How to Invest in Gold Mutual Funds

Investing in gold has been a time-honored strategy for diversifying portfolios and safeguarding against economic uncertainties. Traditionally, investors have turned to physical gold, such as gold bars or coins, to gain exposure to this precious metal. However, the rise of gold mutual funds has revolutionized the way investors can participate in the gold market. In this detailed guide, we will explore the various ways to invest in gold mutual funds, the advantages they offer, and the factors to consider when venturing into this lucrative investment avenue.

Different Ways to Invest in Gold Mutual Funds

Gold mutual funds can be accessed through different investment vehicles. One popular method is purchasing shares of a gold exchange-traded fund (ETF) like PDR Gold Shares (GLD), which is one of the best-known ways to invest in gold mutual funds. Additionally, investors can explore other gold mutual funds such as Tocqueville Gold (TGLDX) and Gabelli Gold Load-Waived (GLDAX.LW). Each share of these funds represents a portion of gold, often equivalent to one-tenth of an ounce. These funds can be bought just like stocks, through brokerage firms or other financial institutions offering gold ETFs and gold mutual funds.

If you need to learn more, check out what is a gold mutual fund before continuing on with this article.

Advantages of Investing in Gold Mutual Funds

One of the primary reasons many investors choose gold mutual funds is their cost-effectiveness compared to owning physical gold. Gold mutual funds generally have lower expenses, making them an appealing investment option for beginners and seasoned investors alike. The expense ratio, which represents the management fees and other operational costs, is often less than 0.5%, making these funds more economical than some mutual funds. The lower expenses contribute to the fund’s overall performance, potentially enhancing returns for investors.

Varied Approaches to Gold Mutual Funds

Gold mutual funds may employ different investment approaches. Some funds may invest in indexes of mining companies, while others may tie their fund directly to gold prices. Additionally, some funds may take an active role in managing their portfolio. These diverse strategies make investing in gold ETFs and gold mutual funds an attractive option for the average investor. Notably, gold ETFs have become a staple in gold-based individual retirement accounts (IRAs), further highlighting their value in the investment landscape.

Indirect Gold Investment

It’s important to note that many mutual funds include gold investments and gold companies in their portfolios. However, there are relatively few funds that focus solely on gold as a whole. Investing in gold funds provides several advantages, including low cost, low minimum investment requirements, diversification among companies, simple ownership, and the convenience of no additional research requirements.

Gold’s Performance: Key Factors Influencing Success

The performance of gold is influenced by a myriad of factors that contribute to its value. Among these factors, inflation plays a significant role. When the price of goods and services rises, it tends to impact the price of gold positively. Inflation is often an indicator of economic expansion, prompting the Federal Reserve to increase the money supply, which, in turn, dilutes the value of currency in circulation. As a result, assets like gold, which store value, become more expensive.

Supply and Demand

Like any other good or service, the price of gold is influenced by supply and demand dynamics. When there’s an increase in demand with a corresponding low supply, prices tend to rise. Conversely, when there’s a surplus, the value of gold may decrease.

The Impact of ETFs

While ETFs have a smaller influence on the price of gold compared to other factors, they are still worth mentioning. ETFs allow investors to increase liquidity and minimize risk exposure by spreading funds across various assets. As demand for gold changes, the value of gold can fluctuate based on purchasing and selling activities of ETFs.

Currency Movement

The movement of the U.S. dollar also impacts the price of gold. When the U.S. dollar weakens, it tends to increase the value of other currencies and commodities worldwide, including gold. Conversely, when the dollar rises, the price of gold may fall due to the inverse relationship between gold and the U.S. dollar.

Economic Data

Gold prices can be influenced by economic data such as the jobs report, GDP growth, manufacturing data, and wage data. These indicators can impact the Federal Reserve’s monetary policy, which, in turn, affects the price of gold. For instance, gold prices may decrease during periods of strong U.S. economic growth, low unemployment rates, and significant GDP growth. Conversely, weak job growth, rising unemployment rates, and minimal GDP growth can increase the price of gold.

Gold Mutual Funds or Gold ETFs?

Investors have two primary options for investing in gold – gold mutual funds and gold ETFs. Gold ETFs can provide exposure to gold through instruments like bullion or gold futures, tracking its prices closely. On the other hand, gold mutual funds often invest in companies involved in gold mining. The significant difference between these two options lies in their movement in response to market changes. While the mutual fund’s performance is linked to the market and the value of the company, the ETF’s performance is tied to the value of gold.

While one ETF may have lower fees than another, the same could be said of mutual funds. Understanding the traits and characteristics of each option can help investors choose the one that aligns with their portfolio and investing goals. Usually, ETFs are a useful hedge against inflation, market declines, or declines in the value of mining company stocks. This is because gold prices are often steadier than stock prices, making them an attractive option for investors seeking stability.

Also Read:  Buying Gold ETFS During a Recession


Investing in gold mutual funds offers investors a unique opportunity to diversify their portfolios and participate in the gold market without the complexities of owning physical gold. The advantages of lower costs, diversification, and professional management make gold mutual funds a compelling investment option for both beginners and experienced investors. However, before venturing into this market, it’s essential to conduct thorough research, consider long-term investment goals, and consult with financial professionals if needed. With the right approach, gold mutual funds can serve as a valuable asset in enhancing investment portfolios and providing a hedge against economic uncertainties.


Q : Are gold mutual funds a safe investment option?

A : Gold mutual funds are generally considered a relatively safe investment option as they provide exposure to a stable and valuable asset like gold, which has historically acted as a hedge against economic uncertainties.

Q : How can beginners start investing in gold mutual funds?

A : Beginners can start investing in gold mutual funds by opening an investment account with a reputable brokerage firm or financial institution that offers gold ETFs and gold mutual funds. They can then choose a suitable fund based on their investment goals and risk tolerance.

Tim Schmidt


Tim Schmidt is an Entrepreneur who has covered retirement investing since 2012. He started IRA Investing to share his expertise in using his Self-Directed IRA for alternative investments. His views on retirement investing have been highlighted in USA Today, Business Insider, Tech Times, and more. He invested with Goldco.