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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?

morpheus
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  • This question may help with regards to where to buy: http://money.stackexchange.com/questions/5559/buying-gold-silver-as-a-hedge-against-hyperinflation. – 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. –  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... –  Mar 01 '13 at 14:11

2 Answers2

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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
  • Non-zero risk that the sponsor, while honest, still goes bankrupt. (The other part of counterparty risks)
    • – MSalters Oct 23 '12 at 10:50
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    @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? –  Oct 24 '12 at 16:00