Funds and institutions, so-called professional investors, have poured enormous amounts of capital into gold over the last few years through ETFs, paper ownership in futures and options, and outright physical ownership in the form of bullion. Due to the constraints and logistical problems associated with outright ownership of large physical positions, the most significant funds and institutions with the most extensive commitments do most of their investing through gold ETFs. The chart on gold ETFs’ growth (shown below through 2024) offers ample evidence of growing institutional interest in gold ownership, including the record-breaking stockpiles surge during the COVID pandemic. “Investment demand,” says ETF Trends, “remains robust as an increasing number of institutional investors, sovereign wealth funds, and central banks seek gold as a potential source of return and diversification to traditional stock and bond portfolios.” Even with the decline in ETF holdings over the past two years, total ownership remains well above pre-pandemic levels.
The World Gold Council reports that “The past decade has seen a fundamental shift in central banks’ behavior with respect to gold, prompted by a reappraisal of its role and relevance after the 2008 financial crisis. Emerging market central banks have increased their official gold purchasing, while European banks have ceased selling, and the sector now represents a significant source of annual demand for gold.” Central Banks sold 7,853 tonnes of gold from 1987 to 2009. From 2011 through the third quarter of 2024, they bought over 5000 metric tonnes. Most of the media coverage on central bank involvement in the gold market concentrates on purchases. Still, the bigger story may very well be their withdrawal from the market as sellers. The nearly full stoppage in sales since 2009 is the result of public pressure from citizen groups and a realization among central bankers, since the 2008 crisis, that gold, now more than ever, is an important asset of last resort for national reserves.
Robert Rekasi, who heads up foreign exchange reserves management for the Central Bank of Hungary, explains in a Central Banking magazine interview why central banks take an interest in gold:
“It was a long-term national and economic policy strategy decision to increase the size of our gold holdings. The decision was driven by stability objectives; there were no investment considerations behind holding gold reserves. In normal circumstances, gold has a confidence-building feature, so it may play a stabilizing role and act as a major line of defense under extreme market conditions, in times of structural changes in the international financial system, or during deep geopolitical crises. The central bank also decided to repatriate overseas gold holdings. Holding precious metals within the country is consistent with international trends, enhances financial stability, and may strengthen market confidence in the Hungarian economy.”
Billionaires have been particularly vocal about their attachment to gold in recent years. That group at this writing includes Leon Copperman, Ray Dalio, Sam Zell, Jimmy Rogers, Thomas Kaplan, Mohammed El-Erian, John Paulson, Jeff Gundlach, David Einhorn, Frank Giustra, Naguib Sawiris, Jacob Rothschild, and Paul Tudor Jones – to name a few. Each has expressed concern about future economic uncertainty, central bank money printing policies, and the jeopardized role of the dollar as the world’s primary reserve currency. Each, in turn, has publicly advocated gold ownership as a means to hedging those concerns. One major hedge fund advocate of gold ownership, Ray Dalio (who also heads up the world’s largest hedge fund, Bridgewater Associates) spoke for a good many of his colleagues when he said succinctly: “There’s no sensible reason not to own gold…If you don’t own 10% – if you don’t have that – then there’s no sensible reason other than you don’t know history and you don’t know the economics of it.”
Bridgewater issued a full-report expanding on the firm’s thinking headlined Some Perspective on Gold in the New Paradigm. “We’ve had a few such periods of extraordinary stimulus over the past century,” it reads, “all in times of economic depression, conflict, or both – and in all of them, gold saw triple-digit rallies that dwarf its recent run-up…In the era of fiat money, even without the explicit need to devalue against gold, the effect of reflationary policies is to devalue paper currencies relative to store holds of wealth.”
Gold continues to reach all time highs in every major global currency – Indian rupee, Chinese yuan, British pound, European euro, and Japanese yen. In short, it does not make sense to flee the dollar in favor of some other currency when they are all, for the most part, depreciating against gold. The price of gold has appreciated over 30% in every major currency in 2024 alone.
There is a misconception, often perpetuated by the mainstream media, that individuals who own gold are somehow outside the mainstream. Nothing could be further from the truth. The people we have helped become gold owners are among those we rely upon most in our daily lives – our physicians and dentists, nurses and teachers, plumbers, carpenters, building contractors, business owners, attorneys, engineers, and university professors (to name a few.) In other words, gold ownership is pretty much a Main Street endeavor.
