Loading ...The GLD prospectus states “GLD represents fractional, undivided interest in the Trust.” When you invest in a gold ETF, you are buying shares of the Trustee. Basically, you are a shareholder of the trust, not a gold holder.
As such, GLD shares represent a paper claim on gold, not gold itself. This negates a major reason for owning it – protection during crises. If the economy collapsed and brought down a part of the financial system with it, the Trustee will settle your claim in cash, not gold.
The real irony is the price of gold could be skyrocketing and the ETFs could be going bankrupt at the same time.
Given these issues, long-term investors would be wise to avoid gold ETFs.