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Pros & cons of buying gold directly vs. investing in a gold ETF like GLD, IAU, SGOL?

I’m a new player in this so I hope someone can offer me some suggestions.

I want to invest in gold, maybe buy a small lot of gold coins or bullion. But I’m also thinking of starting a portfolio with gold ETF.

Which would be a better option and why?

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  • Since any answer i could provide would be non-exhaustive, the most i can contribute is en.wikipedia.org/wiki/Gold_exchange-traded_product, which is a very good compilation of exchange traded (paper) gold. – Waldfee Dec 11 '12 at 18:53
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    Please, don't invest in something just because you have a feeling (or your neighbor/uncle/buddy told you) that it's the next hot thing. It isn't – Lagerbaer Dec 11 '12 at 22:14
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    @Charlie - what reasons do you have for wishing to buy gold? And in what dollar amounts are you looking to invest? Your answers would impact the advice you'll get here. – JTP - Apologise to Monica♦ Dec 12 '12 at 4:16
  • Charlie, thanks for your edit - I've re-opened the question. Yet, we're still lacking your country and some idea about your investment goals. These will impact any answer. Thank you. – Chris W. Rea Dec 13 '12 at 20:57
  • Without more detail, I agree this is now a duplicate. – Chris W. Rea Dec 14 '12 at 12:41
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Physical gold fees/risks: low liquidity, high transaction costs, storage costs, security risk

ETFs risks: futures basis, ETF solvency, ETF implied costs Gold Futures risks: basis, margin

Risks that apply to both physical/financial metal holdings: economic slowdowns, general market volatilities, opportunity costs, under performance against actual rate of inflation, and etc.

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