Is the Gold ETF a Better Deal Than Holding the Metal?

There are a number of ways to invest in gold, and it’s worth considering what works best for you: holding the metal physically or holding it in an exchange traded fund (ETF).

Some facts about owning physical gold:

• You have to know where to store it, writes Julian Murdoch for Hard Assets Investor.
  
• The gold bars are usually held in big vaults with ownership shifting hands from one buyer to another; most gold never leaves the vaults.
  
• The cheapest custody fee for an online gold exchange stands at around 0.12 % per year.
• When you purchase the commodity, you need to deal with spreads and commissions.
  
• Retail investors face an average spread of 0.25% for pooled gold (when you’re buying an allocated portion of a bar).

In sum, to purchase physical gold, your cost is the width of the spread, plus commissions buying and selling, as well as a custody fee.

Purchasing a gold ETF such as SPDR Gold Shares (GLD) is as easy as clicking a mouse. You pay an expense ratio of 0.4% per year and you won’t need to worry about storage costs of the physical gold. But you will have to pay a commission to buy/sell shares and an average spread of 11 cents per share.

GLD and other gold-holding ETFs are a great deal and save investors hassle and worry. GLD is also priced competitively to make it an appealing option for investors who’d rather own an ETF rather than deal with purchasing and storing physical gold.

• SPDR Gold Shares (GLD): up 8% year-to-date

For more information on gold, visit our gold category.

Max Chen contributed to this article.