Gold ETF's, are they worth their salt?

Question

I would like about 2-3% of my portfolio to be in gold (the commodity, not the industry), but I don't really want to have to keep up with storing coins and then trying to find buyers for them when I want to sell.

I have heard mixed things about Gold ETF's like GLD, some recommending them as great buys, and others warning against them because while the ETF intends to "track (mimick) the value of gold", they are not audited to ensure that there is gold to back up all the shares and the value thereof.

Anyone knowledgable about this?

Answer 1

Hi Samuel,

I've heard the arguments for and against Gold ETF's that you alluded to, and my personal opinion is that there is a lot of disinformation out there. Yes, it could be that an ETF company says they hold 100 bullion bars of Gold, and is lying, but quite honestly, the damage to these companies reputations would be huge, and seeing as many are part of reputable larger investment vehicles, I don't think its likely.

Gold bulls will encourage you to buy the physical article (i.e. circumnavigate the ETF's) because they believe that this has a higher influence on pushing the price up.

I trade in ETF's, and have, like you mentioned in your post, a small 3-4% holding in one silver and one gold ETF. You put your finger on it, when you said that you do not want to the hassel of holding and selling coins. I find ETF's an easy and convenient way to trade, and can be bought and sold electronically through your broker.

If you are interested, I have positions in SPDR GOLD SHARES (GLD) and ISHARES SILVER TRUST (SLV).