Trade Precious Metals

Gold ETFs leading a new generation of Precious Metals ETFs

Gold ETFs leading a new generation of Precious Metals ETFs

Gold ETFs leading a new generation of Precious Metals ETFs
November 08
03:33 2011

Over the last number of years, gold prices have increased at a rate that cannot be matched by another precious metal, commodity or asset. Investors are looking towards gold as a safety valve against the unstable nature of paper currency which is rapidly losing value. As a result, the popularity of gold ETFs has grown exponentially with the Gold SPDR ranked as the world’s largest ETF for a short while in August 2011 where it unseated the S&P 500 SPDR with approximately $75 billion in AUM.

A combination of increasing gold prices and the simplicity of itGold ETfs - SPDR Price Chart explains its rise. The most basic holdings consist of bullion which moves in line with gold prices. Gold ETFs are more or less the same as owning physical gold as there are no dividends or index rebalances to worry about. Physical gold ETFs have $80 billion invested in them at present.

However physically backed gold ETFs are just a drop in the ocean. Investors are also keen on getting in on the extraction and production of gold as well. The Gold Miners ETF is very popular with junior mining companies. Yet this is still only a minor part of the Gold ETF range with new products making their way to the market with great regularity.

Now that the ETF industry is growing all the time, a number of complex products are on offer for the more discerning investor. Here are examples of more gold ETFs that give investors a wider exposure to gold prices.

FactorShares 2x Gold Bull / SP 500 Bear

If you want to leverage your gold exposure and have a spread betting strategy with a level of risk you can manage, this ETF is for you. Everyday, there is a spread on offer between large cap stocks and gold stocks. With this option, you go short in E-mini futures and long in gold futures. Remember, with this option, your leverage resets every single day which can lead to a major return on investment when a position is held for a long time. At the moment, this option has yielded a return on investment of around 40%, impressive figures.

E-TRACS S&P 500 Gold Hedged ETN

With this option, investors are exposed to large cap stocks. Its index will measure an investment strategy’s long performance on the S&P 500 and hedge against changes in the dollar compared to gold prices. COMEX gold futures are hedged with S&P 500 index values. The gold hedged index will offer a better return on investment unless gold prices fall against the dollar. So far this year, S&P 500 is down 7%.

RBS Gold Trendpilot ETN

This option gives you exposure to gold or an investment in quarterly US Treasuries. It will invest in bullion when gold’s price closes above its simple moving average for 200 days over five sessions in a row. If gold falls below the aforementioned average for five sessions in a row, this gold ETF will invest in quarterly Treasuries. When you invest in gold, you pay 1% expenses which is cut to 0.5% if cash is invested in instead.

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John Armstrong

John Armstrong

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