What is Gold ETF?

Gold ETF is Gold Exchange Traded Fund and are usually called as paper gold. They are traded in the major stock markets around the world. Gold ETFs can be bought and sold just like other stocks. They are backed by the physical gold bullion stored in secure vaults. Gold ETF price is same as the price of gold in the current day, hence it is exactly same as buying and selling physical gold bullion except for the fact it has management expense ration(MER) which is approximately 0.4%.

ETF is traded on major stock exchanges and Gold ETF is mainly traded in American Stock Exchange(AMEX). ETF is equivalent to investing in a group of companies rather than a single company similar to mutual funds. Since the value of gold ETF is directly linked with the value of gold price, any gold price fluctuation will affect the gold ETF proportionately.

Pros and Cons of Gold ETF

The pros of gold ETF are

1. It can be purchased and sold easily through your brokerage account just like you deal with other stocks.

2. You can purchase small amount of Gold ETF like a small part of an ounce. So you don’t have to invest big bucks at once. You can slowly increase your Gold ETF investments over time.

3. There is no risk associated unlike physical gold where you will have to bother about security and insurance related stuff.

Though the pros outweight the cons of gold ETF it is necessary to be aware of the cons as well

1. There is a small ~0.4% MER expense for gold ETF.