Gold recently saw a price drop, mostly because of the ongoing concerns in Europe, particularly Greece. However, gold ETFs are still a good investment, even with the current price drop.
Why? Simply put: because it is gold. Even with the price drop, investors are still continuing to scramble to get their money into gold, because gold provides a guaranteed safe haven for their money right now.
The price of gold is up 30 percent in just the last six months. That return looks all the more enticing at a time when investor fears are growing in the stock market, and there’s little to be made from U.S. Treasury’s or money-market funds. Basically, get your money in gold or other precious metal ETFs.
When to Buy
Excerpt taken from The Associated Press
The big question right now is when to jump in. As demonstrated in recent weeks, gold prices react very quickly to economic news.
“The pendulum swings one way on fearfulness and back the other way on complacency,” said Tom Winmill, portfolio manager of $105 million Midas Fund, which owns gold and stocks in gold miners.
Also affecting gold prices are purchases by the world’s central bankers. This amount more than quadrupled this April through June, compared with a year ago, according to the World Gold Council. That continued source of demand bodes well for sustaining gold’s value.
But looking at the purchase from a personal level, gold provides a hedge against inflation and it’s a reliable store of wealth since investors don’t have to worry about credit risk. It also adds diversification to a portfolio because its price doesn’t move in tandem with the stock and bond markets.
“It all makes the argument for establishment of a gold position as a core holding (in your portfolio),” Winmill said.
How should you buy gold? Obviously most of us don’t have the option to just go buy gold bullion. However there are some alternatives. While a 1-troy ounce American Eagle gold coin may cost as much as $1,900, investors can get into a mutual fund or ETF for a fraction of that. That is why gold ETFs are still so valuable. They offer the chance to invest in gold without breaking the bank. The gold ETF’s total return year-to-date is 28.7 percent, compared with a 5.5 percent decline of the S&P 500 ETF (SPY).
Remember, always exercise caution and do your homework when it comes to investing in any sort of ETF. While gold ETFs are a good investment, you should still always know what you are getting into.