With the current market downturn since the beginning of the year, more and more retail investors are searching for simple and affordable ways to speculate on gold prices. The S&P500, which is the most traded and followed US equity index, has begun 2016 with its worst performance ever. While we believe markets could experience a short-term relief after such a chaotic start of the year, we also believe that many investors will soon look for a safe haven. Gold has historically been a safe haven in periods of strong volatility on the equity and bond markets and has historically outperformed risky assets during such periods.
What is a gold ETF ?
There exist two effective ways to trade gold for retail investors: through a gold ETF and through gold binary options. Gold ETFs (Exchange Traded Funds) are listed instruments that track the performance of gold but that trades like an equity stock and that are a lot more affordable than Gold Futures (contract value of 110’000 US dollars) . ETFs allow you to speculate on gold with a small capital. Some gold ETF are indeed trading as low as 50 US Dollars per unit.
There exist multiple exchange traded product on Gold (long, short, leveraged…) and most of them are either tracking the physical Gold or a Gold Index. You should nevertheless keep in mind that the main disadvantage of gold ETFs is what traders call rolling costs. In order to replicate the performance of gold, most gold ETF issuers need to buy gold futures contract and roll them every time the contract expires. Most of the time they have to sell the expired contract at a lower price than the following expiry contract they need to buy, they thus lose a bit of capital every time they roll the contracts. If you need further information on these trading conditions, the upward shape of commodity future curves is called Contango.
So every time the gold ETF roll the futures to continue the replication, they pay a premium that lowers the performance of the fund. This is why there is always a small tracking error between the physical gold and gold ETFs. This tracking error is also reinforced by the management fees of the Gold ETFs that are expressed yearly in the below list.
List of the best Gold ETF available for retail investors
Gold ETF – Simple Replication
GLD US – US78463V1070 – SPDR GOLD SHARES – fees 0.40% – GOLD Index
PHAU LN – JE00B1VS3770 – ETFS PHYSICAL GOLD – fees 0.39% – GOLD Index
ZGLD SW – CH0139101593 – ZKB GOLD ETF – fees 0.40% – Physical Gold
JBGOUA SW – CH0044781141 – JULIUS BAER PHYSICAL GOLD FUND – fees 0.41% – Physical Gold
IGT CN – US4642851053 – ISHARES GOLD TRUST – fees 0.25% – GOLD Index
Gold ETF – Short replication
SBUL LN – JE00B24DKC09 – ETFS 1X DAILY SHORT GOLD – fees 0.98% – GOLD Index
DGZ US – US25154H7310 – DB GOLD SHORT ETN – fees 0.75% – GOLD Index
Gold ETF – Leverage replication 2x long
LBUL LN – JE00B2NFTL95 – ETFS 2X DAILY LONG GOLD – fees 0.98% – GOLD Index
2GOL LN – IE00B94QKS44 – BOOST GOLD 2X DAILY ETP – fees 0.44% – GOLD Index
DGP US – US25154H7492 – DB GOLD DOUBLE LONG ETN – fees 0.75% – GOLD Index
Gold ETF – Leverage replication 2x short
DZZ US – US25154H7567 – DB GOLD DOUBLE SHORT ETN – fees 0.75% – GOLD Index
Gold ETF – Leverage replication 3x long
3AUL LN – JE00BYQY4X40 – ETFS 3X DAILY LONG GOLD – fees 0.98% – GOLD Index
3GOL IM – IE00B8HGT870 – BOOST GOLD 3X LEVERAGE DAILY – fees 0.44% – GOLD Index
List of the best Gold producer ETF available for retail investors
Over the last years, some investors have also tried to leverage the performance of gold through gold miners. When the price of gold increases in times of high market volatility, gold producers see their margins expand significantly. Please find below a list of the most liquid and efficient gold miner ETFS.
GDX US – US57060U1007 – MARKET VECTORS GOLD MINERS – fees 0.53%
GDXJ US – US57061R5440 – MARKET VECTORS JUNIOR GOLD MINER – fees 0.59%
GLDM FP – LU0854423687 – LYXOR ETF MSCI ACWI GOLD – fees 0.50%
SPGP LN – IE00B6R52036 – ISHARES GOLD PRODUCERS – fees 0.55%
GLDX US – US37954Y8637 – GLOBAL X GOLD EXPLORERS ETF – fees 0.65%
You can also speculate on gold with binary options
Of course, if you want to build a short-term trading strategy on gold, then binary options might be the best financial instrument for you. Don’t hesitate to have a look at our detailed review of AnyOption, 24Option and TopOption that all offer efficient gold binary options. 24Option is the broker that proposes the most extended combination of binary option types and maturities on gold while Anoption offers the largest range of unederlying assets. We highly recommend that you only deposit with the binary option brokers that you find listed on our website. This will secure safe payouts and the full support of our team should you face any problem.