Gold ETFs or Gold Coins?

Gold ETFs or Gold Coins?








The
extraordinary and popular expansion of gold ETFs (Exchange Traded
Funds) in the gold market has prompted the question 'Are gold ETFs
taking over the gold money market?' It has even been said that the
increase purchase of gold by ETF funds has partially driven the current
bull market.

The apparency that gold ETFs give the smaller
investor a better spread on their investment is somewhat outweighed by
other factors.

The buy in and sell out cost on gold EFTs is
smaller than on purchasing actual bullion. With bullion you have the
dealer mark ups on the buy and a reduced below actual gold cost per
ounce on the sell. Bullion is somewhat of a longer term market but with
gold being a bull market currently, the concept of being able to buy
gold and even sell it for a nominal broker's fee seems very attractive
for the small investor.

What is often over looked however is that
gold ETFs are considered an investment activity and therefore subject,
in many countries, to a capital gains tax or income tax. Accumulating or
buying and selling gold coins however are usually not as they are
actual legal currency.

There are some exceptions however as in
some US states it seems a capital gains tax may be charged if one sells
gold bullion coins. So in all situations when it comes to any
investments or the buying or selling of gold in any form, and potential
tax considerations, one should always consult with ones own financial
advisors.

In addition, regardless of being backed by gold, other
influences affect the gold ETF which is in reality a just a share
backed by gold rather than the gold itself. This is demonstrated by the
fact that you cannot take delivery of solid gold if you cash or trade
in your ETFs. You will only be paid in cash..

There is a vast
difference between owning actual gold and owning a certificate or piece
of paper that says you own shares in a gold pool.

If that gold is
not in your possession it is subject to the influences, such as
governmental and bank regulation, in whatever country and bank it is
deposited.

It is subject to the short term frame of mind where
investors buy in to make a quick buck and sell out. This does nothing to
increase the stability of the precious metal.

Of course there is
nothing wrong with gold EFTs. They have wriggled themselves into a
niche in today’s gold market by providing a platform for investors to
invest in gold who ordinarily would not, without exerting too much
effort.

It is probably too soon to say if they have found their
level playing field. Hard gold bullion is still the favorite of die hard
gold investors, especially for the long term. Eventually a balance will
be found as those that want to 'play' investment will be satiated and
the gold 'nuggets' of the industry will still be around buying and
selling actual gold coins and bars.

So in the game of gold EFTs
vs Gold Coins, it is unlikely that gold ETFs are taking over the gold
money market. Just providing a lazy way for investors to jump on the
gold band wagon.