ETFs in a Market/Dollar Collapse Scenario

Discussion in 'ETFs' started by DoxazoAdonai, Feb 8, 2007.

  1. I have money in retirement funds that I'd like to invest in gold. I can't use those funds to buy gold outright, so I'm considering investing in gold ETFs. In the event of a dollar/stock market collapse and a rise in gold, is there risk in having money in gold ETFs that would not be present if I were holding gold outright?

    Any other suggestions?


    Scott <><


    Scott Sutherland
    484 Yorkshire Dr.
    Oviedo, FL 32765
  2. There can be liquidity risks in ETF's on the way up and down. An ETF can "disconnect" from it's underlying basis. If there's enormous buying pressure on an ETF, the ETF can potentially trade at a big premium to it's underlying component(s). If there's enormous selling pressure on an ETF, the ETF can potentially trade at a huge discount to the underlying. With something as "emotionally arousing" as gold, people won't be entirely logical and calm in a "panic" scenario. From history, you should already know that when gold-related panics arise, they resolve themselves very quickly and travel farther than you expect. You can easily get chopped to pieces if you react instead of act.
  3. Given the scenario I'm envisioning (market/dollar down & gold up), it sounds like it could work to my advantage. What concerns me is that if we face a true financial catastrophe, ETFs are connected to the market (as opposed to actual gold which is not). Could that "connection" cause me problems? I'd really like to get some of my IRA/401k funds invested in gold, but since that's not possible, I'm looking for safe alternatives.


    Scott <><
  4. Jaime