Once the objective of the client is known, it should be very easy to identify the most suitable product and form of custody for their needs.
However, this requires that the merchant is the right one and that he cares about the interests of the client. To verify that this is the case, here are some recommendations:
Go to a dealer who has been recommended to you by a trusted source .
Do your research beforehand to make sure they have a good reputation, years of experience, and care about customers.
Compare the price and conditions in at least three different establishments before deciding, just like you would with any other product.
Be wary if the merchant is urging you to make a purchase decision. It is he who must adapt to his rhythm, and not the other way around.
Insisting on the first recommendation, be wary if the merchant does not assure you that you will repurchase the product.
Buy Shares Of Mining Companies
As Dykewitz explains in his article, in his 25 years of experience he has frequently come across people who, when asked if they owned gold, responded that they owned shares in mining companies and gold funds.
“Keep in mind that these assets can be wonderful investments , but it does not mean, in any way, that you own gold , ” says the expert.
Although both options provide exposure to gold, the difference is important:
“When you buy gold, it becomes your possession. It is a raw material that belongs to you. If the price goes up or down, the value of your gold is immediately affected by that swing. However, when you buy shares in a gold mining company, you own a stake in a company that is in the business of making a profit mining gold and sharing those profits – to a certain extent – with investors. But just because the price of gold goes up doesn’t mean the company’s profits go up, ” Dykewitz explains.
Therefore, buying mining shares can be a good investment, but it is not gold.
Investing in ETFs believing that it is physical gold
In the same way that mining company stocks are not the same as physical gold, neither are ETFs. Physical gold is a raw material whose price fluctuations are immediately transferred to those who own it.
Instead , ETFs are nothing more than exchange-traded funds , run by a manager. The job of this manager is to reconcile investor demand with the products that the fund has. A task in which problems such as physical restrictions or logistical needs arise.
In addition, they work with a system of leverage, which means that not all the ounces of gold represented in the shares of the ETF are actually backed by gold . In fact, units that exceed the total gold that the fund owns are often sold, so participants would have problems if they request more gold than actually exists.
Being Afraid Of The Government Confiscating It
This is a concern that has been the subject of debate in the United States of late and requires a brief explanation. In 1933, US President Franklin D. Roosevelt made it illegal for citizens to possess physical gold . The metal was confiscated (in exchange for the payment of its price) and its possession was prohibited until 1975.
The only formula that allowed American citizens to keep some gold in their hands was the possession of collector coins with numismatic value. This argument has subsequently been used by numismatic dealers to ensure that their product was safer than coins or bullion , since it could not be confiscated.
But that hypothesis does not arise right now. What happened in 1933 is that the government needed to devalue the dollar, but since it was directly convertible into gold, and the metal had an officially set price, they needed to get hold of the gold in order to change its price.
This dollar/gold convertibility ended in 1971, so a confiscation of the metal in private hands would be unthinkable right now.