It may not be long now until U.S. investors are able to trade gold bullion like a share of stock. While gold has long been as asset that investors have turned to as a hedge against unstable markets, it has generally only been available in bullion form, at an extremely high cost to carry, or indirectly though the holding of mining company shares. All of that may soon be about to change, as Barclays Global Investors (BGI), which manages iShares, is now the second entity to file for an exchange-traded fund (ETF) based on gold bullion. BGI has filed with the SEC to launch the iShares COMEX Gold Trust. COMEX is the exchange market on gold futures contracts operated by Commodity Exchange Inc., a subsidiary of New York Mercantile Exchange Inc.

The iShares filing follows one by Equity Gold Trust more than a year ago to launch a new U.S. gold-bullion-based ETF. The Equity Gold Trust ETF would be managed by BGI's chief competitor in the ETF market, State Street Global Advisors (SSgA), which runs the world's largest ETF, the SPDRs Trust (SPY). The SSgA Gold ETF will likely be branded under SSgA's StreetTRACKS brand. The Equity Gold Trust filing includes the participation of the World Gold Council, which is the organization founded by major gold mining companies around the world to promote gold.

The iShares gold ETF, pending regulatory approval, would be listed on the American Stock Exchange with the ticker symbol IAU, while the SSgA variant would trade on the NYSE under the ticker symbol GLD. The objective of the trust is for the value of the funds to reflect the price of gold owned by the trust at that time, less the trust's expenses and liabilities. Essentially, a share of IAU or GLD would represent ownership of one-tenth of an ounce of gold-at current prices, about $41 per share.

In 2003 the first gold ETF, Gold Bullion Securities, began trading on the Australian Stock Exchange. A separate Gold Bullion Securities ETF now trades on the London Stock Exchange. For both of those funds, and for the forthcoming U.S. variants, actual physical bars of gold are held in a vault to represent all the outstanding shares of the fund. Shares can be traded in by authorized participants in groups of 50,000, for the actual physical gold. Share prices are held close to the underlying value of the gold by arbitrage, as with any other ETF.

Investors have long turned to gold in times of market uncertainty, and many conservative investors have held a part of their portfolios in bullion or gold mining stocks. Furthermore, gold is considered the ultimate inflation hedge, and with economic growth surging in much of the world, gold bugs see a fundamental reason for the metal's rise as well. Like the fixed-income and value equity investors of the late 1990s, the precious metals crowd took a beating through the last bull market. Now they're back with a vengeance.

One problem with gold investing has been that it is historically one of the most inconvenient asset classes for an average investor to access, due to the high costs associated with purchasing, transporting and safely storing it. Yes, there are many gold mining companies and mutual funds that invest in mining companies-even Vanguard has such a fund. And these stocks do, to some extent, capture the price movement of gold. But many companies are hedged against price movement and involved in other mining activities-and, well, they're just not gold. However, the problem with buying bullion is about to change in the United States.

Already, investors in the United States can buy gold futures to achieve gold exposure, as well as Total Return Asset Contracts (TRAKRS) futures contracts that give similar exposure to the price movement but also provide a return component to investors-giving them the benefits of lending gold, as if they were holding the bullion (and had the market power of Central Banks or major bullion dealers). In addition, the exchange-traded funds in Australia and the United Kingdom enjoyed highly successful launches. These ETFs actually allow investors to hold gold bullion itself, as stacks of real gold bars in London are what underlie the ETF portfolios. As with any ETF, shares can be bought and sold through any broker like a single stock. And they are coming to the United States soon.

The world of gold is clearly changing. New trading instruments will make gold more accessible and at lower cost, to both retail and institutional investors, than it has ever been before. A combination of factors-what happens in the equity markets and with gold prices, how aggressively the funds are marketed and to what extent investors harbor a deep-seated desire to own some gold-will all be keys to the level of success the products will achieve. I wouldn't be surprised, however, if it these funds do extremely well.

Jim Wiandt is editor of Journal of Indexes, a sister publication of Financial Advisor magazine. For more information regarding gold, including details about the fund structures and fees of the products, as well as links to some of the sources that provided the basis for much of this article, please visit the Gold/Commodities microsite of