It may come as a surprise to you that not everyone wants to store their gold at home. Some people prefer a way to invest in the yellow metal without having the headaches or hassles of keeping track of it. Other investors who purchase gold for their retirement accounts are not allowed to keep it in their house. Below are several alternative ways that you can own gold without physically having it in your possession.
ETFs
ETFs are exchange traded funds. They may be the easiest means of investing in gold. While they sound like an account that holds a variety of different investments, the name can be misleading. The only function a Gold ETF fulfills is to track gold prices. With a number of years of successful track records, these ETFs have worked almost perfectly. While the Gold ETFs are supposedly backed up by physical gold holdings, some investors have argued about whether or not these gold holdings are actually physically owned and held by the ETFs. They are extremely easy ways to obtain exposure to gold. The two most popular and widely held Gold ETFs are the GLD, which is the SPDR Gold Shares and the IAU which is the fund run by iShares as the COMEX Gold Trust. The costs of holding these funds are marginal at .4% annually with similar or lower commission fees.
The pros to this type of holding gold are fairly obvious:
• It is an easy way for traders who want to buy into and sell out of gold on short notices to participate.
• There is not any simpler or more convenient way to buy or to be exposed to gold.
• These ETF shares can be held in retirement accounts like Gold IRAs.
There are several cons to consider as well:
• It is impossible to tell if the Gold ETFs really have the quantity of gold that backs up their outstanding shares.
• There could be other costs and especially capital gains taxes with these Gold ETFs.
Gold Accumulation Plans
Many investors and savers for retirement are not aware of what Gold Accumulation Plans are. The idea is that you are saving money in increments to buy gold. They eliminate higher premiums for buying smaller amounts of the yellow metal, which is much of their appeal. Once each month, the money that you designate is deposited into the account and utilized to purchase gold. After this amount of saved gold builds up, you have the ability to exchange and withdraw it in the form of cash, gold bars or coins, or even jewelry.
The Pros to Gold Accumulation Plans include:
• It gives your savings the diversification out of dollars and other currencies and into gold.
• You gain the advantage of cost averaging into gold.
• You can buy gold in small amounts without paying high premiums.
A downside to Gold Accumulation Plans lies in the potential missing out on heavily buying gold on price pullbacks.
Gold Certificates in Gold Pool Accounts
If you believe in the banks and their integrity, there is an inexpensive way of investing in gold through gold pool accounts. These accounts basically provide you with gold certificates of ownership in an unallocated storage account. There is risk in this form of purchasing gold, which you have to weigh against the convenience and cheap price. Banks are allowed to use your gold as it suits their needs in these forms of accounts. The bank is essentially providing you with an IOU on your gold if they loan it out or sell it to increase their capital reserves. If the bank gets into trouble, and your gold is reduced to this form of debt to you by the bank, you would likely have a problem. Gold pool accounts do not fall under government insurance plans like the FDIC. Despite this potential danger, more than 90% of gold held by customers in banks resides in this type of arrangement. You can generally have your gold be delivered to you by requesting this from the bank or financial institution and exchanging your gold certificates. These certificates are your proof of ownership in the gold pool account.
The main advantages to this form of purchasing gold are:
• It is simple for you to set up with a variety of banks or financial institutions.
• You spend very little to buy and own the gold.
• This form of gold ownership is often allowed in retirement accounts.
The principal disadvantage to these accounts is that your gold is entirely in the hands of the bank holding it. There is no insurance against the bank failing.
Segregated Gold Accounts
For those of you who do not trust the good intentions of banks, there is another form of purchasing gold and holding it more securely with these institutions. Segregated accounts take away the hassle of having to keep the yellow metal safely at home. You are able to store your gold in the bank vaults. The bank is not allowed to touch your gold, as it is physically yours. The bank may or may not offer a private lockbox for your gold, and either way you will pay for this form of storage. Your gold will come with certificates of ownership that describe the fineness, weight, and type of holding as well. All the bank is doing is safeguarding your gold until you decide to sell it or have it delivered to you.
The main benefits to these arrangements are:
• Because the gold is being stored by a bank in a vault, it is often approved for gold retirement accounts.
• You do not have to be concerned about where your gold will be kept safe and how it will be transported to the bank as they will handle this.
The disadvantage centers on the fees that you will have to pay for this service. There will be annual storage and insurance charges as well as a handling fee for setting up the arrangement.