Jay Coulter, CFP®, CIMA®
BAR - GraniteShares Gold Trust
For centuries, gold has been considered a reliable store of value and an ideal hedge against inflation. Traditionally, investors have purchased physical gold to protect their wealth. However, the rise of Exchange-Traded Funds (ETFs) has changed the game. Gold ETFs offer investors a more convenient and cost-effective way to gain exposure to gold.
First, lets look at the benefits of Gold ETFs.
Ease of Access and Liquidity
One of the main advantages of gold ETFs is their ease of access. Investors can buy and sell shares of a gold ETF on a stock exchange just like any other stock, making it easy to enter or exit a position. Conversely, buying physical gold involves locating a trustworthy dealer, paying for shipping and insurance, and often paying a premium over the market price. Additionally, selling physical gold may require additional steps such as appraisal and verification of authenticity.
Gold ETFs also provide investors with greater liquidity. Since they trade on stock exchanges, gold ETFs can be bought or sold during market hours, allowing for instant transactions. On the other hand, selling physical gold may take longer, especially if it needs to be transported to a buyer or dealer.
Lower Costs and Expenses
Investing in a gold ETF can be more cost-effective than purchasing physical gold. When you buy physical gold, you typically pay a premium over the spot price, along with shipping and insurance costs. Furthermore, storing physical gold securely may require renting a safety deposit box or purchasing a home safe, both of which can be costly.
Gold ETFs, on the other hand, eliminate many of these additional expenses. While there is a management fee associated with gold ETFs, it is generally lower than the combined costs of buying, storing, and insuring physical gold. This means more of your investment goes towards the actual exposure to gold, potentially increasing your returns.
Gold ETFs offer investors an easy way to diversify their portfolios. By purchasing shares of a gold ETF, you can allocate a portion of your investments to gold without having to store or manage the physical asset. This can help reduce overall portfolio risk and provide a hedge against inflation or economic downturns.
Transparency and Tax Efficiency
Gold ETFs provide transparency in terms of pricing, as their value is based on the spot price of gold. This means that investors can easily track the performance of their investment. In contrast, physical gold can be difficult to value accurately, as it may be subject to premiums or discounts based on factors such as coin rarity, condition, or bullion form.
Every gold ETF is different. It is important to know the differences. Let's look at BAR from GraniteShares.
From their website:
Physically Backed: The Trust holds only LBMA1 good delivery bars stored in a vault domiciled in London, UK.
Transparent and Secured: The list of gold bars held by the Trust is published daily. The vault is audited twice a year. Lending of metal is not permitted, and the Trust cannot hold derivatives.
Cost Effective: BAR is among the lowest cost gold ETFs on the market.2
Easy to Access: BAR is listed on NYSE Arca and can be traded through a normal brokerage account.
ETF Website: graniteshares.com/institutional/us/en-us/etfs/bar
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