In a recent Bankrate survey, one in seven investors (14%) chose gold as the best place to park money they wouldn’t need for more than ten years – making it the fourth most popular choice. To put that number into perspective, 28% chose stocks (an asset garnering considerable attention of late). In comparison, 26% chose real estate (the old mainstay), and 4% chose bonds (often touted as gold’s chief competitor for safe-haven purposes). Another 18% said they would simply bank the money. Similarly, a 2020 Gallup poll found that 17% of American investors rated gold the best investment “regardless of gender, age, income or party ID. . .” The World Gold Council, we might add, recently reported global retail investment demand running at a record pace as investors adjusted their portfolios to weather the economic and financial ill-effects of the pandemic.
The incident is one of the most memorable of my career. Never before or since has the value of gold in preserving assets been made so abundantly clear to me. It was the mid-1970s. The United States was finally extricating itself from the conflict in South Vietnam. Thousands of South Vietnamese had fled their embattled homeland rather than face the vengeance of the rapidly advancing Communist forces.
A couple from South Vietnam who had been part of that exodus sat across from me in my Denver office. They had come to sell their gold. In broken English, the man told me the story of how he and his wife had escaped the fall of Saigon and certain reprisal by North Vietnamese troops. They got out with nothing more than a few personal belongings and the small cache of gold he now spread before me on my desk. His eyes widened as he explained why they were lucky to have survived those last fearful days of the South Vietnamese Republic. They had scrambled onto a fishing boat and had sailed into the South China Sea, where the U.S. Navy rescued them. These were Vietnamese “boat people,” survivors of the final chapter in the tragedy of Indochina. Now they were about to redeem their life savings in gold so that they could start a new business in the United States.
Their gold wrapped in rice paper was a type called Kim Thanh. These are the commonly traded units in Hong Kong and throughout the Far East. Kim Thanh weigh about 1.2 troy ounces, or a tael, as it is called in the Orient. They look like thick gold leaf rectangles 3 to 4 inches long, 11⁄2 to 2 inches wide, and a few millimeters deep. Kim Thanh are embossed with Oriental characters describing weight and purity. As a gesture to the Occident, they are stamped in the center with the words OR PUR, “pure gold.”
It wasn’t much gold—about 30 ounces—but it might as well have been a ton. The couple considered themselves very fortunate to have escaped with this small hoard of gold. They thanked me profusely for buying it. As we talked about Vietnam and their future in the United States, I couldn’t help but become caught up in their enthusiasm for the future. These resilient, hardworking, thrifty people now had a new lease on life. When they left my office that day, there was little doubt in my mind that they would be successful in their new life. It was rewarding to know that gold could do this for them. It was satisfying to know that I had helped them in this small way.
I kept those golden Kim Thanh for many years. They became something of a symbol for me—a reminder of the power and importance of gold. Today, when economic and financial problems have begun to signal deeper, more fundamental concerns for the United States, I still remember that Vietnamese couple and how important gold can be to a family’s future. Had the couple escaped with South Vietnamese paper money instead of gold, I could have done nothing for them. There was no exchange rate for the South Vietnamese currency because there was no longer a South Vietnam! Wisely, they had converted their savings to gold long before the helicopters lifted U.S. diplomats off the roof of the American Embassy in 1975.
Over the years, I have come to understand and appreciate the many important uses of gold—artistic, cultural, economic, and industrial. Gold is unsurpassed for jewelry and as a high-tech conductor of electricity. Gold has medical applications in dentistry and in treating diseases from arthritis to cancer. Gold plating is used in computers and in many other information-age technologies. In nanotechnology, it is used in a variety of cutting-edge medical diagnostic devices. As for its engineering uses, gold can be found in automobile anti-pollution devices, in jet engines, in architectural glass, and in a number of space applications. All of these pale, though, compared to gold’s ancient function as money, as an asset of last resort and an unequaled store of value.
Panics, manias, crashes, and collapses are as familiar to financial history as thunderstorms to placid summer afternoons. They tend to show up suddenly, wreak more than their fair share of havoc, and recede into the history books only after endless discussion as to their causes and cures. Whether brought on by popular delusion, unscrupulous market operators, misguided governments and/or central banks, or some random, unforeseen shock, black swan events are part and parcel of the human experience. They are just as permanent a fixture in our collective history as wars, pandemics, and natural disasters.
