Investors are starting to prefer stable investments given the unpredictability of the US market as well as the rest of the global economy. Despite this overall pessimism, gold has gained the trust of investors. However, buying actual gold bars is quite a hassle, and not all individuals have access to this investment. As an alternative, many have chosen gold-backed mutual funds and ETFs.
Indeed, the price increase in many gold-backed funds mirror this overall market sentiment. SPDR Gold Shares even reflects a +31.73% growth through the last year. This can be attributed to intense media coverage on gold prices, so you can hold the media responsible for at least part of that.
Gold-backed or not, a smart investor should never take figures by face value. One of the reasons why gold prices have increased drastically is the dynamics of supply and demand. As media coverage on gold increases and investors’ faith in stock dwindles, there is renewed and heightened demand for gold.
Additionally, investors should be aware that placing their cash in gold-backed mutual funds and ETFs are still not equivalent to actually owning gold bars. For one, the success of gold-backed funds is still largely dependent on the overall stock market’s performance. Nevertheless, gold is a safe outlet for these trying times, and returns from gold-backed funds may be higher than the rest of the market in the short run.
You still make the final decision of whether gold-backed funds are suitable for your investment purposes. Even if gold tends to under perform when the rest of the market is bullish, there is no question that gold has always been a favorite investment of wealthy people with low risk appetites. So, is it too late to invest in gold? Not really. Since gold is such a prized commodity, it will always be of timeless value.
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