Paper vs. Physical Gold: Are ETF’s That Different from Bullion?

wall street, stock exchange, ETFQ: What’s the difference between ETFs and physical gold?

A: Paper gold is essentially a mutual fund for gold that was set up by Wall Street in order for that industry to make money by selling gold without losing control of their clients’ money. In theory, paper gold is supposed to match the spot price of physical gold, and the fund should theoretically have the same amount of actual physical gold in reserves backing up the paper gold shares you’re buying. This has never been proven or validated to be the truth.

As gold and silver became more popular in the early 2000s, the financial industry saw more and more money being pulled out of their control and invested into gold and silver. Wall Street’s answer to this problem was to create pretend gold and silver, a product they could sell and represent as precious metals while maintaining their ability to charge commissions and management fees.

Theoretically, you own rights to the gold. But if you look at the actual documentation for the ETFs, you’ll find none of them allow you to exchange your “shares” for actual physical gold if you wanted it. More importantly, none of them guarantee they have actual physical gold corresponding to the shares they’re selling!

Basically, this means the whole paper gold and silver investment is a scam. It doesn’t make any sense to hold any of your wealth in paper gold or paper silver. The only real way for an investor to hedge in gold and silver over the long term is to own real physical gold and silver. Remember, if you can’t touch it, you don’t own it!