The final quarter of 2011 is one that Gold investors would like to forget.

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SPDR Gold Shares (GLD) was down over 5% in the last three months of the year compared to a 15% gain for the SPDR S&P 500 (SPY) over the same time period.

However, from a longer term perspective, gold has consistently outperformed equities.  In just the the past five years, GLD has tripled while SPY has been flat.

So where does gold go from here?  According to the Wall Street Journal, the $125 billion hedge fund manager Bridgewater Associates is positioned for higher gold prices in 2012 while anticipating further turbulence in US and European markets.

On the other hand, declines in other asset classes may drive a continued sell-off of gold as investors seek liquidity.  According to another WSJ note, “A liquidity squeeze like the one seen during the 2008 financial crisis could force cash-strapped investors to sell their stakes in commodities, and would likely curtail the credit lines banks make available for commodity deals.”

The Gold Shares (GLD) represent fractional, undivided interests in a trust that holds allocated (or secured) gold.  According to State Street, for many investors, the transaction costs related to the Gold Shares are expected to be lower than the costs associated with the purchase, storage and insurance of physical gold.

The Gold Shares represent fractional, undivided interests in the Trust, the primary asset of which is allocated (or secured) gold.

For more ETF investing choices, see our overview Investing in Gold with ETFs.

– ETF MarketPro Staff
January 3, 2012