There are many ways to invest in gold today. There are gold bars, gold coins, gold ETF’s, gold stocks, gold pool, futures contracts, etc. None of these are particularly *bad* ideas, especially considering how the yellow metal has performed over the past several years. However, purchasing “physical” gold has some very real advantages over paper gold.
- Paper gold is, well paper. Though we call it paper, most often paper gold is actually electronic gold. It is electrons on a screen; it is a promise of gold. When you buy gold pool or ETF, you’re trusting that the account holder is actually purchasing the physical gold to back it up. When you’re spending hundreds or thousands of dollars, that’s a lot of trust.
- Physical gold is removed from the market. When you buy a gold coin or bar, it’s no longer available for sale. When you buy, for example, a gold futures contract, no gold has been removed from the market. They can sell as many as they want – because these customers don’t demand delivery of the actual metal!
- Paper gold can disappear. If the government decides to shut down GLD (popular gold ETF) and declare all shares void, what are you going to do about it? Your investment will be gone in an instant, with no recourse. Granted, this is entirely unlikely, but it’s something that needs to be considered. When you own physical gold, you’re in charge of it. It can’t be taken away on a whim.
- Gold in your hand feels amazing. OK, this one might be a little corny. But after having felt an American Gold Eagle in your hand….. there’s just nothing quite like it. Certainly not the same as seeing shares of GLD in your brokerage account. Our ancestors used to use this stuff as money on a daily basis, and it’s easy to understand why.
If you’re going to invest in gold, physical is most definitely the way to go. There are just too many positives vs paper / electronic gold.
