How They Differ From Each Other – Exchange-Traded Funds And Gold Mutual Funds

There are many ways to invest in gold for retirement. It is common to invest in exchange-traded funds (ETFs). Mutual funds have become a well-known financial instrument. Even new investors know this. These two types of investments are comfortable. Although they differ in significant ways.


EFTs has become a common vehicle for investment. Typically, ETFs consist of a fund collection or basket that tracks a particular market index. They are traded and listed on the leading stock exchanges like individual stocks. The financial instruments that make up an ETF are known at the time of purchase.

Gold ETFs are of two types: the first type is the owner of physical gold; the second type invests in futures contracts. Since the first type has physical gold, the ETF prices should carefully follow the spot price of gold. The spot price is the instant delivery price, that is, within days.

However, due to phenomena such as contango and backwardation in the futures market, the second type of ETF does not always monitor gold spot prices as carefully as possible. During the futures market, when prices are progressively lower for distant delivery months, this is called backwardation. Contango is the prevailing scenario where prices are gradually higher for months or distant delivery.


Gold mutual funds are a basket or pool of shares issued by gold mining, processing or distribution firms, and potentially other precious metals. Securities issuing firms can come from any part of the world.

 Mutual funds differ from ETFs in many ways. First, on stock exchanges, mutual funds are not traded. These funds can be sold from the bank, broker, or directly from the fund. By the way, even if a bank sells to a particular mutual fund, it is not covered by FDIC insurance.

 Each share of a mutual fund represents the composition of shares in that fund. Unlike ETFs, orders from mutual funds can only be filled at the end of the day.

The actual composition of the fund is not known, except quarterly. If you want to exit the fund, you will have to pay your shares with the fund.


These two financial instruments facilitate participation in gold price movements. And these are liquid markets most of the time, but not always. So they can get quickly in and out if necessary.

 All issues with underlying gold or precious metal mining assets are with gold mutual funds. Quality of management, debt ratio, mining cost and political scenario should be taken into consideration. Price movements of gold mining shares cannot be followed.

 Buying an ETF means that you are buying paper representation of gold. Gold stores cannot be audited in the case of gold-backed ETFs. There is a trust problem, and market changes can be disastrous with future contract-based ETFs.

It is not the same as having gold bullion that you have these investments. If you lose confidence in the current economic system, then buying physical gold (gold bullion) is the only way to maintain any control.

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