Although gold has been a tradable asset since only 1971, following President Richard Nixon’s taking the Unites States off the gold standard, it and other metals now are a large portion of many traders’ portfolios. A look at average daily volumes in gold futures contracts traded at CME Group over the last 10 years shows that growth in interest (see “Gaining popularity,” below).
Now, 40 years after becoming a tradable asset, gold and other metals can be accessed in a number of ways, including traditional physical holdings, futures contracts, exchange-traded funds (ETFs) and through correlated markets such as mining stocks. Each vehicle has its own advantages and disadvantages, but with so many options available, investors of all types should be able to find a product to match their temperament.
Before discussing each of the specific investment vehicles, David Meger, director of metals trading at Vision Financial Markets, reminds that, “No one vehicle is necessarily better than the others. It’s all about what the comfort level of the client is, what the client is acclimated to trading and just what it is they are looking for. We can draw out the plusses and minuses of each, but at the end of the day, they’re each relatively similar.”