Gold funds; Exchange-traded fund

Gold funds: Investors can buy shares in a mutual fund that invests in gold-mining companies, but this is only slightly less complicated than picking individual stocks.

"You have to know, does it buy only gold-mining companies, or does it buy other metals? Does it stick to companies that hedge, or to unhedged ones? Does it buy mostly large companies or speculative companies?" says Russell.

Exchange-traded fund: Gold exchange-traded funds (or ETFs) are traded on the major stock exchanges including London, New York and Sydney, under the symbols GBS, GBL, GLD, GOLD or IAU. The first Gold ETF, namely Gold Bullion Securities (GBS), was originally represented by exactly one-tenth of an ounce of gold. Due to costs, the amount of gold in each certificate is now slightly less. They are fully backed by gold which is both deposited and insured. The gold can be withdrawn, subject to a minimum size of 100,000 GBS. Gold Bullion Securities is two-thirds owned by the World Gold Council.

ETFs represent a quick and easy way for an investor to gain exposure to the gold price, without the need to deal with the hassle of storage of physical bars. Typically a small commission of 0.2% is charged for trading in GBS and a small annual storage fee is charged. The annual expenses of the fund such as storage, insurance, and management fees are charged by selling a small amount of gold represented by each certificate, so the amount of gold in each certificate will gradually decline over time. You can also find information on buying gold at the World Gold Council (www.gold.org), but don't expect unbiased advice. The council calls itself honestly "The World Advocate for Gold."