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Physical and Paper Assets: Gold and Silver vs. GLD and SLV


Are you looking to get in on gold and silver but don’t know how to go about it? Confused between physical possession and ETF holdings such as GLD and SLV? Here’s the scoop.

Nick AdamoBullion.Directory precious metals guest post 20 January, 2016
By Nick Adamo
President at Bullion Shark LLC

Physical Possession

If you are a hands on person, physical gold and silver bullion is the way to go. The process to buy silver and gold bullion is quite simple.

You can go to a local shop or order from an ecommerce website such as Bullion Shark. Once you lock in at a spot price for the metal you wish to purchase, you must pay a small premium over that price.

The premiums get more expensive as reputability of the product increases. For example the premium for an American Silver Eagle coin is higher than for a generic silver round. However, many private mints do produce high quality precious metal products that are comparable to some government issued ones.

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Now, what are some of the key benefits of physical delivery and possession?

The answer is simple. You have full protection against frozen assets, which is a situation that recently occurred in Argentina and Greece. When these two countries experienced major economic and governmental issues, they froze people’s bank accounts and only allowed minimal withdrawals.

However, if you physically have the metals in hand there is nothing a bank can do to freeze the asset. This allows you to take full control of your money if tough times were to arise.

The second benefit goes hand in hand with the first. If a paper currency becomes worthless, your gold and silver will still hold value. Owning physical gold and silver is a great way to hedge against inflation and other government issues that arise in many countries around the world.

Third, gold and silver are recognized world-wide as a means of trade. There is nowhere on the globe that you can go to that does not recognize the value of the precious metals. This helps make silver and gold considered “World Currencies.”

Lastly, there is something to be said about an investment that you can actually hold in your hand. Many investors prefer tangible investments over those that they look at on a piece of paper or on a computer monitor. Physical delivery also saves you managerial fees that you would have to pay with an investment in an ETF.

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GLD and SLV are the respective ETFs (exchange traded funds) of gold and silver. These are paper assets that follow the trends and indices of gold and silver. An investor can save on storage fees and premiums when investing in GLD or SLV over the physical metals.

The ETFs give the investor an opportunity to invest in the metals at a lower cost. For example, the stock price of GLD is at around $140.22 while an ounce of gold is around $1090 before premiums. Basically, you own shares of a stock that are based on the prices of either gold or silver and the prices fluctuate accordingly.

This seems like a very viable pathway to invest in the metals with much less money. Some issues have arisen with custodial trustworthiness and possible discrepancies in quality of the physical metals backing GLD. However, GLD and SLV are trustworthy investments that are quite popular, so there shouldn’t be much to worry about.

The best option seems to be diversification between the two.

An investment in both physical gold and silver and their respective ETFs allows an investor to hedge against inflation, protect his or her money and save on some of the storage and managerial fees that would come along with a one sided investment. There are pro’s and con’s to both avenues, making diversification the best option for a well-rounded portfolio.

Editors Note: There is a third way – which is owning allocated gold and silver, purchased online through a trading account and stored at a secure offshore facility. This allows for purchase at near spot price and provides the same liquidity and real-time access to price movement as any derivative. Examples of these service providers would be BullionVault, based in Europe and Bullion Capital in Australia. Advantages are lower price and immediate buy/sell, disadvantages are storage fees and out-of-hand nature (although delivery can be arranged at an additional fee plus taxes if applicable.)
Bullion.Directory or anyone involved with Bullion.Directory will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading in precious metals. Bullion.Directory advises you to always consult with a qualified and registered specialist advisor before investing in precious metals.

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