Gold and Silver Bullion Investment Guide

Gold Futures vs ETF Review

Due to investors’ elevated interest to all sorts of gold investment mechanisms, let’s try to compare gold futures vs ETF and decide whether buying gold futures or gold ETF is a more investment savvy decision.

A gold exchange traded fund (ETF) tracks the current market price of gold and is considered a very cost effective way of investing into gold assets compared to actually physically owning gold that comes with hefty storage fees and security risks. One share of ETF represents one tenth of ounce of gold that is stored in a secure remote location. It might be a cost effective but not a free way of owning gold assets and you are entitled to an average of 0.4% fund maintenance fee. In addition, gold exchange traded funds are taxable within the “collectibles” bracket of 28% in case you hold on to your gold fund’s shares for over a year. A lot of investors try to sell their gold fund shares in attempts to avoid these hefty tax consequences and most of the times miss the opportunity to gain profits on the appreciating price of gold which happens overtime. Having explained the basics of ETF’s and trying to compare gold futures vs ETF, it’s quite clear that gold ETF’s do come with heavy tax brackets and management fees that might significantly eat into your earnings.

While ETF investment does not require substantial funds and could be started with just a few hundred dollars, gold futures trading commands very substantial funds due to standard futures contract units that are set at 100 oz of gold each. You can certainly take advantage of mini gold futures contracts option with lower 33 oz gold trading unit. In addition to a significant investment portfolio, our gold futures vs ETF comparison needs to take into consideration advanced trading skills and knowledge one must possess in order to navigate in the volatile environment of gold futures necessary to accomplish gold price prediction. Without proper knowledge you can run into most common mistakes of a novice gold trader like overtrading, overleveraging, selling good positions to fund the losing once and many more. On the positive side of our gold futures vs ETF comparison, there are no fund management fees or heavy taxation associated with futures. If you know what you are doing and playing by the book, you might be better off dealing with gold futures.

Gold futures are not better than gold ETF’s or the other way around. You need to look at all pros and cons of gold futures vs ETF investing and decide what is more beneficial in your particular situation.