ETFs Vs. Physical Gold

In 2024, gold spot prices experienced a record-breaking rally, peaking at a new all-time high of $2,788.54 in October, before receding slightly in the post-election aftermath.

Interestingly enough, gold buying last year was driven primarily by central banks worldwide and individual investors in the Far East, with a lot of demand for gold as a safe haven asset spurred on by geopolitical conflict in Europe and the Middle East. Yet, Americans and western investors as a whole have not yet entered the market en masse as one would expect during a bull market.

Key elements are in place for gold spot prices to go even higher in 2025 and the coming years. But with the current pause in spot prices, there's a solid opportunity to buy gold below the all-time high before the next rally.

When the western retail investors finally come to this gold bull market, lured by bullish sentiment and the expectation of easy profits, the biggest opportunity in the market will already have passed. Don't be one of the ones left behind and kicking themselves.

Once the excitement kicks in, experts believe prices will rise past $3,000 an ounce... potentially to $4,000 an ounce or higher. In the last bull market, gold rose 650% from the lows. Historical patterns for gold indicate that the bull market will peak with gold at 2-3 times the recent lows.

We're not even close. To own gold in 2025 and reap the benefits of the ongoing bull market, you must act now.

There are four common ways investors typically purchase gold:

• Gold Jewelry: Although gold in the form of jewelry has been a popular way of storing and expressing wealth for several millennia, gold jewelry is not a very rewarding form of investment. The markup on gold jewelry makes it unlikely that you will be able to recoup your investment or make money on top of it later. Although, the last gold bull market (which coincided with the global recession) was a very favorable time for clients looking to sell gold family heirlooms at the height of their value. For many cultures gold is still seen as a store of wealth and customarily given as a gift for births, coming of age occasions, and weddings.
• Bullion: While it might not make sense to obtain physical gold in the form of jewelry as an investment, gold bullion – coins or bars— is easy to buy and sell, and once purchased, you don’t need to do anything but store it. It is a historically successful tangible asset that can help you maintain your wealth and add diversity to your portfolio.
• Mining Stocks: These tend to be high-risk investments, with the potential for higher profit. They are highly liquid, but highly unreliable. Anything that goes wrong with the mine could affect their value, like poor management, political upheaval, environmental disasters, currency fluctuation, or new taxation rules, which could blindside inexperienced investors. These assets are not recommended for investors without a strong familiarity and working knowledge of how mining stocks and companies work. Guidance from an asset manager would be recommended here.
• Gold ETFs: ETFs (Exchange Traded Funds) are also a higher risk way to buy gold for profit. Many investors look to buy gold in the form of an ETF because they are accustomed to buying stocks and bonds, so it seems like an easy way to obtain gold. However, it is not the same thing as directly owning gold; it is a fund that must be managed. For investors that don't understand the hidden fee structures at play, this could prove costly. Also, most do not allow direct gold distributions.

In a survey we conducted at the end of last year, a surprising number (35.2% of survey respondents) indicated that they preferred to own gold in non-physical form such as an ETF or mining stock. Given the interests of our typical client, we were shocked! Gold and the stock market may move in sync during “risk-on periods” when investors are bullish, but they tend to become inversely correlated in times of volatility, which is why physical gold is often revered as a hedge against risk in a diverse portfolio.

It is essential for investors to understand that you will not own any physical gold when investing in an ETF, even a gold ETF that tracks physical gold or is backed by gold cannot be redeemed for tangible metal.

There's still a place for both physical gold and non-physical gold in a portfolio, but ultimately, the purpose they serve in a diverse portfolio is NOT the same.

Investing in physical metal like bullion bars and coins provides unique benefits that cannot be replicated by any other asset class. Now more than ever, you cannot afford to miss out on gold and silver as a store of value in 2025. Give us a call 1-800-831-0007 to explore your options or visit www.assetstrategies.com to view availability and pricing on a wide range of bullion products.