GO
Loading...

Owning Gold Is Simple If You Do This: Pro

Will Rhind, ETF Securities US LLC
Thursday, 28 Mar 2013 | 2:16 PM ET
Kerem Uzel | Bloomberg | Getty Images

In the long history of gold, dating back at least 6,000 years to the first trinkets in the Transylvanian Alps, owning gold meant actually having it in hand. Gold adorned a beloved's neck or was stored in a strongbox. The point being – the owner could get at it – behold its luminous glow, and hold the weight of the gold.

That has changed. More than ever before, there are new ways to own gold.

(Read More: Gold Is Trendless, Don't Expect A Lot From It: Bob Doll )

Market Pro: What Q2 Holds for Gold
Thursday, 28 Mar 2013 | 12:30 PM ET
The Futures Now team discusses what the markets have in store for the precious metal.

One novel way to own gold turns 10 years old this week: The world's first physical gold Exchange Traded Product (ETP) was introduced in Australia paving the way for the introduction of precious metals ETFs. These funds have changed how we own gold today, emerging after several decades of, at times, tumultuous change in people's age-old relationship to gold – especially in the U.S.

There's another anniversary coming up, too. Eighty years ago next week, President Roosevelt proclaimed it illegal for Americans to own any significant quantity of gold. Executive Order 6102, issued on April 5, 1933, reads: "I, Franklin D. Roosevelt, President of the United States of America… hereby prohibit the hoarding of gold coin, gold bullion, and gold certificates."

Before 1933, gold certificates could easily be exchanged for the metal itself. When the Depression descended, though, the U.S. banking system began to destabilize due to people hoarding gold. President Roosevelt's order made exemptions for coin collectors, dentists, artists, and jewelers, and average citizens could own up to $100 in gold coins. Still, the message was clear: sell your gold back to Uncle Sam or it will be confiscated. Fines and jail time were threatened for non-cooperators. And, in 1934, The Gold Reserve Act became law.

(Read More: Gold Slips as Calm in Cyprus Saps Interest)

It would be 30 years, in 1964, before citizens could own gold certificates again. Then, in 1971, President Nixon took the U.S. dollar off the gold standard, and in 1974 President Ford and an act of Congress again permitted gold ownership. In 1984, the U.S. Mint introduced its first gold coin since before 1933 – an Olympic gold coin, a de facto sanction for gold coin investing.

But there are costs to owning gold. A top-of-the-line safe could cost $1,200. But even the best safe can be hauled away by a thief. So experts recommend safes be built into the floor and hidden.

A safety deposit box at a bank? Assume $100-$300 per year. And two points of caution: safety deposit boxes are not covered by the Federal Deposit Insurance Corporation. An estimated $15 million in valuables stored in safety deposit boxes "go missing" each year, according to a 2012 Wall Street Journal article, due to factors such as incompetence during bank mergers.

During our recent "Great Recession" – Americans have once again hoarded gold. As a result, a whole new "cottage industry" of vault companies has sprung up to store your gold, along with a great many enterprises offering to buy your gold.

What about owning gold without the cost of actually having it on hand?

(Related: Will Gold End the Second Quarter Higher or Lower?)

Over the years, there were various attempts to create publicly traded gold funds. None caught on until, on March 28, 2003, 10 years ago this week, my firm launched the firstexchange-traded fund (ETF) for gold bullion on the Australian Securities Exchange. Unlike a fund that simply tracked an index, this fund was "physically backed," meaning the fund purchased and stored gold bullion. Since then, similar products were launched on 31 exchanges throughout the world and have seen assets under management reach $147 billion.

So, apologies, I've declared my bias, but I also believe there are truly objective reasons to own ETFs versus coins and bars:

•Security – ETF Securities gold fund is physically backed with the bullion stored in vaults in London, Zurich, and Singapore. Recent events in Cyprus underscore the advantage of owning bullion that is vaulted in a secure location.

•Cost – Commissions are low to own gold ETFs. In fact, at least one nationwide brokerage is now offering ETFs at zero commission.

•Liquidity and Transparency – You can buy and sell precious metals ETFs in the open market easily. And you know the price reflects the spot market price of the underlying metal.

•Fractional Ownership – At this writing, an ounce of gold is $1,600. Want to start out smaller? ETFs enable you to do that.

A broker who started his or her career in 2003 will never have worked in a world without precious metals ETFs, but today we take them for granted. After decades of gold ownership falling in and out of favor with the U.S. government, there is a more cost-efficient and simpler way to own gold – to hold it, you no longer need to behold it. Reason enough to celebrate this week.

(Read More: Gold Slips as Calm in Cyprus Saps Interest)

Bio and Disclosure: Based in New York, Wil lRhind is the Managing Director of U.S. Operations for ETF Securities, which introduced the first physically backed gold exchange-traded fund in 2003. Today, physically backed ETFs are available in the U.S.: for gold (SGOL and AGOL), silver (SIVR), platinum (PPLT), palladium (PALL) and a mixed basket of precious metals (GLTR and WITE).

  Price   Change %Change
GOLD
---

Featured