Question

Why did the ETF invest in the Futures and not the Spot Market for gold?

Answer 1

Gold ETFs are commodity funds that trade like stocks and have become a very popular form of investment. Although they are made up of assets that are backed by gold, investors don't actually own the physical commodity. Instead, they own small quantities of gold-related assets, providing more diversity in their portfolio. These instruments cost far less than the actual commodity or futures, making it a good way to add gold to a portfolio. But what many investors fail to realize is that the price to trade ETFs that track gold may outweigh their convenience.

Gold futures are contracts that are traded on exchanges. Both parties agree that the buyer will buy the commodity at a predetermined price at a set date in the future. Investors can put their money into the commodity without having to pay in full upfront, so there is some flexibility in when and how the deal is executed.Gold futures,, are contracts that are traded on exchanges in which a buyer agrees to purchase a specific quantity of the commodity at a predetermined price at a date in the future.