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Google search brings up some articles on this topic, but they can be biased, so:

What are the advantages and disadvantages of buying physical gold vs. investing in a gold ETF like GLD, IAU, or SGOL?

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This question may help with regards to where to buy: money.stackexchange.com/questions/5559/…. – Muro Oct 16 '12 at 18:52
Hi morpheus, there may be a good question in here, but there are definitely some parts of this question (in particular "some reputable companies") that are not constructive. Please review our FAQ and the shopping blog post. If you can remove the not constructive bits I'd be happy to reopen it. – C. Ross♦ Oct 17 '12 at 12:34
Is it a scam is a different question than buy gold or buy etf. I removed that part from this question because I think you were be on a direct course for being closed not constructive. Scams not "a regular thing" on wall street. They are very irregular and rare. Just been a few big ones that make it feel more dangerous than it is to the uninformed. If you want you could ask that in another question. – user4127 Oct 18 '12 at 19:52
I would note that even the some gold shills are backing off buying gold as an investment with the current prices... – user4127 Mar 1 at 14:11

2 Answers

up vote 5 down vote accepted

Owning physical gold (assuming coins):

  • somewhat heavy
  • risk of theft
  • have to take it to a dealer to buy or sell
    • there may be some spread over the market value of the gold, to cover the dealer's expenses
  • you can only really buy or sell in increments of "one coin"
  • small but nonzero risk you're being defrauded by the dealer
  • the actual ownership is free (unless you need to pay for anti-theft insurance, a safe, etc)

Owning gold through a fund:

  • more liquid and convenient (it's probably easy to buy and sell from a brokerage than to walk yourself down to a dealer)
    • ownership may qualify you for brokerage minimums of some sort or another
    • you're pretty much getting the exact same price for gold as all the hedge funds
  • you can only really buy and sell in increments of "one share"
  • the actual ownership is not free (fund expenses)
  • small but nonzero risk you're being defrauded by the fund sponsor
  • in times of extreme political chaos (revolutions, etc) there's an elevated risk you won't actually be able to get a hold of it afterward
    • there's some international element to this depending on where the gold is actually held, so if it's being held in (say) London and you're in a politically-unstable third-world country or something it might be a better hedge against asset seizures than the physical thing
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- Non-zero risk that the sponsor, while honest, still goes bankrupt. (The other part of counterparty risks) – MSalters Oct 23 '12 at 10:50
@MSalters - Physical ETF funds are supposed to maintain a physical stock of (e.g.) gold bars to represent the value of the shares. In a vault. The fund (and its shareholders) own this gold, not the sponsor - that's the defining feature of this fund type. The fund is also capable of liquidating small quantities of this gold to cover its ongoing expenses. So a sponsor bankruptcy might be temporarily disruptive, but (in the absence of fraud) there's not really a lot of counterparty risk. Did you have a specific risk in mind? – fennec Oct 24 '12 at 16:00
up vote 1 down vote

If you want to speculate on gold price you should always buy an ETF/ETC (Exchange Traded Commodity). The reasons are simple:

  • Easy to buy and sell (one mouse click)

  • Cheap to buy and sell (small bank commission), compared to buy real gold (always 6 to 12% comission to the local shop when you buy and when you sell), see this one it's one cheap gold buy/sell shop I found on the internet

But if you sometimes feel unsecure that you might one day loose everything due to a major economy collapse event (like an armageddon), or not to have enough money in bad periods or during retirment, and it makes you feel better to know you buried 999 Gold Sovereign in your house backyard (along with a rifle as suggested in comments), then just buy them and live an happy life (as long as you hide your gold in good ways and write a good treasury map).

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