Although purists would have you believe there is no substitute for owning physical gold, the truth is there are better alternatives. Owning physical gold creates security issues. Where do you keep it? You can buy a safe, but safes cost money. Plus, a determined thief can find a way to open your safe or haul it away. If someone in your household happens to mention that you have a safe full of gold, now you’ve created a magnet for burglars. You could store your gold in a safe deposit box, but those cost money, too. You’re trying to save money, not spend it.

The other disadvantage to owning physical gold is the resale market. Presuming that you want to own gold to store wealth, someday you will need to access that wealth. Selling gold is not easy. Those billboards along the road screaming ‘We Buy Gold’ are not the answer. Those kinds of outfits do not pay anywhere near the spot price for gold. It’s no coincidence that you see those signs near pawn shops and payday loan places. The ‘We Buy Gold’ outfits are in the business of providing quick cash to desperate people.

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Best Alternative to Physical Gold

The best alternative to owning physical gold is a gold ETF. If you are not familiar, ETF is an Electronically Traded Fund. ETFs behave just like stocks; you can buy and sell shares with any brokerage account such as TD Ameritrade, E-Trade, or Charles Schwab. Share prices for gold ETFs rise and fall with the price of gold.

GraniteShares Gold Trust goes by the ticker symbol BAR. They own 1,000 gold bars secured in bank vaults in London. Another is Aberdeen Standard Physical Swiss Gold Shares, ticker symbol SGOL. They own 2,000 gold bars held in vaults in Switzerland and London. A third is iShares Gold Trust, ticker symbol IUA. They own 30,000 gold bars scattered across New York, Toronto, and London. 

Over the past year, the share price for each of these gold ETFs increased in lockstep by about 30%. That compares favorably to the Dow which has been essentially flat over the past year, punctuated by terrifying drops and uncertain rallies.

Conclusion

If you want to store hundreds of thousands of dollars of wealth in gold, owning physical gold is not the answer. Gold ETFs are a better solution. Just don’t buy it all at once. Unlike blue chip stocks such as Proctor & Gamble or AT&T, trading volume on gold ETFs is relatively low. If you bought $500,000 in shares at one time, you could literally ‘move the market.’ In other words, the market would run out of sellers and the share price would increase. Better to spread your purchase out over time or use a limit order that states you won’t pay more than a specific amount for your shares.

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