Short Gold ETF

Posted in Finance, Accounting and Economics Terms, Total Reads: 246
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Definition: Short Gold ETF

An Exchange Traded Fund (ETF) is a fund similar to the stocks and shares which is an investment fund and is traded on the Exchange. It is an entity that owns assets such as Gold, bonds, shares and its ownership is divided using shares. The shareholders are part- owners of the assets behind the shares.


They are similar to mutual funds and the difference is that they can be traded on a daily basis over the Stock Exchange. In general, ETFs track a stock or bond index.

Inverse ETF is an ETF which is traded on the reverse of the index which it tracks. Short Gold ETF is a type of Inverse ETF which tracks the Gold rates. These funds work using various options such as short selling and futures contracts.


Working:

The Short Gold ETF tracks the gold rates. So, if the gold rates increase by 5%, then the Short Gold ETFF falls by 5%. Similarly, when the Gold rate falls by 5%, the Short Gold ETF rises by 5%.

This has the direct positive implication of short selling because it would prove profitable in case of a bearish market. As it tracks the Gold rates daily, it can be traded on the Exchange Market. Also, the Short Gold ETFs are traded during the last hours of the trading day.


Advantages:

• Gives the advantage of short selling with the loss being only the purchase price. Does not contain a risk of unknown losses

• Can be held in retirement accounts unlike short selling of ordinary shares

 

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