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What is the best way to invest in gold as a hedge against inflation without having to hold physical gold? Is it possible for a regular person to just purchase shares in GLD?

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    For what it's worth, investing in any equity (including stock) is a hedge against inflation. – JohnFx Oct 3 '16 at 6:05
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GLD, IAU, and SGOL are three different ETF's that you can invest in if you want to invest in gold without physically owning gold. Purchasing an ETF is just like purchasing a stock, so you're fine on that front.

Another alternative is to buy shares of companies that mine gold. An example of a single company is Randgold Resources (GOLD), and an ETF of mining companies is GDX.

There are also some more complex alternatives like Exchange traded notes and futures contracts, but I wouldn't classify those for the "regular person."

Hope it helps!

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Since GLD is priced as 1/10 oz of gold, I'd call it the preferred way to buy if that's your desire. I believe gold is entering classic bubble territory. Caveat emptor.

A comment brought me back to this question. My answer still applies, the ETF the best way to buy gold at the lowest transaction cost. The day I posted and expressed my 'bubble' concern, gold was $1746. Today, nearly 5 years later, it's $1350, a drop of 23%, plus an additional 2% of accumulated expenses. Note, GLD has a .4% annual expense. On the other hand, the S&P is up 80% from that time. In other words, $10K invested that day would be worth less than $7,700 had it been invested in gold, and $18,000 in stock. It would take a market crash, gold soaring or some combination of the two for gold to have been the right choice then. No one can predict short term movement of either the market or metals, my answer here wasn't prescient, just lucky.

  • +1 - Don't be at the top of the bubble. No way to know, but be careful. – MrChrister Dec 14 '11 at 6:39
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    I just stumbled upon this 5 years later, and: Congratulations to your accuracy, you wrote that right about 2 weeks before GLDs 5-year high :D – kasoban Aug 1 '16 at 13:16
  • I think you are being too modest. You weren't calling whether gold was going up or down tomorrow. You were talking about long-term trends not short-term movements. Also gold is on an upward trend lately. The bottom was under $1100 and the top over the last 5 years was above $1900. Something to think about when you hear the but this time is different! from the same people who are always bullish on gold. – JimmyJames Aug 1 '16 at 14:43
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Definitely look at CEF. They have tax advantages over GLD and SLV, and have been around for 50 years, and are a Canadian company. They hold their gold in 5 distributed vaults.

Apparently tax advantage comes because with GLD, if you supposedly approach them with enough money, you can take out a "bar of gold". Just one problem (well, perhaps more):

  • a bar of gold is an enormous sum of money (and as such not very liquid), and apparently gold bars have special certifications and tracking, which one would mess up if one took it to there personal collection, costing additional sums to re-certify.

  • many, many articles on the web claiming that the gold GLD has is highly leveraged, is held by someone else, and tons of other things that makes GLD seem semi-dubious.

I've used CEF for years, talked to them quite a few times; to me, and short of having it my possession, they seem the best /safest / easiest alternative, and are highly liquid/low spread betwen bid and ask.

The do also have a pure gold "stock" and a pure silver "stock", but these often trade at higher premiums. CEF's premium varies between -2% and +4%. I.e. sometimes it trades at a premium to the gold and silver it holds, sometimes at a discount. Note that CEF generally shoots to have a 50/50 ratio of gold / silver holdings in their possession/vaults, but this ratio has increased to be heavier gold weighted than silver, as silver has not performed quite as well lately. You can go to their web-site and see exactly what they have, e.g. their NAV page: http://www.centralfund.com/Nav%20Form.htm

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    CEF is a good fund, but it has some complexities. It's a closed-end fund that usually trades at a premium to the underlying security. Also, CEF is considered as a "Passive Foreign Investment Company", and that status brings some potential tax advantages compared to GLD or IAU, but also some complexity. Understand how these issues apply to you before you buy! – duffbeer703 Dec 14 '11 at 15:43
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Investing in gold without having physical gold is not really a hedge against inflation. GLD is really more for speculation, not protection against serious inflation. If there is any kind of inflation worth really protecting yourself against then one thing you will notice at its onset is a divergence in the price of physical and GLD; with GLD offering very little protection if any against inflation. Ultimately holders of GLD will demand physical metal and the physical price will rise and the paper price will fall. I would advise you to study physical gold before you purchase GLD for that reason.

EDIT: Just adding this to my answer - I don't know why I didn't put it in before, and I hasten to add that I'm not an expert though a little investigation will show you that this is at least one option for owning gold. If you think of having the physical gold yourself at one end of the spectrum and buying GLD at the other; so that you don't need to take physical delivery, there is another scenario which I understand is in between (and sorry I don't actually know what it's referred to as) but it's where you buy the physical gold but instead of taking delivery the bars are stored for you in a vault - these bars are numbered and you actually own what you have paid for and theoretically you could go and visit your gold and actually remove it because it's your gold - as opposed to having paper GLD which in my understanding is a "right to take physical delivery" of gold - and this is slightly different - of course unlike GLD you actually have to pay a storage fee and of course unlike having the physical gold buried in your garden or something you are not entirely secure against say a robbery of the vault, and you are also depending on the company not to sell the same bar to more than one person - but that's the only think that their reputation is built on, and a company like that would live or die by the reputation - ( and of course you might lose the proverbial gold buried in the garden either, so nothing's 100% secure anyway really )

  • Somebody else flagged your answer as incorrect and misleading. I'd have preferred if they downvoted and commented here instead to express disagreement. Nevertheless, I'll follow up: Why would GLD fail to track the physical price in a scenario such as you've outlined? Do you have something to back this up or is this just speculative opinion? Is there something inherent about the makeup of the GLD ETF that would make it susceptible to significant tracking error of the physical metal price? – Chris W. Rea Sep 13 '11 at 20:27
  • Sorry to hear that, though I very much doubt that my answer is misleading. This is far from my own speculative opinion. I was really drawing from what I've heard several people saying. Most notably Mike Maloney from goldsilverauthor of Rich Dads Advisors:Guide to Investing In Gold and Silver. Also check this page. I really do think there is a lot of talk about this in both pro and amateur circles... – byronyasgur Sep 13 '11 at 20:47
  • In this video we have 2 industry experts talking about and explaining the scenario, in this case it's actually about silver but I understand the principles are similar with gold. And this one really nails it for me and was the first piece of information I received on the subject. – byronyasgur Sep 13 '11 at 20:49
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    GLD is an audited ETF which has the insured physical gold to back up its claims. Sorry, any references to these funds being leveraged sounds like conspiracy theory to me. – JoeTaxpayer Dec 14 '11 at 12:05
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    After the mortgage meltdown, and the Madoff scandal, I'm hard pressed to ever suggest anything is impossible. But, I've never heard of these guys. Experts? What are their credentials? What actual evidence can you point to besides youtube videos of self professed experts who are discussing leverage but not specific to the GLD EFT? – JoeTaxpayer Dec 18 '11 at 3:10

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