Editor's note: As part of our partnership with PBS's Nightly Business Report, TheStreet's Alix Steel joined NBR to explain what you should know before investing in gold or silver ETFs.(Watch video here.)
There are five physically backed ETFs traded in the U.S.: The biggest, SPDR Gold Shares (GLD); the cheapest, iShares Comex Gold Trust (IAU); the newest ETFS Physical Gold Shares (SGOL) and the two silvers, iShares Silver Trust (SLV) and ETFS Physical Silver Shares (SIVR).
When you buy gold and silver physically backed ETFs, you do not own the physical metal, you own a paper representation. With respect to the gold ETFs, for every share you buy, you "own" one tenth of an ounce of gold; for silver, it's one ounce.The actual metal is stored by a custodian, usually one of the large banks like JPMorgan (JPM) or HSBC. The share-to-metal correlation erodes the longer you hold the shares. The fund must sell gold, for example, periodically to pay for expenses which decreases the amount of gold allocated to each share.
Select the service that is right for you!COMPARE ALL SERVICES
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV