For investors seeking an exchange traded fund that tracks gold futures contracts, the PowerShares DB Gold Fund offers the investment opportunity that they’re looking for.
ETFs are a type of hybrid financial product between a stock and a mutual fund. Like stocks, ETFs can be traded on an exchange during a trading day. Like mutual funds, ETFs represent a raft of investment products, which are usually part of a similar industry group.
For gold investors, ETFs are less expensive than owning physical gold and a more flexible financial product than other gold investment products.
In addition to these benefits, ETFs also have certain tax benefits. Because ETFs mimic market indexes, they have a turnover that is usually considerably lower than actively managed funds. The reduction in turnover often results in tax efficiencies for folks who invest in the ETFs, because less trading of the ETF by other shareholders results in fewer capital gains distributions for other shareholders.
Because ETFs seek to track market indexes, their turnover is typically lower than that of actively managed funds. Lower turnover can result in tax efficiencies for investors when securities are sold at a gain. In addition, with traditional mutual funds, the buying and selling activities of some shareholders can trigger capital gains distributions for all of the fund’s shareholders.
The PowerShares DB Gold Fund tracks the Deutsche Bank Liquid Commodity Index – Optimum Yield Gold Excess Return, which is an index comprised of gold futures contracts. The ETF trades on the NYSE Arca under the symbol DGL. The fund is managed by DB Commodity Services LLC.
Since the ETF’s inception, it has enjoyed a 21 percent average annualized return. Last year, the ETF experienced a 33 percent average annualized return. The ETF has net assets of more than $226 million.
Because the ETF follows gold futures contracts, when investors feel the price of gold will go up, this fund will do well as positive investor sentiment toward gold futures contracts results in higher prices for those contracts.
Gold recently crossed the $1,300 per ounce barrier and some analysts believe it will go even higher before the end of the year. As such, gold futures contracts are expected to trade higher for some time. For an ETF that’s a good bet going ahead, the PowerShares DB Gold Fund represents a solid investment in future gold price growth.
Prior to investing in any gold ETF or other financial product, it’s important to learn as much as possible about the investment. Investors are advised to read the PowerShares DB Gold Fund’s prospectus, which is available online and consult with their financial advisor before making an investment in the PowerShares DB Gold Fund.