Ed Brown
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Gold ETFs: you trade them like funds or stocks. Pros: fast trading, low premium over the actual gold value. Drawbacks: quality of the management matters, fees vary, you really need to read the prospectus (e.g. some ETFs lease gold to 3rd parties - i.e. the gold is physically not really there), it may not be backed 100% by gold but just 90%, etc.. it really depends -> prospectus and a lot of research. But, gold ETF is taxed as a mutual fund, which can result in slightly lower capital gain tax than physical gold..
Physical gold: you pay a premium (usually $50-70 over spot with 1 ounce coins). But then, you also get the premium back (partly) when selling gold (even if you sell on ebay, you still get more than the spot price - check out http://www.goldprice.org/ebay-gold-prices/). Pros: You hold the physical and you know it's 100% there, in any type of meltdown. Govt doesn't need to know you have them or you sold them (purchases under $10,000 or sales up to 25 ounces don't have to be reported) -> consider capital gains tax. If you buy from BBB A rated dealers you can be sure it's genuine. Drawbacks: you need a safe place (safe at home or safe deposit $100-300/year), shipping cost when buying online ($30-50). If you believe there may be a serious market crash (exchanges may be down and ETFs not tradeable), this is the better option.
Allocated gold: this is a compromise between an ETF and physical gold. You are a partial owner of a standard 400oz gold bar. The total cost of gold ownership about the same or lower as ETFs. Gold is held as bailment, i.e. you really hold title to it. Only two companies offer this so far: BullionVault and GoldMoney. Pros 24/7/365 instant transactions, low cost, gold is 100% physically there unlike many ETFs. Drawbacks: possibly higher taxation than ETFs or coins..
All in all, my favorite would be probably gold coins (and silver coins too > gold to silver ratio tends to get narrower in crisis times so silver may appreciate more if the dollar hits the fan, plus silver is much more practical - 1oz coin is worth only $20 so you can actually effectively use it for daily transactions etc..) .. but that's my opinion. I'm very conservative and don't trust the management of most funds. |
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