How to Invest in Gold ETFs

NEW YORK (TheStreet) -- Gold ETF funds are an efficient, easy way to gain access to soaring gold prices.

As this precious metal continues to test new highs, investors are flocking to ETFs like Market Vectors Gold Miners(GDX) and SPDR Gold Shares(GLD).

Investors add gold ETF funds to their portfolios for a variety of reasons: diversification, concerns about inflation, concerns about deflation and fear of financial crisis. Before adding a gold ETF to your portfolio, however, it is first important to establish your investment time frame.

ETFs can be effective vehicles to target and capture quickly moving market trends. The upward movement of gold prices has been fast and furious, and many of the investors looking to gold ETFs are hoping to cash in on a continued rise in gold over the short term.

These short-term investors should consider one of the Market Vectors Gold Miner ETFs. GDX, the large-cap gold ETF, gives investors exposure to some of the largest gold mining companies worldwide, such as Barrick Gold(ABX), Goldcorp(GG) and Newmont Mining(NEM).

Market Vectors Juniors(GDXJ), on the other hand, offers investors exposure to junior mining firms. The success of gold mining firms has outpaced the advance of gold prices themselves, so both of these funds are good to capture gold's upward moment in the short term.

These funds are aimed at risk-tolerant investors. Investors who want to take on the most short term risk, with potentially the biggest payoff, should check out the junior gold mining fund. Investors who prefer a larger-cap holding, with potentially less volatility, should consider GDX.