ETFs For The Golden Bull

Gold has shot up from below $1,000 to as high as $1,265.30 in the previous 1 year. Is it going still higher? If that's the case, you must figure out how to take advantage of trend.

Now I will review several ways you could get concerned in the gold through easy-to-buy exchange traded funds (ETFs). Of course, you may perhaps want to own certain actual gold coins to your possession, as well. But, for larger amounts or else short-term speculation, ETFs are likely to be the top way to go.

You can even play the gold market by way of gold stock ETFs, that are dissimilar over gold bullion ETFs. I am going to give reasons for this in a moment. Firstly, let's look at what gold could have been doing lately.

Gold languished for years in Nineteen Nineties but is quickly making up for lost time. It's been a dangerous ride.

However gold prices have become above they were in 1979-80 inflation panic.

Are people actually that concerned about inflation another time? No doubt some are. I do believe even larger forces are at work, though.

Economic power plus influence is shifting to people in emerging markets who're not so wanting to rely on in paper funds. They need to store their assets in somewhat actual - exactly how gold have been used for centuries.

Regardless of the reasons, gold has without doubt seen impressive returns the previous few years. I can not speak how long it can continue, of course. But when you think the uptrend may move on, here i will discuss three methods to take advantage of it by ETFs.

Golden Idea 1: Gold Bullion ETFs

This kind of ETFs is completely tied to the gold price. You put your dollars into the fund after which the manager makes use of it to purchase gold bullion, that is then kept in a vault.

The first this kind of ETF was SPDR Gold Shares (GLD), which came out in the end of 2004. This was the first time U.S. buyers had access to gold using this method, moreover GLD was a rapid success. Just a few months later on iShares jumped in with the very similar iShares Comex Gold Trust (IAU).

Credit for being first - and maybe because of a more memorable ticker symbol - GLD is in the present day much bigger than IAU. Both are big, liquid Exchange-traded funds as well as have accomplished their objective of the closely monitoring the day by day modifications in gold prices.

Some people hate the thought of an intermediary coming among them plus their gold, or they doubt if the gold is really present. But this describes you, therefore my answer is simple: Don't buy a gold ETF. Purchase your own gold coins or bars, plus store them in the spot where you feel will be secure.

A new ETF, however, tries to address some of these concerns ...

ETFS Physical Swiss Gold Shares (SGOL) came out back in September 2009. This fund do well very very similar to GLD as well as IAU. The primary change is that the gold is stored at bank vaults in Switzerland. GLD and IAU store their gold in London as well as New York.

Therefore if having with your gold in the Switzerland makes you think better, then you might choose SGOL from both better alternatives. And you would not be alone! The sponsors of SGOL appear to get tapped into a niche market, getting attracted around $500 million along with sufficient trading quantity.

A different method to take advantage of a gold bull market is via gold mining stocks ...

Golden Idea 2: Gold Mining Exchange-traded funds

The firms that discover, develop as well as function gold mines are very leveraged to gold rates. It's because their working costs are mainly set. Once you've found the gold deposit then built the facilities to remove it, nearly every extra dollar you get for it goes straight to the bottom line.

Gold mining might be a high-return business. There's a trouble with gold stocks, though: They are still stocks. Meaning they respond not just to the gold market but on the stock exchange as well. Once stocks go in a downtrend, gold stocks regularly drop right together with everything else.

Will this suggest gold stocks are a nasty belief? No, never. It simply indicates they're just a different sort of investment in gold. They might be a good idea in case you be aware of what to expect.

Unluckily, you may not get any gold stocks by just buying an ETF which represents "mining" or "materials" or "natural resources." In most cases, these assets may have little or else no gold company exposure. They are typically much concerned in base metals, steel, coal, along with additional such things.

If you would like an ETF that focuses just on gold mining stocks, here are three you might think:

Market Vectors Junior Gold Miners (GDXJ)

Market Vectors Gold Miners (GDX)

PowerShares Global Gold & Precious Metals (PSAU)

As names recommend, GDXJ focuses on the minor gold mining businesses at the same time its big brother GDX owns the major large-cap gold stocks. Both could be a fine selection. PSAU have carried out fine except it is lightly traded.

Golden Idea 3: Leveraged Gold Exchange-traded funds

If you want to get very aggressive, you will discover Exchange-traded funds that offer leveraged exposure to gold. Leverage is known as a two-sided sword - it provides you with magnified gains on upside and magnified losses on the downside. Furthermore, the daily reset of the leverage on these assets implies that long-term performance won't be an exact multiple of gold costs.

In case you understand how leverage works plus are prepared to manage the risk, then here are 2 ideas to consider:

PowerShares DB Gold Double Long ETN (DGP)

ProShares Ultra Gold (UGL)

Both products give 200 percent exposure to the daily moves in gold as well as gold futures. DGP has slightly better performance while UGL is structured for ETF moreover does not possess the exchange-traded note (ETN) unsecured debt structure of DGP.

Are you ready to be a gold bug? If that's the case, this week I've specified you 3 golden thoughts.


Article Source: FxTradingStock.com

About the Author

Gold Market Monitor is a subscription based membership site that uses an exclusive gold timing strategy. It shows its members the best time to invest in gold bullion or gold stocks and when to exit to the safety of cash. Try the Gold Market Monitor for 60-days and safely profit from up and down trends in the gold market.

by: Greg Matthews

Total views: 4 Word Count: 1099 Date: Sat, 17 Jul 2010

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