ETFs (acronym for Exchange -Traded Funds , listed investment funds), an investment product introduced a few years ago, which allows investor exposure to gold, but without the need to acquire the metal.
A gold ETF is an exchange-traded fund whose price is determined by the evolution of the gold price , just as there are other ETFs whose prices are linked to the evolution of certain stock market indices.
In Europe, differences in legislation with respect to the United States determines that these products are called ETC (Exchange-Traded Commodities , something like listed raw materials).
The volume of gold that these funds had in the month of September was 2,855 tons , a figure that represents the historical maximum, above the 2,841 tons of December 2012 .
It is important to clarify that investing in these gold ETFs, through the purchase of a share, does not imply ownership of this gold , but only a right over it: the investor can request the delivery of the physical gold that corresponds to him , in proportion to its participation, but it is the fund that decides whether to deliver it.
Most likely this is not the case and the applicant will be returned the money equivalent to that share in gold, since the participants in an ETF do not have the gold assigned (that is, reserved in their name, with the numbers of the corresponding ingots).
In general, these funds have an insufficient amount of physical gold to support all the shares sold , just as the banks do not have sufficient funds on hand to return all the deposits to the clients if they agree to claim them from the time.
For this reason, it is often referred to as the “bubble” of gold ETFs.
They are another indirect way of investing in gold without having to purchase physical gold. These are funds that invest capital in companies engaged in the gold business . In this way, its participants can gain exposure to the metal without having to acquire it or buy shares in a mining company.
The profitability of these funds obviously depends on the evolution of the price of gold, which affects all the companies that work with this metal. However, it should be noted that investing in this type of fund is not the same as investing in gold since, as with ETFs, it does not grant ownership titles to gold .
In addition, the fact that they are investment funds cannot be ignored, with high profitability but also a high level of risk , at least much higher than that involved in a simple investment in physical gold.
At a more advanced investor level there are other investment products referenced to gold such as certificates and warrants.
The certificates are listed investment products that replicate the evolution of gold and that do not have an expiration date and the liquidity that allows their immediate placing on the market.
However, investors in gold certificates have to bear an annual cost, as a management fee, which usually amounts to 1.75% of the value of the certificate.
As for warrants, they are listed products that grant the theoretical right to buy or sell an asset , in this case gold, at a fixed price and up to a certain date.
In general, they function as purchase rights, known as calls, or sales rights, put, on gold titles, which are established at a price, called strike, and at a future expiration date, which cannot be less than three months. Its operation is similar to that of a bet on the future evolution of the asset .
This type of product carries a high level of risk, so they are only suitable for very experienced investors with a high tolerance for volatility and the ability to take losses. That is, the complete opposite of physical gold, whose objective is the protection of heritage.
Gold futures are contracts to negotiate with the metal under established conditions of quantities and prices, which are set more than three months in advance . Hence the name futures.
The transaction, that is, the exchange of gold for money, takes place on the so-called settlement date. During the time that the postponement lasts, traders take the opportunity to speculate and carry out operations of greater volume, with greater risks, to obtain greater benefits, with the margin of maneuver that allows them the fact of having at least three months to date in which the operation is executed.
To guarantee that the operation is carried out and neither party backs out due to a rise or fall in the price of gold, there is a guarantee called margin , which is a deposit made in an independent financial institution and whose value It is usually between 2 and 20% of the value of the operation .
To operate with this type of product, it is necessary to have specialized and qualified agents to operate in futures markets, so there is a significant extra cost for investors. In recent years, the development of technologies such as the blockchain has allowed the appearance of new formulas to invest in gold in an easy and accessible way.
Broadly speaking, the companies that have put these investment mechanisms on the market allow clients to invest in precious metal from very small amounts and have an account with their balance in gold , which they can manage from their mobile phone, buying, selling or exchanging grams of gold for money or even for other products.
It would be a technological evolution of the concept of using gold as money, with the security that blockchain technology allows.
These new investment formulas are becoming very popular in countries closely linked to gold, such as India. In this country there are several companies competing for a market of millions of potential investors, who regularly acquire various amounts of gold as an investment.
However, this novel formula also suffers from the same problems as other versions of paper gold: investors do not get to get their hands on the gold and, in the event of an emergency situation, they cannot dispose of the metal to meet their needs, since everything is based on digital transactions.
Finally, investing in shares of mining companies is a form of indirect investment in gold . Investors benefit from good times in the metal market or the discovery of new deposits.
However, they are also exposed to external circumstances that may affect the price of mining companies, such as accidents, labor disputes, confrontation with governments over the terms of concessions, tightening of environmental regulations.
In short, all these investment options use gold as a more or less close underlying, but do not give the investor ownership of the physical metal, which is the best way to enjoy its main attributes, such as its ability to maintain value, preserve purchasing power or serve as a refuge in times of crisis .
…