Best way to hold gold? Are ETFs safe?

phildew

I want to invest quite a large lump sum in gold. I don't like the way the pound is going down and my feeling is the economy is going to get worse before it gets better.

I'd welcome any views on the best way to invest in gold? I have read that ETFs are the easiest, but are they really safe if the financial sector goes pear shaped again?

Say I buy into ETFs, it means I get shares in another company that owns the gold, and the shares are managed by another company as a custodian like Barclays. So what happens if the ETF trading company or the company that owns the shares goes belly up, or the custodian collapses (do banks fill anyone with complete confidence any more?), or what if one of these EFTs turns out to be part of a Madoff type fraud? If I invest in an online ETF, what have I got apart from a bit of paper or an email to secure my investment in gold?

If anyone thinks my concerns are unfounded, then which ETF is best?

Thanks for any suggestions.

tradetime

Personally I would say if you are trading gold, on a relatively short term basis, or diversifying a portfolio with a small percentage of gold then ETF's are fine.
If however you are an apprentice goldbug, worried about financial collapse and putting a large percentage of your net worth into gold, then you would be best served with physical gold.
If you do believe the world is going to grind to an abrupt end, and chaos ensue, I'd suggest you are able to store it yourself, as under such a circumstance the bank whose vault it is tucked away in is unlikely to be open, and they're notoriously hard to get into when closed unless you specialize in that sort of thing.

purch

For the reasons you want to hold Gold, then ETF's are not the vehicle for you.

ETF's make it easy to trade in a market or commodity that it would not be possible form you to access otherwise.

If you want to hold Gold (not invest in) to store value, then physical holding is the only sure way you can achieve this.

TRUSt_NO_1_2

phildew wrote: »

I want to invest quite a large lump sum in gold. I don't like the way the pound is going down and my feeling is the economy is going to get worse before it gets better.

I'd welcome any views on the best way to invest in gold? I have read that ETFs are the easiest, but are they really safe if the financial sector goes pear shaped again?

Say I buy into ETFs, it means I get shares in another company that owns the gold, and the shares are managed by another company as a custodian like Barclays. So what happens if the ETF trading company or the company that owns the shares goes belly up, or the custodian collapses (do banks fill anyone with complete confidence any more?), or what if one of these EFTs turns out to be part of a Madoff type fraud? If I invest in an online ETF, what have I got apart from a bit of paper or an email to secure my investment in gold?

If anyone thinks my concerns are unfounded, then which ETF is best?

Thanks for any suggestions.

ETF's are a fraud. (like most of the financial sector)...so they represent a good investment to the general public.

I would suggest learning the hard way.
By into them and wait 10 years.

MacsReturns

Best way to hold gold?

In your hand.




I'm not being facetious, by the way. The way I look at it, ETFs are paper (or digits), not gold, and they're also fractional reserves, in that more 'certificates' are in circulation than the funds hold in physical gold. You can choose the depth of rabbit hole you want to go down on this subject, there are plenty of commentators suggesting all sorts of shenanigans. Every now and then someone will pipe up about imminent defaults etc etc. Only you know your appetite for high wierdness, but there's plenty of 'goldbug' material on the web.

FOR ME, the point of gold is to have physical possession in the 'Royal Bank of Orthopedic' or whichever is your local branch

How you'd go about it depends on the size of your lump sum. Strictly speaking, any gains on selling gold are subject to CGT. Any purchase over £10,000 is notifiable to the relevant authorities. My lump sum is very small, so I've chosen to collect sovereigns as and when - this has allowed me to buy at quite small premiums but it may not be practical for you.

You could do worse than take a look at http://www.goldline.co.uk/investmentBarsPage.page to see what sort of investment products are available - maybe a 1kg bar @ £26,489.75 would tempt you?

IMO prices are crazy right now, with Greece stirring things up a bit, £787/oz on latest London fix. And there was me thinking a while back I'd missed the boat when I started buying in at £450/oz...:eek:

Kohoutek

Try https://www.bullionvault.com and https://www.goldmoney.com

phildew

Kohoutek wrote: »

Try bullionvault and goldmoney

Most the replies above all seem to share my concerns about ETFs! Actually I'm surprised as I wondered whether I was being over cautious.

I did wonder about bullionvault and goldmoney too - is there not a risk with them too? What if they are as not holding as much gold as has actually been purchased? What if everyone tries to redeem their bit of paper for physical gold? How can either website prove that the gold is there? What happens if either company goes belly up?

Physical gold. I see the sense in this. My only issue with physical gold - say I purchased a couple of bars - is that it may be hard to move it on at a later date. I assume the buyers market for actual gold bars is really limited - how and where do you sell it if you need to convert back to cash quickly?

shaun_from_Africa

Strictly speaking, any gains on selling gold are subject to CGT.

Not if the gains are made from selling Sovereigns or Britannias.
These are classed as Sterling legal tender, and as such are exempt from CGT.

Kohoutek

phildew wrote: »

I did wonder about bullionvault and goldmoney too - is there not a risk with them too? What if they are as not holding as much gold as has actually been purchased? What if everyone tries to redeem their bit of paper for physical gold? How can either website prove that the gold is there? What happens if either company goes belly up?

The way they are structured is that you are the legal owner of the gold, so even if the company went bankrupt, their creditors would have no claim on the gold. I agree there is an element of trust but I think it's almost certain they are legit - they both have auditor's reports you read, Goldmoney is regulated by the jersey financial regulator. On Goldmoney you can withdraw the gold physically via a gold refiner based in London I believe too.

PasturesNew

shaun_from_Africa wrote: »

Not if the gains are made from selling Sovereigns or Britannias.
These are classed as Sterling legal tender, and as such are exempt from CGT.

There are so many sovereigns and britannias, how do you know what is the "right price" for any one you are looking to buy? They seem to sell based on years and descriptions, rather than weight. While one might be at sale for £200 and another at £400, how would one know they're both worth (say) £190?

shaun_from_Africa

The price difference between various issue years of Sovereigns and Britannias is due to people who collect them for their rarity value as opposed to keeping them purely for their bullion value.

If you want these coins simply as a gold investment, I would say just go for the cheapest ones available on the market as their selling price is only based on the weight of gold they contain + the dealers premium.

If you are not investing too much and don't think that CGT will be an issue, then there are better (in my opinion) options available for buying physical gold.
You can either go for non UK bullion coins such as Krugerrands (as these are often available at a lower premium tham Sov's or Britannias,) or gold bullion bars. Generally, the smaller the bar the higher the dealers markup, so for investment purposes I wouldn't consider anything lower than 1oz.

This site:
http://www.taxfreegold.co.uk/index.html
gives a lot of info and is good for anyone interested in buying bullion.