Short Gold ETF Pros and Cons

Short Gold ETFSome might think you have to be out of your mind to invest into Short gold ETF now while the market price of gold is at its all time highs. However, it’s just a nature of all investments that tend to come down in price after a long period of steady growth pattern. Some business analysts strongly believe that gold prices have the potential to start coming down in the near future. If you are a savvy and risky investor who feels rather bearish about the gold market, then Short gold ETF might just be right for you. If you are a novice investor unfamiliar with all the ins and outs of the gold market, definitely stay away from Short gold ETF since you might not possess enough knowledge as to knowing which gold ETF to pick and might end up losing a lot of money. Novice investors might be better off investing in physical gold bullion.

While best gold bullion ETF’s enable you to profit when gold prices are on the rise, Short gold ETF (sometimes referred to as inverse gold ETF) allows its investors to profit from declining gold prices. Now that we know how short gold ETF’s work, let’s discuss the pros and cons of investing into this type of gold Exchange Traded Funds.

Pros: Short Gold ETF gives you an option to bet on decreasing gold prices. If the price of gold goes down, your shares go up in price. Most investors do not realize that physical gold does not hold that much value except serves as hedge against falling US dollar. Additionally, physical gold bullion incurs hefty storage fees and has very little industrial uses. It’s inevitable for gold to start coming down in price because of the market being oversaturated with physical bullion. Investors can experience substantial gains if they choose to diversify their portfolio by including several strong Short ETF choices like Pro Shares Ultra Short Gold (GLL) and Power Shares DB Gold Short ETN (DGZ)

Cons: If you choose short ETF gold investment companies and the price of gold continues its climb for a longer time that you have anticipated, you are going to face significant losses. Short Gold ETF’s come with higher than average management fees of 0.75% and more depending on the fund. You need to be really good at understanding overall market trends to be able to predict whether gold prices are going up or down.

Short gold ETF’s are highly volatile and speculative forms of investment, that perhaps are only suitable for hard core investors with strong knowledge of how gold investment instruments work. However, they could be really profitable for investors who can correctly predict future gold trends.

Check out our other articles on the website to figure out the best gold investment company for your portfolio.