Gold Vs. Gold ETF

This post is regarded to a question from one of my loyal readers. He asks what the advantages/disadvantages to owning physical gold to a gold ETF.

I would like to start the answer to this question with a statment. The government does NOT want you to own gold/silver. They realize that it is a key indicator of the government screwing you, the average citizen and consumer, over. The government is very good at keeping the shifty business on the down low. The skew curtain statistics and spin others. An example of this is the CPI. I have previously mentioned that under the Clinton administration they decided to remove food and energy costs from the CPI. Those are two of the highest inflatonary goods in our economy. True inflation is not judged by the price of goods, but instead it is measured by the amount of currency in circulation. So what does this have to do with gold and silver? Gold does not lie and is a true judge of when the government is printing "funny money" and inflating its currency to the eventual outcome of nothing. Trust me I'm getting at something here. So how does the government try to influence the investor to stay away from precious metals. They tax precious metals profits approximately 30%. "Regular" stocks profits are only taxed 10%. The advantage of owning physical gold and silver as opposed to an ETF is that the government doesn't know about it. They can't get their filthy hands on your money. You can go to local hole in the wall coin/bullion shops and pay cash and never have your name listed on anything. I personally buy from a supplier in Colorado who has the same policy. He keeps ZERO records of personal transactions. In summary, owning physical metals is more low key to put it bluntly.

I would like to talk about another advantage of owning the physical metals. The government can't tamper with it. Well, to an extent. The federal reserve likes to sell of their gold reserves in an attempt to artificially keep the price of gold low. They do this for the previous above mentioned reasons of keeping their shady business on the down low.

A friend of mind with a slightly more pessimistic view on the situation had some interesting things to say on the topic. He believes there is a sort of "day of reckoning" coming. The equivilant of Black Friday I guess. I would like to use a quote of his and pardon the language. He stated, "When shit hits the fan, gold and silver is gonna be your midnight crossing the border money. You won't be able to take a piece of paper that says you own gold." This brings me to another brief point. Gold and silver are the only thing that you can take anywhere in the world and trade it for goods or services.

I guess what I'm saying is physical is the way to go. I would like to touch briefly on an indirect positive effect regarding the gold ETF. The ETF has allowed the average investor who doesn't want to hold physical metals to diversify their investments. This has created a large increase in demand for the yellow metal. Streettracks gold trust-GLD is the most popular gold ETF. They own 448.76 tonnes of gold. That's 14,428,096 ounces of gold worth $9,045,781,137.46 (U.S. dollars.) So you can see why the ETF has been good for the demand for gold.

Quick Note-I recently liquified my account and I am currently in the process of switching over to Charles Shwabb. This will take a week or so, but I've got some GREAT stock picks for 2007. Some that I guarantee, minus some mining disaster, will double or even triple in the next 12 months. I also have gotten rid of my gold ETF :) I will keep you posted with my 2007 picks.