What Is a Gold Fund?

A gold fund is a type of investment fund that holds assets related to gold. The two most common types of gold funds are those holding physical 澳洲幸运5官方开奖结果体彩网:gold bullion, gold 澳洲幸运5官方开奖结果体彩网:futures contracts, or gold mining companies.

Gold funds are popular 澳洲幸运5官方开奖结果体彩网:investment vehicles among investors who wish to hedge against perceived 澳洲幸运5官方开奖结果体彩网:inflation risks. They are also frequently held by so-called "澳洲幸运5官方开奖结果体彩网:gold bugs"—investors who are particularly bullish on the prospects of goal.

Understanding Gold Funds

Gold funds are pooled investment vehicles which often take the form of 澳洲幸运5官方开奖结果体彩网:mutual funds or 澳洲幸运5官方开奖结果体彩网:exchange-traded funds (ETFs). In the case of mutual funds, the gold fund may be accessible through a financial institution such as a 澳洲幸运5官方开奖结果体彩网:commercial bank, whereas ETFs can be bought directly on the 澳洲幸运5官方开奖结果体彩网:stock exchange. In either case, gold funds offer investors a convenient way to gain exposure to gold without incurring the relatively high 澳洲幸运5官方开奖结果体彩网:storage and insurance costs associated wit♉h directly owning physical gold bulliꩲon.

Depending on the type of gold fund selected, a variety of investment objectives can be accommodated. To begin with, an investor might wish to purchase a gold fund holding gold bullion or gold futures as a way to hedge against the risk that their 澳洲幸运5官方开奖结果体彩网:purchasing power might be eroded by inflation. This is a common concern among gold investors, who often feel that factors such as 澳洲幸运5官方开奖结果体彩网:expansionary monetary policy, high levels of 澳洲幸运5官方开奖结果体彩网:government borrowing, and chronic 澳洲幸运5官方开奖结果体彩网:trade deficits could cause the value of the 澳洲幸运5官方开奖结果体彩网:U.S. dollar (USD) to decline over the medium to long term. For these investors, owning a gold fund could help counterbalance any potential decline in the USD, based on the premise that investors will turn to gold as a 澳洲幸运5官方开奖结果体彩网:safe haven if the dollar begins to fall.

For other investors, gold funds may be attractive less as an inflation hedge and more as a pure investment in gold-producing companies. These types of investments can be quite attractive for investors who believe gold prices are likely to rise. After all, the cost of equipment, personnel, and other 澳洲幸运5官方开奖结果体彩网:fixed costs borne by mining companies remains fairly static regardless of the price of gold, which means that if the price of gold does rise significantly, this could have a substantial positive effect on gold mining companies' 澳洲幸运5官方开奖结果体彩网:profit margins. For this reason, 澳洲幸运5官方开奖结果体彩网:investing in a gold fund that specializes in gold mining companies can be an attractive way to profit from any potential appreciation in gold. Of course, the opposite iಞs also true, in that a decline in gold prices could lead to rapid declines in gold mining companies' profit margins.

Real World Example of a Gold Fund

Investors interested in increasing their exposure to gold have many options to choose from. For example, a popular gold fund that invests directly in gold futures contracts is the SPDR Gold Trust (GLD). For those wishing to invest in gold mining companies, a popular option is the VanEck Vectors Gold Miners ETF (GDX)🅰. In both cases, however, there are many ✅more gold funds to choose from.

Some funds focus on other aspects of gold as an asset by investing in mining companies. The 澳洲幸♛运5官方开奖结果体彩🍨网:Vanguard Global Capital Cycles Fund (VGPMX) mutual fund spreads a po🅠rtion of its investmen🍃ts in precious metal and mining companies by holding U.S. and foreign securities.