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Commodity Investing

SPDR Gold Shares: The Simple Way to Invest in Bullion

You may be looking to invest in gold, but you may not be sure how to get started. One great option for you is the SPDR Gold Shares ETF (NYSE: GLD). A great feature of this ETF is that it’s backed by physical gold bullion. And you can also can trade it on the exchange like any other ETF or stock.

The main advantage of purchasing SPDR Gold Shares is that your investment will generally mimic the returns of physical gold. Plus, you can do it without the various hassles of actually having to buy gold directly.

Like any other security, the SPDR Gold Shares ETF has its risks. But if you’re looking for an easy way to invest directly in gold, purchasing shares of this fund can be a great option.

A bull looking at bars of gold, representing SPDR gold shares

The History and Performance of SPDR Gold Shares

State Street Global Advisors founded the SPDR Gold Shares ETF on November 18, 2004. State Street designed the ETF to mimic the spot price of physical gold while eliminating the hassles associated with investing in physical gold.

By doing so, State Street lowered the barriers to entry for people who were interested in investing in gold. Some of those barriers included access, custody and the transaction costs of gold bullion.

Purchasing a share of SPDR Gold Shares ETF means that you now own a fractional share of State Street’s gold bullion trust that backs the security. And although the fund mostly holds gold bullion, at times it does hold some cash as well.

Since its inception in 2004, the fund has performed quite well, with a 9.39% average annual return. Although its 10-year return averages only 4.23%, year to date, the ETF would have earned you 22.65% on your money.

This fund is now the largest physically backed gold ETF in the world. As of September 24, it had $75.8 billion in assets under management. The closing price of the ETF on that date was $174.36.

Why a Bullion-Backed Gold ETF?

You may be wondering why you would buy SPDR Gold Shares or another gold ETF rather than just investing in gold bullion directly. That’s a great question, and the simple answer is this: Investing in an ETF is easier than buying physical gold.

When you buy physical gold, you are literally buying the physical substance. That means you have to arrange for its arrival and storage. And if you sell it, you need to arrange to transfer it to the buyer.

But a gold ETF trades on a stock exchange like any other stock. In other words, you’re buying and selling paper, and there’s no need to arrange for delivery, shipping or storage. Nor do you have to worry about the associated costs of those responsibilities.

The fact that gold ETFs trade like stocks also means that they’re liquid, meaning that in general, you can buy or sell them at any time. If you decide you want to get out of the ETF fast, you usually can.

Since the price of SPDR Gold Shares is designed to mimic the price of physical gold, investing in the ETF vs. physical shares of gold makes your life simpler, and you can still enjoy similar returns.

Should You Invest in SPDR Gold Shares?

Every individual investor must determine whether SPDR Gold Shares – or any other security – is the right investment for them. This is always dependent on a variety of factors, including asset allocation, diversification, time horizon and risk tolerance.

But if you’re interested in investing in physical gold, SPDR Gold Shares provides an attractive alternative. And if you’re looking to hedge against stocks with commodities, the lifetime return of this security is attractive.

But you have to remember that nobody has a crystal ball. It’s impossible to tell whether the fund’s future returns will match or beat those from its past. But that’s the risk you assume when you invest in SPDR Gold Shares, or any ETF, for that matter.

If you’re interested in learning more about the commodities market and other ETFs, I highly encourage you to sign up for Investment U’s free e-letter, where you’ll find insights, tips and suggestions from some of the greatest investing minds in the world.

SPDR Gold Shares represents a simple and accessible way to invest in gold bullion, and you can leave the hassles of purchasing physical gold behind.

My fellow investors, this combination of attributes can be absolute gold.

Good investing to you.


About

Brian M. Reiser has a Bachelor of Science degree in Management with a concentration in finance from the School of Management at Binghamton University.

He also holds a B.A. in philosophy from Columbia University and an M.A. in philosophy from the University of South Florida.

His primary interests at Investment U include personal finance, debt, tech stocks and more.

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