The iShares Gold Trust (the “Trust”) seeks to generally reflect the performance of the price of gold. iShares Gold Trust is not an investment firm. The costs of buying, insuring and storing gold can be substantial for individual investors. The fund offers a lower cost method for purchasing and maintaining raw materials.
ETF stocks are very liquid, easy to buy and sell throughout the trading day at the current market price. The structure of the fund makes it possible to create and exchange baskets of the underlying asset as dictated by market demand. Each share represents one-tenth of an ounce of the price of gold. The liquidation of the Trust may occur at a time when the disposal of the Trust's gold results in losses for investors.
Gold futures contracts involve a substantial amount of leverage, which can amplify both gains and losses. GLD tracks the price of gold by holding gold bars in a trust in the form of 400-ounce London Gold Delivery ingots, deposited in an assigned account. Gold is one of the most common and valuable products in the world, and has been used in society for thousands of years. The ETF's sponsor is World Gold Trust Services and the marketing agent is State Street Global Markets.
There are several ways to invest in gold, such as actually buying the physical commodity, buying shares in companies in the gold business, buying gold futures, or investing in gold exchange-traded funds (ETFs). Since the Trust's shares are intended to reflect the price of gold held by the Trust, the market price of the shares is subject to fluctuations similar to those affecting gold prices. If one or more of these institutions decide to sell in quantities large enough to cause global gold prices to fall, the stock price will be negatively affected. Therefore, my first observation is that investors who are optimistic about gold and want to invest for the long term may consider buying physical or digital gold instead of IAU.
Investing in gold ETFs is a cost-effective and easy way to expose yourself to gold, and the SPDR Gold Shares (GLD) ETF is one of many ETFs that offer this exposure. If the speculative community adopted a negative view of gold, it could cause global gold prices to fall, which would have a negative impact on the stock price. Long-term investors who are optimistic about gold may choose physical or digital gold because the spending ratio of each gold fund, however small, will erode its momentum compared to the price action of the precious metal. The fund is an easy way to have a stake in the physical asset without the risks and costs of owning real gold bars.
The shares of the Trust are intended to reflect, at any given time, the market price of the gold held by the Trust at that time, minus the Trust's expenses and liabilities.