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What are Gold Mutual Funds?

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  • Written By: Matt Brady
  • Edited By: Jenn Walker
  • Last Modified Date: 01 November 2018
  • Copyright Protected:
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    Conjecture Corporation
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Gold mutual funds are funds that purchase gold directly as well as invest in companies that produce and mine gold. Like other mutual and exchange-traded funds (ETFs), gold mutual funds are operated by managers who invest in securities on behalf of the fund's investors. There are also mutual funds that invest in other precious metals, such as silver and copper.

Gold is a tangible asset, so in some cases investing in gold means physically possessing amounts of gold bullion, which can be liquidated for other currency at any time according to the going exchange rate. Assets in gold mutual funds, however, often may not be actual gold, but rather gold securities such as mining shares from gold mining companies. In some funds, however, investors do collectively buy stocks of gold bullion.

Gold mutual funds are considered to be a speculative investment as well as a secure, long-term investment. Speculation is the word used for investments made in commodities, such as gold, or securities, such as gold mutual funds, in anticipation of a sharp rise in their value. This form of trading is called speculation because it's considered less certain and more risky than a carefully calculated investment. Although the risk is high when speculating with gold, some investors find the potential payoff worth it, as the value of gold has been known to experience profitable surges in response to unstable economic situations.

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Gold has long been regarded as a generally safe investment. Throughout its history, it has remained in consistent demand, and has proven uniquely capable of retaining value. Rather than speculatively trading in gold mutual funds, some investors treat them as a long-term vehicle. Gold is considered to be something of an insurance against other currencies that are perhaps less stable. In fiat money systems, where the value of a currency can rise and fall merely by people's confidence in it, gold investments can provide peace of mind—they're highly liquid and have a relatively safe return on investment (ROI) over the long haul.

The value of a gold mutual fund is usually comparable to the direct worth of gold at any given time. This applies to any gold investment held by a fund, whether it be a security or gold bullion. This can make investing in gold funds a more transparent option than other investment packages, whose value may be dependent upon many commodities and types of securities.

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