Physical Gold and Silver Vs Precious Metals Exchange Traded Funds (ETF)



What do we say about investing in physical gold vs. investing in a gold ETF? We say “Ain’t nothin’ like the real thing, man!” Of the four ways to invest in precious metals today, the one that, to us, easily makes the most sense is investing directly in the physical asset. This can be achieved by purchasing physical gold bullion coins and bars or rare gold coins and junk silver bags.

There are three other primary ways to get involved with precious metals, the first is a silver or gold ETF (exchange traded fund), the second is to invest in shares of stock in precious metals mining companies, and the third is to invest in precious metals futures contracts. We’ll be brief and clear on two of these three choices. First, we don’t recommend futures investing to anyone who has not already proven themselves a master futures investor–and that applies to most people. Futures contracts can give amazingly high returns in an astonishingly short period of time, but the risks of loss are equally high. Avoid gold futures. Second, if you invest in a mining company stock, you are not investing in physical gold and silver–you are still investing in paper. You may assume that gold and silver will be rising so much that the companies’ stocks will inevitably rise with it, but despite the very sharp rise in the prices of gold and silver over the last decade, many of the gains in mining company stocks have underperformed the physical asset. With stocks, not only are you investing in a mining company, but also the company’s management, equipment, mine assets, and so forth. The bottom line is that it’s not physical gold, nor physical silver.

But with a gold ETF, aren’t you investing in physical gold? No, you’re still not.

A gold ETF is an investment in a derivative of the value of an ounce of gold. Quite typically, a share in a gold ETF equals the market value of 1/10th of one ounce of physical gold. The fund is underpinned by real gold bullion-but that’s not what you are buying. And for you as an individual investor (as opposed to, say, an institutional money manager), that’s not really that good. And here’s why: Take a gander at this quote within the 10-K filing by the World Gold Council for the GLD ETF. It says “Each outstanding Share will represent a proportional interest in the gold held by the Trust. As the Trust will not generate any income and as the Trust will regularly sell gold over time to pay for its ongoing expenses, the amount of gold represented by each Share will gradually decline over time. This is true even if additional Shares are issued in exchange for additional deposits of gold into the Trust, as the amount of gold required to create Shares will proportionately reflect the amount of gold represented by the Shares outstanding at the time of creation. Assuming a constant gold price, the trading price of the Shares is expected to gradually decline relative to the price of gold as the amount of gold represented by the Shares gradually declines…”

You see…physical gold and silver always have intrinsic, real value. But a gold ETF will likely lose money unless the market value for gold goes up and up and up. It may be expected to do that right now, but can you predict the exact timeline? When will be the right time to redeem your shares? If you buy physical gold and silver 파일코인, you’ll never need to worry about that, because the precious metals themselves will always have great value relative to how healthy all other financial investment instruments are at any time: stocks; bonds, futures contracts, and any given currency.

So once again, the bottom line is: own physical gold and silver. Everything else is, to one degree or another, mere speculation. And while speculation can make you even more money than owning precious metals coins, it can also cause you to lose your shirt. You can’t lose with physical precious metals.


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