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Bullion Investment Strategies

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EXCHANGE TRADED FUNDS AND PAPER GOLD

First time bullion buyers are almost frightened of precious metals. The mere sight of them sends shivers down the spine – bullion is viewed as being worth lots of money, and that provides a level of fear. Consider that $100,000 worth of American Gold Eagles would fit within your average coffee can with room to spare. That’s an extremely compact form of wealth!

Bullion Investment Strategies

We have been so conditioned to accept paper and digits as actual wealth that seeing the wealth in person, right in front of you, tangibly, is downright scary. They feel that actually possessing that wealth puts them at risk of robbery or worse, and thus they avoid it.

Therefore, most novice bullion investors once again turn to paper for reassurance in the form of paper gold. Paper gold, otherwise known as Exchange Traded Funds (ETFs) or gold certificates are basically like bank notes all over again. They are nothing more than a piece of paper that allows the bearer to redeem the note or certificate for a certain amount of gold.

In some cases, ETFs allow people who would otherwise not be able to invest in gold to purchase at least some of it – for example, if you can only afford $50 to spend on gold, and it normally trades for $1300 plus or minus per ounce, then clearly you can’t buy hardly any of it. What an ETF does is allow you to buy a tiny fractional share in gold, and then these funds are traded on the open market and their prices fluctuate. Here is why we hate ETFs and gold certificates:

  • According to the banksters that sell paper gold, it is supposed to be backed by real gold at a ratio of 1:1. This means that in theory, they should only be allowed to sell shares of the gold they actually possess. If you believe that banks, hedge funds, and securities dealers are 100% honest 100% of the time, then we have some Arizona oceanfront property to sell you.
  • Someone else actually holds the gold – not you!
  • There is usually no way for you to actually redeem your paper for gold – only to get your money back. Remember – you are trying to avoid paper money!
  • ETFs are paper or digital money, which can always be confiscated or forfeited with the stroke of a pen. The ETF turns out to be bogus? Poof – money gone. The hedge fund receive a government bail out? Poof – money gone. The bank fails? Poof – money gone.
  • ETFs are traded like stocks on an exchange, and thus their value is not necessarily connected to the physical gold they are supposedly backed by.
  • The custondianship of the gold has little accountability and is not audited.

Basically, paper gold or ETFs are like cash money – except far riskier. Quite literally, holding cash money is far better than paper gold, and even that is risky.

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