It’s easy to buy gold. These days, there are plenty of online shops where you can get insured deliveries of gold coins and bars, silver, platinum, and all kinds of precious metals products. But that’s not where the story ends. Owning physical gold or silver bullion has ongoing costs that should be considered before you buy.
The Costs of Owning Gold and Silver
There are several costs beyond what you might usually pay for stocks:
- Premiums over spot price that cover the costs incurred by the seller, including their own insurance and storage costs.
- Delivery costs.
- Your own insurance and storage costs.
A small quantity such as a 1 oz. the coin might be secure in a home safe, but you should still ensure it against theft and fire. For larger investments, you should consider allocated storage solutions.
There are more affordable ways to own gold and silver, though none of these solutions are free. These include paper alternatives such as ETFs, mining stocks, or futures. All of these investment options will also come with costs such as management or broker fees.
The advantage of using paper alternatives is that you won’t have to deal with issues like storage or insurance. With an ETF, for example, the fund handles those aspects. It’s easy to trade, much like stocks, and works well, unless you’re buying gold because you want to protect your wealth from bear markets and the unexpected. The drawback to all of these methods is a risk.
Why You Should Still Own Physical Gold and Silver
Owning physical precious metals is always going to be different from owning a paper claim, and that’s what these other methods are – claims. ETFs, mining stocks, certificates, and futures are all just claims on bullion. For some investors, it won’t make a difference. But for the investor who’s buying gold because they want to protect their wealth no matter what happens, bullion is the only sure-fire way to maximize personal control of your wealth and mitigate risk. Those who want to control their wealth should click here to learn about the best investment opportunities for gold and silver bullion in 2019.
There are several risks to owning paper gold or adjacent products like mining stocks. For one, you’re investing your confidence in the management of those assets, i.e., the executive level of a mining company to profitably operate, or trusting the management of an exchange-traded fund.
Then there’s the risk of oversold gold, one of the major drawbacks of ETFs. When you buy into an ETF, you are not buying the real thing, you are buying the promise of future ownership. Due to gold lending and the proliferation of ETFs, there’s far more paper gold out there than bullion. In a crisis, if investors wanted to actually collect their gold from an ETF, most would be out of luck. Owning the real thing is the only way to go for those who care about ownership and delivery.
Gold bullion is like a lifeboat – it may take up be cumbersome to bring on board, but when the ship is sinking, you’ll be glad you went to all that effort.