With Gold valued at $1,700+ it is becoming a hot topic again in fall 2012, I’ve decided to bring this post from 2010 back to the front page. Enjoy!
With extremely volatile markets since 2007, Gold has been a favorite safe haven for investors to wait out the storm which is evident in the run up in price. There are a large number of Gold advocates that promote gold as an essential piece of any portfolio. As gold has gotten a lot of press lately, I decided to do a little digging on how a regular investor can get some (or more) exposure to the shiny yellow metal. Note that the only portion of gold in my portfolio is from my position in the Canadian Index.
There are people that do not believe in the markets and hold physical gold for their gold exposure. While this strategy may avoid management fees that occur with ETFs or mutual funds, there are limitiations. Two of which are that with physical gold, like gold bars, require physical space and liquidity can be an issue. Imagine trying to sell gold bars on kijiji!
Claymore Gold Bullion Trust (TSE:CGL)
This is perhaps one of the easiest ways for Canadians to purchase and hold gold bullion. This ETF holds physical gold bullion and tracks the price in Canadian dollars. CGL charges a Management Expense Ratio (MER) of 0.50%.
SPDR Gold Shares (NYSE: GLD)
This ETF is in USD, and also holds and tracks the price of gold bullion. The pricing is set to approximately 1/10 the price of one ounce of gold and charges a 0.40% MER.
Horizon Beta Pro Leveraged Gold (TSE: HGU/HGD)
The pair of ETFs are from horizon beta pro and are leveraged 2x on a daily basis. Leveraged ETFs are specfically taylored for traders and not for long term buy and hold investors. The reason being is that the leverage is calculated on a daily basis, so even if the underlying index is trading relately flat (or basing), the leveraged ETF can potentially go down in price. As well, the MER is fairly high for an ETF where it charges 1.2% annually. Trading this security is not for the weak.
iShares Global Gold Index (TSE: XGD)
This is an iShares ETF that tracks the Global Gold index. As with any index, this ETF will move in price depending on the performance of the underlying securities. The top 3 holdings, which make up over 40% of this ETF, are Barrick Gold, Goldcorp, and Newmont Mining. This is a Canadian product, thus traded in Canadian dollars with a MER in the amount of 0.55%.
If you don’t like the idea of paying a management expense ratio to purchase the index, then consider purchasing the individual stocks instead. As mentioned for the iShare Gold Index XGD, owning the top 3 positions is a fairly close proxy for owning the index.
As I’m fairly new to the gold game, I’m sure that there are many other ways to invest in gold. If you have gold in your portfolio, what is your strategy?