Tim Fields
Metal in general has a specific allure; for a lot of traders the simplicity of a piece of paper stating that they own metal is enough… but for others, they want to hold that troy ounce in their hand. Personally, I’m not a paper investor. I want something I can hold onto, something I can take somewhere and cash in, if the sh*t hits the fan. With a piece of paper, in time I can have my money but it doesn’t help me in pinch.
For the paper investors, or ETF/ETN investors, just knowing they have shares is enough and the great thing about those kinds of investments is that a digital share of the Gold ETF (GLD) doesn’t weigh a thing and takes up no room in an investors house or safety deposit box. But it doesn’t stop with space or weight…
For instance, one of the many attractions to paper metal is liquidity. You’d just have to point and click to sell your metal. Whereas selling or trading physical metal, you would have to get in the car, drive wherever and try to get the spot price, or send it to one of the online companies. Paper gold is easier.
Another attraction is pricing. You’re getting spot price + a small .05% brokerage fee. With physical metal, expect to pay spot + premium. Paper metal can be bought in small denominations of 1 gram. Some companies even offer 500 mg units. Keep in mind that this is spot + .05%, where the small denominations of gold will carry a huge premium…
For instance, checking one of the online mints, I can get 1 gram of Credit Suisse gold for $44. Multiply $44 X 31.1 (grams in a troy ounce). The price is $1368/Oz. Spot is $1,282.
Another thing to consider, while not really a major issue if you buy from a reputable source; is purity. ETFs/ETNs are required to buy metal that is at least 99.5% pure. When buying digital metal, you need not care about this – it’s already taken care of for you.
Buying from a non-reputable source can be troublesome, especially if you think you’re getting .999 metal.
In the end, its either you’re a physical or digital investor. Some have the luxury of buying physical bullion and bars, others don’t. Some may say that the premium is worth it when they hold a 100 Oz bar of pure gold, others not so much.
I know that in looking at the pros and cons, digital does appear to be better off, but like I said, I need it physically in my hand, it’s my preference and I know there are a lot of you out there who share that same feeling.
Let’s hear what you think and why… Physical or Digital? Email me here
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