traded fund (ETF) offering investors exposure to a specialized sector. As with any investment, however, GLD carries risks and can be volatile; however, its diversifying and hedge against economic uncertainties makes it worthwhile weighing all options prior to making a decision. To protect yourself and maximize returns it’s wise to consult a financial advisor prior to taking action.
ETFs operate as grantor trusts, meaning that actual physical gold bullion is held in vaults as the backing for every share. This sets them apart from gold mining companies which may incur operational risks.
Many investors appreciate ETFs because they allow them to “own” physical metal. Suzanne Hutchins, Newton’s global investments team manager and head of its real return investment group, told Forbes that her team appreciates GLD as it offers a cost-effective way of accessing yellow metal exposure – her team even visited vaults holding gold bars!
Why is GLD so popular?
GLD is popular with investors because it gives them exposure to gold without needing to store physical metal in their vault. Trading it is easy, while offering numerous investment options.
GLD comes with its own set of risks that make it less desirable for certain investors. For instance, any profits may be taxed at a higher rate than traditional long-term capital gains.
GLD’s main drawback lies in its sole backing by physical gold rather than any underlying company, leaving investors vulnerable should any theft or damage occur due to poor care by custodians storing it. While this risk is low, investors should nonetheless remain cognizant. GLD Authorized Participants do have some protection through general insurance on vaults where gold is kept but this cannot guarantee protection from all possible losses.
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