If you have invested in a gold exchange-traded fund (ETF) to take advantage of the security and growth potential of gold, then take a second look: ETFs have higher costs and greater risks than most people think. To enjoy the safe haven benefits and the stabilizing effect on portfolios that gold offers, make sure your gold is real. Make sure it is safe. Make sure it is physical gold.
Physical Gold and Rare Coins
(such as American Eagle
Gold Bullion coins)
Pros
Safest possible long-term investment
Hedges against volatility of paper stocks to balance portfolio performance
Ultimate protection from bank failures; stores wealth outside banking system
Private transaction
Low to no reporting requirements
Portable (especially coins)
Great for inheritance planning
Universal recognition; easy to liquidate worldwide
Most security (and growth potential) in worst-case scenario
Can be used as currency to make purchases, if necessary
Has intrinsic value; will never be zero
Cons
Must be physically held and stored
To buy or sell requires physical transfer
Must be bought from a trusted vendor to ensure quality & security
Shares of an ETF
(such as GLD)
Pros
Convenient way to trade on gold prices
Can be part of a larger account
Can be bought and sold quickly, like stocks
Good choice for short investment horizons (weeks or months)
Cons
Shares not redeemable for physical gold
No hedge against volatility of paper stocks because it IS a paper stock
ETF gold holdings can be vulnerable to excessive leveraging by custodians as much as 100:1 – a potential house of cards. (View Rick Santelli discussing GLD risks)
Custodianship of gold holdings not audited, little accountability
A gradually depleting asset: fractions of gold holdings are regularly sold to offset management & other fees
Higher reporting requirements & less privacy
Zero transparency: ETFs don’t disclose their actual, physical gold holdings
Zero benefit in a worst-case scenario
American Eagle
Gold Bullion Coins
If you don’t hold it,
you don’t own it.
Call a Blanchard and Company, Inc. representative at 1-800-880-4653 to transfer ETFs into real, physical gold or to discuss your investment options. We are here to serve you.
