Bottom Line: There are several ways to bet against the U.S. dollar; some ETFs are more useful over a short-time period, while others can help hedge currency exposure over the long-haul.
93. Gold ETFs For The Super-Paranoid
Gold as an asset class has long been a popular allocation among investors concerned about the occurrence of extreme events that would destroy the value of any assets they can't hold in their hands. Gold ETFs have become a popular tool for accessing this precious metal, eliminating the costs and time associated with storage for a relatively nominal fee. Though the various physical gold ETFs are almost identical, there are a couple that distinguish themselves from the crowd in an unconventional manner: the location of the vaults.
It may seem like a bizarre concern to many, but there are those investors worried about a repeat of the gold confiscation in the United States or a similar event in London. If the idea of storing your gold on U.S. soil makes you nervous, there are a couple ETFs out there that can alleviate those worries:
Physical Swiss Gold Shares (SGOL): This ETF vaults gold in Switzerland, a country known for its neutrality.
Physical Asian Gold Shares (AGOL): The gold held by this ETF is vaulted in Singapore, far away from the United States.
Bottom Line: Physically-backed gold ETFs can offer investors the peace of mind that comes from being comfortable with the location of the vaults.
94. Commodity Producer ETFs Aren't As Sensitive As You Think
As mentioned previously, many investors have embraced ETFs that focus on stocks of commodity-intensive businesses as a way to gain indirect exposure to natural resource prices. While there are a number of advantages to this approach-such as avoiding the nuances of a futures-based strategy-there are a couple common features that may diminish the correlation between, for example, gold miners and gold prices.
Many companies engaged primarily in the production and extraction of natural resources-particularly for a single commodity-engage in some type of hedging to eliminate volatility from their operations and lock in prices ahead of time. While that stability may be a smart move for the companies, the process of making stocks less sensitive to swings in commodity prices may diminish the appeal of these ETFs to investors looking for a way to play commodity prices. This phenomenon explains why gold miners don't always surge when spot gold prices climb, a common frustration among investors in 2011.
Bottom Line: Commodity producers tend to hedge for natural resource prices; this can make stocks less sensitive to swings in the commodity spot price.