During times of uncertainty, there has long been one safe haven for investors: gold. To call current times uncertain is an understatement. Thatâ€™s why the time to invest in gold is now.
Donâ€™t believe us? During this time of uncertainty, gold spot prices have broken the $1800-per-ounce threshold for the first time since 2011. In fact, gold is currently up 19% this year-to-date, and is threatening itâ€™s all-time high of around $1900 per ounce!
Why is Gold So Hot Right Now?
During times of uncertainty, the value of gold and other precious metals almost always increases. Two specific factors that are contributing to the growing success of gold right now are:
- Low interest rates: low interest rates tend to negatively impact the dollar, which is one goldâ€™s direct competitors
- The likely inflation our economic system resulting from stimulus money: gold has traditionally been a place to put your money in times of inflation
Why Choose Gold ETFs?
While investing directly in gold might sound like an interesting play, gold ETFs (Exchange Traded Funds) may be the best option. Why? Because they are a relatively low cost and liquid way to invest in gold.
Popular Gold ETFs
Here are some of the more popular gold ETFs and their year-to-date performance:
- GLD (SPDR Gold Trust), up 18.3%
- IAU (iShares Gold Trust), up 18.41%
- GLDM (SPDR Gold Minishares Trust), up 18.36%
- UGLD (Velocityshares 3x Long Gold ETN), up 43.05%
- UGL (Proshares Ultra Gold), up 33.7%
These are just a few of the most popular (and highest performing) ETFs on the market. There are many more that can be researched and purchased, though. Since ETFs can be bought through most brokers, this option should be an easy way for most investors to get their place in the gold game.
Benefits of Gold ETFs
You may be asking, â€śIn a market that is currently tracking upwards, why would I want to invest in gold ETFs, when there are likely options that will yield better short-term results?â€ť Well, to put it bluntly, the current bull market is not necessarily considered sustainable by many market analysts, particularly with the recent COVID-19 outbreaks causing high levels of uncertainty.
The benefits of gold ETFs are therefore two-fold.
- First off, you are investing in what is considered an extremely safe option during times when the market can fluctuate rapidly.
- Secondly, gold ETFs are soaring. They have provided investors gains that are comparable (or better than) most other ETFs or other market-related investments in 2020.
How Do Gold ETFs Work?
You may also be wondering just how a gold ETF works. In general, ETFs are investments that are traded on exchanges like stocks. However, ETFs are typically a combination of investments all bundled together.
Gold ETFs work in the same way. The main difference, of course, is that the principal asset is gold. In other words, gold ETFs hold gold-derivative contracts that are backed by gold. So, the biggest difference here is that you donâ€™t actually own gold. However, as gold moves up or down in overall value, your ETF will move in the same manner. Gold ETFs thereby give the investor an easy way to put their money into gold without directly purchasing of the metal.
In closing, gold ETFs are an easy and highly liquid way to invest your money in the market. They provide an investment that is backed by gold, which is considered a safe haven during volatile times. Investors in gold ETFs in 2020 have been rewarded handsomely with double-digit percentage gains nearly across the board. If the points laid out in this article align with your investment objectives, then gold ETFs may be the right place for your money.