Buying Gold ETFs Can Act as a Hedge

If you are worried about the economy, you are probably paying particular attention when people talk about buying gold shares of ETFs.

There are a number of funds that are traded electronically and these ETFs, as they are known, have become quite popular for the entry of new investors in to trading. An electronically traded fund generally represents a tangible asset like a commodity and is thus unlike most investments. Traditionally, commodities are considered as safe avenues for investment. So an ETF commodity can be bullion, natural gas, oil or a food item.

An example of a commodity that is trade through the electronic route is gold. The economic climate now present has ensured that bullion or gold has shown a steady upward trend over the past few years. There was a time, as recently as six moths back, when the idea of an ounce of gold being valued at 1200 dollars would have seemed absurd, but the price at present has crossed this barrier. It is the devaluation of currency that has led to this sharp increase in the value of bullion. There have been some downturns in the value of gold, but if you see the long term trends, gold has always increased in value since the beginning of the 20th century. This is the reason why for average investors, gold has always been a sensible investment. So if you have an interest in bullion, buy some gold through an ETF and keep it as an hedge against other investments that can be more risky. This helps to balance your portfolio.

Interviews conducted with prominent people in the market, like the Chief Executive of USGI, have indicated that bullion prices during the year could go as high as $2,300 per ounce. This may have been a reaction to the announcement of the Federal Reserve Bank that it would be printing money worth $650 billion. This printing of currency is likely to devalue the dollar, increase inflation and lead to concerns about the stability of the dollar. This will in turn drive more people to invest in gold and this effect can last for months. So buying bullion ETFs immediately and holding on to them till the end of the year can make for good investment. These ETFs can be sold when the dollar strengthens or at the end of the year. The good news is that you yourself get to decide what and when to sell, based on the relevant financial information and facts.

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