Almost two thousand years ago, Seneca, the Roman stoic philosopher, admonished his fellow citizens about their complacency: “You say: ‘I did not think it would happen.’ Do you think there is anything that will not happen when you know that it is possible to happen when you see that it has already happened?” These are not the thoughts of a pessimist but a realist. When it comes to times of financial stress, market breakdown, and general societal upheaval, the fact of the matter is that we do not know when the worst of the ill effects will take hold. Therefore it is impossible to prepare for it thoroughly. In the end, gold is not an investment at all, though we commonly refer to it as such, but a form of wealth insurance. The time to buy it is when you come to the realization that you need it.
‘Gold is the one asset that’s outside of the banking system that’s a form of wealth that can be liquefied immediately, within 24 hours — no exceptions to that, for whatever reason,” writes long-time gold market analyst John Hathaway (Sprott Asset Management) If you have some percentage of your wealth in effect insured by a position in physical metal, you really shouldn’t care about the day-to-day price fluctuations measured by one currency or another. What you know is you have a secure asset so that when some opportunity comes along — let’s say the S&Ps are trading at three times earnings, for whatever reason — and you want to back up the truck, gold would be a way to do that, and there’s probably nothing else that you can say that about. That’s the real reason to own gold. Too many investors think of it as a way to make money. I’m not saying that that’s completely wrong, but it really isn’t the fundamental reason for owning gold.”
(Please see Black Swans Yellow Gold for a critical in-depth review of gold’s historical record as a hedge against inflation, deflation, stagflation, disinflation, and hyperinflation.)
Answering the question, ‘Where to invest in gold?’ is a critical step in the process of becoming a successful gold and silver owner. A wrong step can be detrimental, if not devastating. First, narrow the field to only the most reputable companies. From there, make sure that the company you choose can meet your needs as an investor and that their philosophy, and associated product recommendations, match your own. Just as the prospector locates, grades, and evaluates a deposit all before mining a single ounce, an informed investor should perform comprehensive due diligence, including reputation ‘prospecting’, all before buying a single ounce. Keep in mind that you will be relying on it for liquidity at some point along the way, whichever firm you choose. Longevity and staying power are important attributes when choosing a gold firm. Ten years in business is good; fifteen years or more is even better.
At USAGOLD, we have always prided ourselves in educating first-time investors – taking the time and providing the means for would-be owners to learn about the investment and find their comfort level. This website launched in 1997 is testament to that commitment, and we invite you to browse the menu at the top of the page to see what we have to offer. We have thousands of clients – some stretching back to the 1970s – and a long history of efficiently and economically serving their investment needs. We invite you to become a client of the firm and discover the USAGOLD difference for yourself.
For more detail, including commentary on pitfalls to avoid, please see: How to choose a gold firm
This chart, more than any other, we feel, is central to understanding why gold continues to make sense as a long-term portfolio holding. When the United States abandoned the gold standard in 1971 and freed currencies to float against the dollar, the fiat money era began. We are still in that era today. This chart shows gold’s performance from the early 1900s to 1971 when gold backed the dollar and the era from 1971 to present when it did not. Gold has had its ups and downs since 1971, but clearly, over the long run, in the absence of an official gold standard, individual investors have been well-served by putting themselves on a private gold standard.
At USAGOLD, we have always emphasized gold’s long-term, safe-haven attributes. The mainstream media often characterize gold as a volatile investment – so volatile, they say, that ordinary investors should avoid it. On the contrary, this chart demonstrates gold’s long-term stability from year to year, along with its potential as a vehicle for long-term asset preservation. “The average annual price,” says Austria’s Incrementum AG, “shows the benefit of a regular accumulation plan as a long-term strategy.”
The first chart presented here shows that even when measured against the inflation rate as measured by the CPI, gold has consistently shown a positive real return - especially over the past 2+ decades. We hear much these days about the real rate of return on assets, or better put, the lack of a real return in low rate environments - the notion that the rate of return (interest rate paid) on a fixed income asset like a bond is less than the prevailing inflation rate, such that while investors may not lose 'principle', they instead steadily lose purchasing power over time. In a persistent low yield/high inflation environment, gold is receiving considerable attention among professional investors as a worthy alternative to bonds as a long term form of savings. Gold's performance over the past two decades, even in inflation adjusted terms, is especially notable as the last two decades also comprise the 'age of central bank infallibility', a time when markets have (blindly) placed their trust in the Federal Reserve and it's ability to contain inflation, maintain steady growth, and rescue us from crises of varying significance. This chart also reflects the most notable 'unintended consequence' of these policies - the steady decline in the spending power of the dollar, especially when measured in gold terms.
