How Do I Invest in GLD?
Gold can be invested in through many avenues, from buying physical bullion to investing in shares of gold mining companies. One popular means to gain exposure is via GLD – the SPDR Gold Shares ETF.
GLD is the largest physically-backed gold exchange-traded fund on Wall Street with an estimated market cap of $42 billion.
What is GLD?
GLD (SPDR Gold Trust) is one of the world’s most beloved exchange-traded funds. Physically backed by real gold, its shares trade on the New York Stock Exchange Arca.
GLD provides an easy way to access gold’s price, making futures contracts difficult or unnecessary. Unfortunately, since GLD sells some of its gold to cover expenses and reduce the investment value over time.
Investors appreciate GLD because it allows them to buy it directly without risk of counterparty risk associated with other ETFs that hold physical bullion, but Suzanne Hutchins of Newton Investment Manager for Funds and Head of its Real Return Investment Team told Forbes it “cannot replace” owning physical bullion as it doesn’t offer withdrawal of 400 oz gold bars at will; even GLD authorized participants can only withdraw certain quantities at one time.
How does GLD work?
GLD is one of the world’s most-favored exchange traded funds (ETFs), giving investors exposure to gold through physical holdings. But recently it has come under attack by individual shareholders claiming it is fraudulent.
GLD is backed by physical gold bullion stored at vaults around the world by its custodian, HSBC. However, creating and redeeming GLD shares is a complex process; each share represents an interest in 839 troy ounces of bullion bullion bullion. To create a basket of new GLD shares an Authorized Participant (typically a large financial institution) issues orders to Bank of New York Mellon as trustee of GLD.
The Asset Purchaser then requests delivery from a custodian of London Good Delivery bars that meet the Trust’s specifications in terms of size, weight, and fineness. Once delivered to the Trust vault for storage and daily weighings, each GLD share will reflect gold’s market price less expenses incurred by GLD.
What are the risks of investing in GLD?
Gold ETFs like GLD offer investors an easy and straightforward way to make money when the price of gold rises and lose money when it falls. But investing in an ETF also comes with risks that may not be immediately obvious to all investors.
ETFs differ from physical gold in that they don’t hold physical claims on it – instead, the funds hold paper claims held by custodians like HSBC who may hold paper claims that can become worthless as a result of scandals such as predatory lending and helping clients to evade taxes. ETFs may be riskier as their backing can become uncertain over time due to this difference between physical gold ownership and paper claim ownership held by custodians like HSBC with whom paper claims can become worthless due to longstanding scandals such as predatory lending practices as well as assistance provided to customers helping people avoid paying taxes by hiding paper claims held against physical gold assets held by custodians like HSBC who hold paper claims on gold held on paper claims that can become worthless over time due to fraudstering people from paying taxes due.
ETFs present another risk: in times of crisis they can be difficult to sell or redeem, potentially becoming difficult if there is an interruption to power grid, cyber attack or bank bail-in (such as what occurred in Greece) where depositor funds are used to keep failing banks afloat (as was done with Greece). Therefore it’s essential to fully comprehend these risks prior to purchasing gold ETFs; there may be simpler and safer methods of investing in physical gold that don’t carry counterparty risks.