3 Alternative Investment Ideas to the SPDR Gold Trust
Investors who want to own gold will typically flock towards the SPDR Gold Trust (NYSEARCA:GLD) unless they are sophisticated enough to trade futures contracts. SPDR has two attributes that I find to be very appealing. First, it is very liquid with a small bid/ask spread, which allows investors to easily enter or exit a position at a price that is very close to the actual spot gold price. Second, it has a very low cost of ownership at just 0.4 percent per year. Nevertheless, investors who are looking to get exposure to gold have better options in my opinion. This article covers three of them.
The first is the Central Gold Trust (AMEX:GTU). The Central Gold Trust holds most of its assets in physical gold in a vault in Canada. The rest (about 2.5 percent) is held as either gold certificates or in cash or cash equivalents. Like the GLD, the Central Gold Trust has a very low cost of ownership at just 0.35 percent. While the shares are not nearly as liquid as GLD shares the Central Gold Trust has a huge advantage over the GLD: it trades at a 5.8 percent discount to its NAV, which means that investors who buy it are getting gold at about $70/ounce cheaper than those investors buying the GLD.
The second is the Central Fund of Canada (AMEX:CEF). The Central Fund of Canada is similar to the Central Gold Trust except that it holds about 42 percent of its assets in silver with the rest being in gold. Investors who agree with my arguments for silver ownership, put forth here, should consider the Central Fund of Canada, although bear in mind that silver tends to be more volatile than gold. As with the Central Gold Trust, the Central Fund of Canada trades at a discount — 4.5 percent – to its net asset value, which makes it an excellent way for investors to get exposure to the precious metals markets.