Abstract
Exchange-traded funds (ETFs) on indices provide access to a diversified portfolio of assets at a low cost. Whilst ETFs on single commodities have less obvious advantages its number has grown substantially in recent years. This paper analyzes the benefits and risks of single-asset ETFs theoretically and empirically using more than 80 physical and synthetic gold ETFs. We show that ETFs on gold provide a low cost and more liquid alternative to physical investments in gold. As a consequence, the introduction of ETFs on gold leads to a structural demand shift with implications for the price of gold, the volume traded and the volatility of gold. Our analysis provides new evidence on the financialization of commodities and can help to explain the growth of gold ETFs and changes in the price of gold.
Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a call
