Gold remains a valuable hedge against inflation, and GLD’s share price reflects the likely longer-term returns investors can expect from owning gold.
Gold is considered a safe-haven investment due to its limited supply, but its limited supply also makes it relatively expensive. Gold’s volatility is also higher than that of GLD. Overall, GLD is a better investment than gold due to its diversification benefits and the benefits it touts to insurance companies and retirements.
This information is courtesy of the Cayman Financial Review. They publish informaton about investing and have a focus on alternative retirement investments.
What is GLD?
The Gold Trust (GLD), which invests in gold bullion, is one of the most popular gold-based products. Each share holds one troy ounce of gold bullion and is priced in U.S. dollars.
GLD is a gold exchange-traded fund (ETF) that invests in gold bullion. Its shares trade on the NYSE under the ticker symbol GLD. Gold is traded over-the-counter, meaning there is no central exchange or organization for the gold to be traded on. GLD holds physical gold bars in secure vaults around the world.
Gold bullion is a staple for some of the world’s most wealthy individuals. It is a timeless investment that is valuable even if its prices are in steady decline. However, it is far from an investment that is difficult to understand.
Gold is a metal that has been used in jewelry, currency, and other applications for centuries. GLD is an exchange-traded fund (ETF) that tracks the price of gold. GLD is an index fund that holds physical gold bullion bars. GLD tracks shares of gold mining companies. GLD is a company that manufactures gold.
What is the difference between GLD and Gold?
Gold is a commodity, and GLD represents gold as the exchange-traded fund (ETF). Both GLD and Gold trade like stocks, but GLD’s shares are backed by real gold held in trust by The GLD. GLD shares are bought and sold like stocks on the secondary market and on exchanges. Gold is bought and sold directly, but it’s also bought and sold through the GLD ETF.
GLD is an ETF (Exchange Traded Fund) that tracks the price of gold. Gold is a hard asset, but GLD is not. GLD is backed by gold, but gold has no value without GLD. GLD is a financial product, but gold is not. Gold is a commodity, but GLD is not. Gold is a legal tender for the payment of debts in 22 states but is not backed by assets. GLD is not backed by any assets. Gold is volatile, but GLD is not. Gold can be traded in the spot market, but GLD cannot. Gold is fungible, but GLD is not. Gold can be bought and sold in transactions that do not need to be reported. GLD is traded on the stock exchange. Gold cannot be bought or sold in a secondary market. Gold is portable, but GLD is not. Gold can be bought and sold both up and down.
GLD and Gold are traded on two different exchanges, and both share a similar business strategy. Similar to GLD and Gold, GLD and Bitcoin are traded on two different exchanges, and both share a similar business strategy.
Understanding of GLD vs. Gold
Investors should ask themselves whether they are looking for a high return or stability of yield. Assets like stocks and bonds offer a market-based rate of return, which depends on the asset’s underlying value. On the other hand, the gold market has a stable, intrinsic value — and that stability has existed for thousands of years.
GLD (gold) and Gold (gold) means the same thing. However, GLD is a fund that invests in physical assets. It is traded on the stock exchange, whereas the physical assets are not. Gold futures are more similar to GLD as gold is traded on the stock exchange.
Investors seeking to diversify their portfolios may want to consider the weighting of their GLD holdings. GLD holdings make up approximately 2.5 percent of one’s portfolio, but GLD and Gold holdings reflect an inverse relationship — as the weight in gold increases, the weighting in GLD will decrease. Therefore, investors should consider their asset allocations to weigh their GLD holdings appropriately.
Investors should beware of the premium charged by gold exchange-traded funds (ETFs) when investing in gold. Since ETFs are backed by physical gold, they gain in value when gold prices rise, but they suffer when gold prices fall. Investors should expect ETF holdings to decline in value when the price of gold falls.
Advantages of GLD vs. Gold
Investing in Gold is a good diversification strategy, but Investing in GLD gives you diversification, potential upside, and downside protection.
Gold is a risky investment as its price can fluctuate highly. However, GLD is a more stable investment. That’s because GLD is based on gold bullion. Now, with almost $60 billion worth of holdings, GLD is the the second largest gold-backed exchange-traded fund (ETF) in the world.
Dis-Advantages of GLD vs. Gold
Investors are interested in investing in gold because gold has long-term prospects. However, investors need to be wary of investing in gold. Gold has many disadvantages like it is non-liquid, not tax-free, doesn’t pay a dividend, is expensive to store, and a major drawback is that gold does not retain its value. Gold is price sensitive and changes its prices with the changing global economic conditions. While on the other hand, ETFs are a better option. ETFs, provide investors with exposure to gold without owning actual gold. Investors can buy shares of ETFs, like GLD, which consists of shares of many gold miners. ETFs like GLD has a better outlook for investors as gold prices are expected to rise in the long term. Thus, investors can invest their money in gold ETFs like GLD instead of investing in physical gold.
Gold is a precious metal introduced into jewelry, coins, and bullion. Gold is also used in electronic and electrical applications, dental work, and various medical and industrial applications. Gold is currently used mostly as a store of value and as a hedge against inflation.
(Disclaimer: This content is a partnered post. This material is provided as news and general information. It should not be construed as an endorsement of any investment service. The opinions expressed are the personal views and experience of the author, and no recommendation is made.)