Equities:
Investors who trade gold through stocks have the opportunity to express their view through a diversified basket of gold mining stocks such as the GDX ETF. This level of diversification provides greater safety than single stock investments, which are often vulnerable to specific corporate event risk. Gold equities also offer the potential of greater appreciation because their earnings are highly leveraged to the price of the commodity and will tend to increase faster than the metal itself. Investors in gold stocks may also enjoy the possibility of increasing dividends, which could enhance their overall return.

However, investing into individual stocks even through an ETF basket-like GDX does have its drawbacks. Investors are still subject to individual company risk, with no guarantee that the stock may benefit from a rise in the underlying metal if a company’s operational problems cancel out the gains. In that case, investors may decide to choose the GLD ETF which is an extremely simple and liquid way to easily create a direct position in gold. Retail traders will also find the GLD ETFs accessible, as the value is only 1/10th the price of an ounce of gold.

On the other hand, experienced traders may dislike the fact ETFs require at least 50% margin to establish a position, which can prove to be an inefficient use of capital. Both, Market Vectors Gold Miners (Symbol: GDX) and streetTRACKS Gold Trust (Symbol: GLD), have margin requirements per $10K/notional value of $5000 and both funds also charge commission fees. Furthermore, the funds only trade during US market hours, leaving them vulnerable to large gap openings as gold trades 24 hours per day and can experience sharp swings in volatility. Additionally, investors are subject to interest rate charges on their margin accounts, which at present rates amounts to a cost of 9% per annum.

List of selected gold companies and their ticker symbols:

Compare to other methods of gold investing