These charts also tell a compelling story in terms of the notion of 'all-time highs' in the price of gold itself. Much has been made of gold's recent run in this regard. However, when adjusted for inflation, even according to the CPI, gold has not yet eclipsed the high it reached in 1980. The Shadow Government Statistics inflation adjust gold price presented in the second chart tells an even more dramatic story. As most know, the metrics to determine the CPI have been repeatedly revised by the government over the years, prompting many to question just how accurate the government's current reported inflation rate actually is. To point, using the same metrics that the government used prior to 1980, the inflation adjusted all-time-high for gold reached in 1980 is a whopping $28,000 per ounce. Such a value offers an interesting perspective on the recent run up in gold prices, and just how far away we are from the relative value achieved during and after the crushing stagflation of the 1970's.
Please keep in mind that the long-term trends of both the rising national debt and price of gold are still in place today – nothing has changed fundamentally. As long as that is the case, we can assume gold will continue to attract capital as a long-term portfolio hedge just as it has done, to varying degrees, through the first 53 years of the fiat money system.
Added Note: With the near parabolic explosion in the debt following the pandemic, the ratio of public debt to the gold price (as indicated in the lower section of the graph) has actually declined, despite gold reaching new all time highs. Recent estimates suggest the US debit is expanding by $1 trillion roughly every 10 weeks, with no signs of slowing. Given the long established (and logical) correlation between positive advances in the gold price and the ongoing growth in public debt, gold's role as a compelling long term portfolio hedge is undeniable.
As you can see in these charts, since 1971, the dollar has remained functionally range bound in it's value vis-a-vis other major currencies, as measured by the U.S. Dollar Index. Meanwhile, gold has been in a sustained long-term uptrend. The direct inverse correlation between the U.S. dollar and gold in a day to day sense is a matter of much discussion, and still finds its way into regular (superficial) investment commentary. Investors should take note of the longer-term trend, which shows fluctuations in the dollar index both up and down have had little to no impact on the long term uptrend in gold, highlighting gold ownership as the ultimate currency hedge. Further clarity on this notion comes from recognizing the dollar index in no way reflects the actual spending power of the US dollar.
Picking up where the last paragraph left off: This long-term chart shows the direct correlation between the dollar’s debasement and appreciation in the gold price. Since 1971, the dollar has lost an astonishing nearly 86% of its purchasing power. Gold over the same period is up 6061%. Silver, as an aside, is up 1992%, the DJIA 4633%, the S&P 5488%. Even more jarring, since 1900, the dollar has lost over 99% of it's spending power compared to gold.
Modern gold bullion coins are typically the most popular choice for clients looking to gold as a short to mid-term investment who wish to take direct possession of their assets. They are also the preferred choice when purchasing gold for a self-directed IRA. The term ‘bullion coin’ refers to any items minted in the modern era that trade solely for their gold value and move directly in concert with the spot price of gold. The most common bullion coins for purchase are the American Eagle and Canadian Maple Leaf, but all bullion coins offer the same exposure price fluctuations in truth. Modern bullion coins are also available in fractional denominations.
Bullion bars are the preferred form of ownership for investors looking to secure more substantial overall positions, minimize investment spreads, and store their metal in a dedicated third-party depository. Through our long-standing relationships with our storage partners, investors can insure and safe-keep their holdings at highly competitive rates, have immediate liquidity access, the option for future delivery, and can even borrow against their holdings (though certain minimums apply). Silver bars are typically purchased in 100 and 1000 ounce sizes, and gold bars typically in kilo (32.15 oz) and 100-ounce sizes.
As a genre, historic U.S. coins uniquely can combine safety and insulation against the possibility of future government intervention with the opportunity for double-barrel profit potential during periods of premium expansion. The value of many common-date examples of these items is driven primarily by the underlying price of gold itself. But due to an inherently limited supply, the ‘premium’ (the added value above and beyond the gold content) can also expand during times of increased demand. During past flight-to-safety episodes, like the 2008 financial crisis or the Y2K scare, premiums for some historic, common-date U.S. gold skyrocketed to many multiples of current levels. All told, and given the historically lower premiums available at present, this genre represents one of the more compelling choices for asset preservation gold owners. It is specifically during times of economic uncertainty that owners can benefit from both the enhanced privacy and liquidity of these items, as well as their increased investment potential.
