The New Gold Rush: Gold Bullion Of ETFs?

Gold prices have been on a roar in 2020. In recessionary times, the yellow metal can be expected to continue the rally.

But many factors in the current economic environment are different from past recessions. When the economy slows down, gold provides a safe haven for investors. Government stimulus is setting the stage for gold in 2020. Governments are printing money. This monetary stimulus will make inflation raise its head after a long hiatus. Any asset price run-up will eventually come down. Then, you will want reliable gold in your investment portfolio to provide a safety cushion.

But should you buy gold bars or gold ETFs (exchange-traded funds)?

Gold Bars and Coins

Printing money devalues the currency. Investors rush to safe assets by buying silver, gold, and jewelry. Gold, the former reserve currency, still serves as a flight to safety asset. Gold also provides an attractive risk-to-return ratio for investors.

When you buy gold bars or coins, you take custody of the physical asset. You will then need to pay for storage and insurance. Dealer commissions and sales taxes will apply. You can sell gold through a reputable precious metals dealer, in person or online.

Sovereign mints make bars and coins that serve as legal tender. Whereas private mint gold bars are a commodity valued on their mass and purity. Gold coins also have value as collectibles and can trade above the spot price of gold. The full price must be paid for a gold bar or coin. 

Gold ETFs

Record volumes of money are flowing into gold ETFs. Investors are seeking exposure to gold without owning the underlying asset. The high interest, however, means the value of the funds can far exceed the gold they are backed by. Gold ETFs are funds that own the underlying physical gold, or they may be backed by gold futures.

ETFs are low cost and can easily be bought online. Many brokers charge low and no commissions to trade ETFs. Selling a gold ETF is easy. From your online broker account, you can generally click "Sell Gold" to receive the market price.

Although if gold prices drop quickly as part of an overall market sell-off, you may have a hard time finding buyers at your ask price. And if your gold ETF closes, there will not be a 1:1 ratio of gold as security. Gold bullion, on the other hand, is truly a safe asset. You have every ounce of bullion that you paid for.

For more information about buying and selling gold, go to this web-site.