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6 Types of Gold ETFs

Different Types of Gold ETFs for Your Portfolio


If you are looking to include gold in your portfolio, look no further than the different types of gold ETFs that may be a fit for your investment strategy. From using gold ETFs to hedge downside risk, increase exposure to gold, or diversify a portfolio, these types of gold exchange traded funds can help you achieve your investing goals.

1. Gold ETFs That Contain Gold Products

The nice thing about gold ETFs is that you can invest in gold without actually buying gold doubloons and storing them in the attic safe. Gold ETFs like IAU and GLD, track the performance of gold by including gold products like bullions in a trust that is used to cover the liabilities of the fund on an as-needed basis.

2. Gold ETFs That Contain Gold Futures

Some types of gold ETFs are constructed differently to track the performance of gold. A gold ETF like DGL consists of derivatives like futures, forwards, and options in order to emulate a gold index. This same construction strategy is not limited to gold ETFs, but used for many commodity ETFs as well.

3. Gold Industry ETFs

Another type of gold ETF consists of companies in the gold industry. Like a sector ETF, this type of gold ETF will track companies that heavily rely on gold as their core business. For example, GDX tracks the performance of the Amex Gold Miners Index which consists of companies in the gold mining industry.

4. Gold ETNs

While similar, there are differences between an ETF and an ETN. However, the nice thing is that there are both gold ETFs and gold ETNs, so an investor has a choice if he or she prefers one over the other. An example of a gold ETN is DGP which tracks the Deutsche Bank Liquid Commodity index - Optimum Yield Gold Excess Return.

5. More Than Gold ETFs

There is no doubt that gold is a popular commodity and the most common precious metal. However, if an investor is looking for exposure to more than one precious metal like silver or platinum, then there are types of gold ETFs than include multiple metal products. A precious metal ETF like DBP, the PowerShares DB Precious Metals ETF may be a good fit for a portfolio looking for other precious metals tied to its gold investments.

6. Short Gold ETFs

Acting like an inverse ETF, a short gold ETF is uniquely constructed to inversely track the performance of a gold ETF index. For example, when you purchase the GLL, you earn a profit as the index drops in price. So when you buy the ETF, it acts as if you sold the gold ETF. Perfect for investors who wants to short gold, but has account or margin restrictions that prevent them from selling an ETF.

With a nice selection of gold ETFs, an investor can reap the benefits of ETFs including the tax advantages. So, it may be time for gold investors to get started with exchange traded funds.

In case you want to watch some Gold ETFs and see how they react to certain market conditions, here is a list of the major gold ETFs and ETNs.

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