Gold Fund
What it is:
A gold fund is an exchange-traded fund (ETF) or mutual fund that invests in gold.
How it works (Example):
For example, let's assume that John wants to invest in gold. He can either buy physical gold, or he can buy shares of a gold fund. The gold fund pools investors' funds and invests in physical gold and/or shares of gold miners and gold processors (depending on the fund). The largest gold fund is the SPDR Gold Trust (NYSE: GLD).
Why it Matters:
Owning shares of a gold fund is similar to owning gold itself, in theory, and the prices of gold fund shares should correspond to gold prices. Investors often hold shares of gold funds if they're interested in hedging against inflation or currency devaluation.
