A precious metals exchange traded fund (ETF) is a specific type of financial product for offering investment in items like gold, silver and other valuable metals or “ores.” These precious metals are considered as their own class of commodities, where precious metals ETFs might differ in specific ways from funds related to other commodities like timber, energy products, or food materials.
It’s important for investors to understand some of the different types of precious metals ETF choices. Some of the top precious metals ETFs are closely related to the actual price of raw gold, silver, or platinum through holding “bullion,” which is the precious metal in a raw form. For example, the SPDR Gold Trust ETF (GLD) holds gold bullion in order to provide shares that reflect current gold prices. Other precious metals ETFs may invest in mining companies and other or indirect plays on the changing values of precious metals.
A precious metals ETF has some particular advantages for those who like this kind of commodity. Unlike precious metals “futures” contracts, ETFs do not often include specific time frame restrictions related to “exercising” options. The ETF works like a stock, or other exchange traded equity. It has its own ticker and stock chart that shows past pricing. The investor can usually buy into or sell out of an ETF within the trading day. Many brokerage firms are also providing incentives for investment in precious metal ETFs and other exchange traded funds by offering unique low commissions on these products.
Some experts recommend the ETF as a way to diversify a portfolio and stay relatively liquid. This has a lot to do with the easy trading of ETFs and their accessibility from major exchanges. Some investors might find that a precious metals ETF is an easier or more safe way to get into precious metals then some other traditional strategies like holding actual physical gold or silver, buying futures contracts, or selecting individual precious metals stocks.
Beginners can also benefit from knowing about the range of precious metal ETF options. Some gold and silver ETFs act as effective “shorts” for the markets, meaning that traders can benefit from either price increases for the precious metals, or price drops for the same commodities. This is just part of looking at what each different precious metals ETF fund can offer an investor.