For those wanting to own physical gold without storing it, physical gold ETFs are a great alternative.
In fact a lot of investors who want exposure to the yellow metal have been buying up gold ETFs for this very purpose.
An exchange traded fund has certainly become a staple of American financial lingo in the past several years.
Usually referred to by their abbreviation, ETFs have really flourished in the past decade.
But what exactly is an ETF? An ETF is a financial instrument that trades on stock exchanges like the NYSE in the same way as do shares of public corporations.
ETFs track an underlying security, index, or commodity and fluctuate in value as the price of the underlying changes.
Originally ETFs were constructed in a way to mirror the movement of a stock index like the S&P 500.
The basic premise was to give investors a quick, easy, and low cost way to place a bet on the underlying index.
ETFs are structured in a way that allows them to offer very low transaction costs to investors and this is one of their most attractive characteristics.
Because ETFs trade on exchanges like stocks, they also allows investors who would not easily have access to certain investments the opportunity to easily buy and sell a security that directly mirrors the movement of that particular investment.
Their immediate success made ETFs so popular that the investment banks who launched them began constructing ETFs that were tied to more exotic indexes, commodities, and other underlying financial instruments.
Physical gold ETFs were an obvious option for these banks as the yellow metal has been an important part of investment portfolios for hundreds if not thousands of years.
There are several different structures of gold ETFs, but for the most part they all rise and fall based the price of gold.
Some ETFs track the actual price of gold bullion in the marketplace.
Other gold ETFs are linked to a gold index.
Still others are composed of different gold mining companies.
Physical gold ETFs can be bought through your regular stockbroker the same way you buy any other stock.
An example of an American gold ETF is the SPDR Gold Trust, ticker symbol GLD, which is listed on the NYSE.
Another well known gold ETF is the iShares COMEX Gold Trust (NYSE: IAU).