Precious metal ETF’s and certificates provide another avenue for investors to get involved in precious metals. They are somewhat more of a gamble, as you do not own the physical metal, but merely a paper asset that is backed by gold or silver.
For most, a gold ETF or Certificate seems to be a safer and cheaper way in to the precious metal market. It’s cheaper due to the fact that there are no storage fees attached to the ETF or certificate. This can save you money, but it’s also a reminder that you do not own any physical gold.
ETF’s and Certificates are great, as long as none of them ever call for delivery of the gold or silver that backs them. If this happens and you own ETF’s or Certificates, you better hope that it’s the firm you have your investment with that is calling the metal home. If not, this will cause a panic and trigger the rest of the ETF and certificate owners out there to call their metal home as well, and then the truth will be revealed. There is not enough metal out there to cover all the ETF’s and certificates that have been issued, and it is quite possible that you could be holding a worthless piece of paper in this situation.
If you are using ETF’s and certificates as an investment tool for precious metals, be sure you are well versed in the actual value, and what exactly must be done to acquire the metal that backs your investment.