What Is A Gold ETF?
ETF is short for "exchange traded fund." These are financial products sold on the stock market designed to track the performance of a specific asset. An ETF can track anything from a basket of stocks, to a commodity, to real estate. Gold ETFs are set up to roughly track the spot price of gold.
The price of ETF shares change throughout the trading day as the they are bought and sold on the market.
Gold ETFs are backed by physical gold held by the issuer. Since they are bought and sold on the stock market, ETFs allow investors to play gold without having to buy full ounces of metal at spot price. Since their purchase is just a number in a computer, they can trade their investment into another stock or cash pretty much whenever they want, even multiple times on the same day. Many speculative investors appreciate this liquidity.
The most popular gold ETF is the SPDR Gold Shares Exchange Traded Fund, trading under the ticker symbol GLD. Founded in 2004, the fund is set up to track the market price of gold bullion – less the fees and expenses associated with the fund. By purchasing shares of GLD, investors can gain quick exposure to the day-to-day price movement of gold bullion.
It's important to realize that when you buy shares of an ETF, that's exactly what you own. It does not give you any kind of claim to physical gold.
You can learn more about the difference between physical gold and shares of an ETF by downloading our free guide below.