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Tuesday, 21st July 2009 (1388 views)

The Greenlight Capital hedge fund, one of the biggest investors in the world's largest gold exchange traded fund (ETF), recently sold around $390 million (£237 million) of its shares to buy physical gold, prompting one expert to examine the relative merits of each method of investing.

Mineweb's Jason Murdoch said before purchasing physical gold, investors should decide where they will keep it. The main advantage of gold ETFs is that they allow customers to own gold without having to store it.

Bullion buyers also have to deal with commissions and spreads in commodity prices, which can vary based on whether the investor is operating in the over-the-counter market or as part of a pool, where they buy an allocated section of a gold bar.

By contrast, purchasing gold with an ETF is fairly straightforward, as investors only have to enter a ticker symbol into their brokerage account - although they do have to pay commission to buy and sell shares.

Mr Murdoch concluded that for "average investors", bullion is the better bet if they are planning to hang on to their investment for a long time. Gold ETFs may be more suitable if they are looking to trade short-term or in small quantities.

Gold ETFs were originally launched in 2003.

 

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