Select ETFs: Gold

Gold ETFs (Exchange-Traded Funds) can be a useful investment tool for those seeking exposure to gold. They offer a convenient, cost-effective, and liquid way to invest in gold without physically owning or storing the metal. Gold can also serve as a diversification tool, as it tends to have low correlation with other asset classes, and it’s often considered a safe-haven asset that can protect against inflation and economic uncertainty.

Best for Trading

SPDR® Gold Shares (GLD)

Expense Ratio: 0.40%

GLD is the first US traded gold ETF and the first US-listed ETF backed by a physical asset, offering exposure to an asset class that has become increasingly important in the asset allocation process in recent years. GLD can be used in a number of ways; some may wish to establish short-term positions as a means of hedging against equity market volatility, dollar weakness or inflation. Others may wish to include gold exposure as part of a long-term investment strategy. GLD is a relatively simple product; the underlying consists of gold bullion stored in secure vaults. As such, the price of this ETF can be expected to move in lockstep with the spot price of gold. The physically-backed nature of this product eliminates any of the uncertainties introduced by futures-based strategies such as UBG and DGL.

Best for Holding

SPDR® Gold MiniShares® (GLDM)

Expense Ratio: 0.10%

GLDM is a slightly modified alternative to State Street’s giant gold fund, GLD. There are two main differences between this offering and its predecessor. First, the handle: GLDM holds a fraction of the amount of gold per share as GLD, or about the same amount as rival IAU. This may appeal to investors looking to place small orders, but is a potential problem for those paying per-share commissions. Second, the expense ratios may be different and worth considering. Differences in custodian and vault location may also be worth noting.

For many investors, costs associated with buying and selling the Shares in the secondary market and the payment of GLDM’s ongoing expenses will be lower than the costs associated with buying and selling gold bullion and storing and insuring gold bullion in a traditional allocated gold bullion account. As with all physically held gold funds, taxes on long-term gains can be steep, as GLDM is deemed a collectible by the IRS.

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