Gold Exchange-Traded Funds (ETFs) are a popular investment instrument for those seeking exposure to the price of gold. On the other hand, some investors may prefer to invest in physical gold, like gold bars or coins. While physical gold can be a tangible asset, it can also be expensive to store and insure. Gold ETFs can help you gain exposure to gold in a cost-effective way. Here's how.
During the go-go days of growth, gold ETF investments weren't all that popular in many portfolios. But thanks to recent uncertainty, including the COVID-19 pandemic and geopolitical tensions, investors are turning to gold as a safe-haven asset. Gold-backed ETFs and similar products account for a significant part of the gold market, with institutional and individual investors using them to gain exposure to the precious metal.
Before diving into a gold ETF or ETP, investors should understand the nuances of taxes specific to these investment vehicles. Gold ETFs are taxed like mutual funds, which means that investors are subject to capital gains tax when they sell their shares. However, investors may be able to avoid paying taxes on gains by holding their shares for at least one year.