Gold Commodity

Gold commodity ETFs and mutual funds invest the majority of their assets... Gold commodity ETFs and mutual funds invest the majority of their assets in physical gold or gold futures contracts. These funds aim to provide exposure to investors who believe the price of gold is heading higher. Gold commodity ETFs and mutual funds tend to be passively managed. The most common type of gold commodity fund invests in the physical metal itself. These funds store metal in secure vaults on behalf of investors. For over a decade and a half, physical gold funds have come to play a central role in how investors access the gold market. In turn, demand for these funds has also come to play a big part in the direction of the price of gold. When demand for gold funds is high, they stockpile a large quantity of bullion and send the gold price higher. When demand for gold funds is low, they liquidate some of these holdings, which has a depressing impact on the gold price. Some gold commodity funds only own gold futures contracts. These are derivatives that are tied to the price of gold. Gold futures usually move in lockstep with the price of physical gold, but there can be times when it’s more profitable to own futures than physical gold, and vice versa. Investors are attracted to gold as an inflation hedge, a hedge against geopolitical uncertainty, and an alternative asset in case the broader stock market takes a tumble. Despite all these reasons, two factors above all have tended to explain the performance of gold in recent years: the value of the U.S. dollar vs. other major currencies, and inflation-adjusted interest rates. Last Updated: 11/27/2024 View more View less

Gold commodity ETFs and mutual funds invest the majority of their assets in physical gold or gold futures contracts. These funds aim to provide exposure to investors who believe the price of gold... Gold commodity ETFs and mutual funds invest the majority of their assets in physical gold or gold futures contracts. These funds aim to provide exposure to investors who believe the price of gold is heading higher. Gold commodity ETFs and mutual funds tend to be passively managed. The most common type of gold commodity fund invests in the physical metal itself. These funds store metal in secure vaults on behalf of investors. For over a decade and a half, physical gold funds have come to play a central role in how investors access the gold market. In turn, demand for these funds has also come to play a big part in the direction of the price of gold. When demand for gold funds is high, they stockpile a large quantity of bullion and send the gold price higher. When demand for gold funds is low, they liquidate some of these holdings, which has a depressing impact on the gold price. Some gold commodity funds only own gold futures contracts. These are derivatives that are tied to the price of gold. Gold futures usually move in lockstep with the price of physical gold, but there can be times when it’s more profitable to own futures than physical gold, and vice versa. Investors are attracted to gold as an inflation hedge, a hedge against geopolitical uncertainty, and an alternative asset in case the broader stock market takes a tumble. Despite all these reasons, two factors above all have tended to explain the performance of gold in recent years: the value of the U.S. dollar vs. other major currencies, and inflation-adjusted interest rates. Last Updated: 11/27/2024 View more View less