God ETF - some ETFs will track the spot price of gold with...

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Not too long ago, it was relatively very difficult for individuals to proficiently invest in the gold market. However, since the development of the Exchange Traded Fund, or more commonly known as ETF, the market has created more efficient and available avenues for investors looking for exposure to the gold bullion. The use of a Gold ETF is a resourceful and innovative way of investing in the precious metal without dealing with the linked headaches of attaining and securing a physical quantity of gold in your possession. Today there are numerous kinds of exchange traded products that will offer a level of exposure to gold prices. While there are many factors that make the range of gold ETF products distinctive, the most important factor is the manner in which the fund achieves exposure to gold prices. Some gold ETFs will buy and physically hold gold bullion; this can pose inventory risks since they physically possess gold bars. Others might invest in futures contracts. Obviously,
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Unformatted text preview: some ETFs will track the spot price of gold with more accuracy. Others are based on futures contacts and can deviate from spot prices on occasion. Since gold is a commodity, many investors will assume that gold ETFs are essentially all the same and will have relatively the same returns. However, not all gold ETFs are to be treated equally. Some ETFs will leverage the exposure so that an investment in their fund will fluctuate two or three times as much as the pure commodity price movement. Some ETFs are more diversified to capture the returns of the broad precious metals sector. There are even ETF focused on specific companies whose returns and thus stock performance is linked to the price of gold. These are only a few common examples. There are many different ETFs that allow investors to trade based on various levels of exposure to gold values....
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This note was uploaded on 03/06/2010 for the course ECON fin121 taught by Professor Peck during the Fall '10 term at Academy of Design Tampa.

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