Gold has a long-standing reputation as a safe haven asset that investors turn to in times of economic and geopolitical distress. Historically, those looking to access the precious metal would purchase it in coin or bar form from precious metals dealers.
In September 2023, Costco, the popular membership warehouse company, began offering gold bars for purchase to its members online. The gold bars ended up being an immediate hit with its members, with CNBC reporting that “Costco Chief Financial Officer Richard Galanti said Costco sold more than $100 million in gold bars during its most recent quarter.”
Despite Costco’s initial success in its venture, experts say purchasing the precious metal in physical form poses several potential issues for investors. As a result, ETFs may be a better choice. This would be especially true for advisors and investors looking to gain access to the asset class to take advantage of its predicted price appreciation in 2024.
See More: “2 Gold Miner Funds to Consider for 2024“
The Downsides to Costco’s Gold Bars
Debbie Carlson reported in the Wall Street Journal, “Costco buyers may be getting good deals on their purchases at the store, but they have other costs to consider once they receive their goods. There are the potential costs to safely and securely store the gold. And if and when they want to sell it, they need to do their homework to find a gold dealer who will negotiate a fair price since Costco isn’t a dealer and doesn’t allow gold-bar returns.”
She cites the storage costs and dealer discounts as contributing factors regarding why many investors typically tend to turn to gold ETFs.
In addition, in a recent Investopedia article, the author shared that State Street Global Advisors’ George Milling Stanley believes that, “Investors will make out better buying a gold Exchange-Traded Fund (ETF), a financial asset that tracks the price of gold without the friction involved in having an actual piece of metal in your possession.”
See More: “Gold’s 2023 Performance and Looking Ahead to 2024“
How to Gain ETF Access to Gold
One physical gold ETF for investors to consider is the VanEck Merk Gold Trust (OUNZ). The fund tracks the LBMA Gold Price PM Index, like several other physical gold ETFs on the market. However, OUNZ separates itself from other physical gold ETFs as the only fund of its kind that allows shareholders to exchange their shares for actual physical gold. In this way, OUNZ provides investors with the best of both worlds.
Investors looking to gain access to this asset class via more indirect means can look to funds that hold gold mining companies, such as the VanEck Gold Miners ETF (GDX) and the VanEck Junior Gold Miners ETF (GDXJ). These equity funds are global in scope, with considerable assets and liquidity.
Ultimately, with expensive storage and dealer costs associated with owning physical gold, like CostCo’s gold bar, gold ETFs may offer the better option to investors looking to take advantage of all that this asset class has to offer.
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Originally published on ETFTrends.com on January 10, 2024.
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