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Gold (GC=F) has been hitting new highs. But are gold bars or gold coins really the best way to take advantage of those higher prices? State Street Global Advisors chief gold strategist George Milling-Stanley explains why you may want to hit pause before making a purchase.
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So those out there that are saying, okay, well I've got my shovel in my hand. I was just about to go dig a hole so that I can put the gold in the backyard. What are some things investors should know and consider before buying physical gold?
Um, look, I think, uh, the the problem with physical gold buying bars and coins from your friendly local coin dealer is that typically, uh, there's a fairly large markup over the value of the gold contained in the bars or coins when you buy, and frequently as much as 5%. And what the, what the coin dealers don't always tell you when you buy from them is that when you come to sell to take your profits or to take your losses, they're going to suffer a similar size haircut at the end. I don't like the equation that gold's got to go up 10% before I break even. The the narrow trading costs that ETFs can give you and the relatively low expense ratios that gold ETFs can give you, um, to me, they're a no-brainer as far as gold investments concerned.
And so maybe you've had this question asked to you because as recently as a few years back, Costco started offering gold bars. And of course, it's not, you know, uh, a gold bar that is, you know, like what we see in the movies. It's a smaller gold bar, it's got a design on it and everything. But what do you say to those who say, all right, well, this has offered me an entry point into an ounce of gold at this juncture? What is the strategy around that?
I think it's given gold a good deal of publicity. Um, I don't know how much Costco is selling. I don't know because I'm not a member of Costco. So I'm not even allowed to find out what the price is. I've no idea what markup they're charging, what premium they're charging. Are they charging the same kind of premium that a coin dealer might, like a 5% premium upfront? I have no idea about any of that. What it's done is it's given gold a good deal of publicity, and I think it has been a starting point for a number of people who, um, you know, the convenience of doing it at their grocery store makes a lot of sense to a lot of people. Um, but I don't think it's ever going to replace investment in ETFs or investments in bars and coins for that matter.