NEW YORK (MainStreet) —Investing in gold is not for the faint of heart. The beating the precious metal has experienced so far this spring has left it trading at prices that are more than 20% below its 2011 high. It is difficult to predict whether the bottom is in or more bloodletting is in store, but some individual investors may be looking to add gold exposure at this time. If you find yourself in this camp, here are a few of the best ways to go about it.
Exchange Traded Funds
If you want an inexpensive way to purchase a security that will track the price of gold, exchange traded funds (ETFs) such as the SPDR Gold Shares (GLD) or the iShares Gold Trust (IAU) are worthy of your attention. “Instead of hoarding gold coins or taking on gold miner exposure, investors can directly invest in gold price movements through physically backed gold ETFs,” said Tom Lydon, president of Global Trends Investments. “The gold ETFs store physical gold bars in European vaults, so each gold ETF share represents a fractional ownership of the physical gold stored in the vaults.”
Another ETF for investors to ponder is the Market Vectors Gold Miners ETF (GDX). “GDX provides indirect exposure to gold prices, but will be subject to regional and company specific problems such as management and regional strikes,” Lydon said. “Gold miners are currently trading at very attractive valuations, but have been one of the most hated sectors as gold producers have not mirrored the rally in gold prices over the past few years.”
Peter Sorrentino, a senior portfolio manager for Huntington Asset Advisors, favors the use of mutual funds over ETFs for investing in gold due in part to the active management of fund managers. However, he does acknowledge that ETFs are a viable option. “One avenue I recommend to customers who want to go that route is the Central Fund of Canada (CEF),” he said. “Every day they post what their current holdings are of gold and silver and customers can see the discount or premium to the market value.”