A gold fund is a type of investment fund that holds gold-related assets. The two most common types of gold funds are those with physical gold ingots, gold futures contracts or gold mining companies. Gold funds are popular investment vehicles among investors who want to protect themselves against perceived inflation risks. Gold funds can be used as a hedge against economic shocks and stock market corrections.
The movement of the price of gold is generally negatively correlated with stock markets. Gold is a “safe haven” when stocks are corrected around the world. International gold prices tend to rise and to record strong gains when the general appetite of stocks for taking risks decreases. This happens when there are concerns about global growth, political instability, etc.
But these periods, as can be seen historically, do not last; gold ends up losing its gains. In risk scenarios, gold prices stay within a limited range or fall; in search of higher returns, investors abandon gold to find riskier options in stocks and debt. Gold funds are one of the newest ways to invest in gold as an asset class without having to keep it in physical shape. This list includes the most popular gold ETFs on the market (funds you can usually read about in almost any daily commodity summary), as well as some that don't receive as good coverage in the financial media, but that could be better investments than their high-asset siblings.
Some people turn to investing in gold to diversify their portfolios, and aggressive investors may try to profit from short-term swing trading. Indian gold mutual funds (and also physical gold, for that matter) pay taxes based on the capital gains obtained and the holding period. The demand for investment in gold is based on economic uncertainties, since gold is considered to be a safe haven when stock markets are falling. Gold mutual funds are an ideal route to invest in gold, since they allow you to capture all the price movement.
The main purpose of gold funds is to create wealth by using the potential of gold as a commodity. As with other types of ETFs, the issuing company buys shares in gold-related companies or buys and stores gold ingots on its own. There are several quantitative and qualitative parameters that can be used to obtain the best gold funds according to your needs. These companies employ engineers and geologists to help them discover new gold deposits, determine the size of their resources, and even help start mines.
On the one hand, as inflation reaches more categories, gold could begin to behave more like a hedge against inflation, since a more flattened trade will likely limit the dollar's gains in the future, says Ed Moya, senior market analyst at the exchange rate data provider OANDA. Investors buy shares in the fund, whose value rises and falls with the underlying price of gold or the value of the company's shares. Each gold fund would have a fund manager who would accept investment bets based on the fund's objective. These seven gold ETFs offer investors numerous ways to play with metal, from direct exposure to angles related to stocks, at a low price.