Historic fractional gold coins can be an ideal option for those seeking to combine the negotiable/divisible advantages of small-denomination gold coin ownership with added insulation against the risk of possible government intervention in the gold market. Frequently referred to as ‘Historic Bullion,’ their vast mintages and consistent availability often make these items the least expensive fractional gold coins available in the market. They simultaneously can offer buyers the ‘most gold for your money’ option in the pre-1933 genre while tracking the gold price directly. Often prices run equal to or below their modern equivalents on a per ounce basis – a truly, ‘two birds with one stone’ opportunity for the safe-haven investor. The most popular choices include British Sovereigns, Swiss 20 Franc, and Netherlands 10 Guilders, though the market is remarkably diverse, with numerous accessible and affordable options.
Historic collectible coins represent an intriguing and diverse genre of precious metals investing. Also referred to as ‘numismatics’, coins can range from broadly accessible options trading for modest premiums above their metal content to ultra high-end rarities valued entirely for their scarcity. With most historic coins, there are specific years of production where original mintages and survival rates are both very high. These are broadly referred to as ‘common dates’. Take the US $20 St. Gaudens for example. Coins minted in Philadelphia between 1922 and 1928, along with 1908 No Mottos, are 'common dates'. Whenever you purchase a St. Gaudens that has been independently graded by either PCGS or NGC and the date is not specified, it will almost always be one of those dates. Coins of this type are highly accessible and should trade at very transparent and reasonable premiums to the spot gold price, even in higher grades. Past 'common dates', in a sort of 'step up fashion', there are often opportunities in collectible coins to add considerable scarcity without significant added premiums. Take the St. Gaudens series specifically - roughly 25 different dates and mint marks can be acquired for very reasonable premiums to common dated coins, despite the total known populations of those coins being significantly lower. Very similar results can be achieved with $20 Liberties, Morgan and Peace Silver Dollars, as well as small denomination US gold. Many gold owners build impressive heirloom positions comprising date runs, mint mark sets, and type sets all without paying significant premiums above common date/historic bullion type alternatives.
A Word of Caution: Investors would be wise to be on guard when it comes to items presented as 'modern collectibles' - proof coins, commemoratives, graded bullion coins, bullion coins sold by date, mint rarities, and private mint limited run issues. These items are very often offered at exorbitantly high premiums under the guise of 'rarity', but typically serve the interests of the dealers selling them, not you as an investor. These items are most typically recommended as inclusions in self-directed IRAs.
Gold and silver ETF’s, like GLD, are a viable vehicle for those looking to trade in and out of gold regularly and to speculate on short-term trends in the gold price itself. That said, anyone holding shares of the ETF as a long-term store of value, asset preservation tool, or foundational hedge would be wise to review the prospectus of the ETF in which they are investing. Take the GLD prospectus (specifically pages 9-12), for example. Salient points include:
GLD shares owners cannot take physical delivery of their position unless they own 10,000 ounces of gold or more – a roughly $20 million position at today’s prices.
The physical metal owned by the ETF to back its shares is subject to sub-custodial relationships, which, as the prospectus states: “Because neither the Trustee nor the Custodian oversees or monitors the activities of sub-custodians who may temporarily hold the Trust’s gold bars until transported to the Custodian’s London vault, failure by the sub-custodians to exercise due care in the safekeeping of the Trust’s gold bars could result in a loss to the Trust.”
The fund is exposed to counter-party risk associated with the fund’s custodian, HSBC: “Gold held in the Trust’s unallocated gold account and any Authorized Participant’s unallocated gold account will not be segregated from the Custodian’s assets. If the Custodian becomes insolvent, its assets may not be adequate to satisfy a claim by the Trust or any Authorized Participant. In addition, in the event of the Custodian’s insolvency, there may be a delay and costs incurred in identifying the gold bars held in the Trust’s allocated gold account.”
To boot, the fund’s annual maintenance cost is 0.4%, which is more on an annual basis than the cost of insured storage offered by USAGOLD.
A couple of additional relevant quotes on the safety of Gold ETF’s…
“ETFs are a financial product that have counter-party risk. Counter-party risk is present when there’s a possibility the other party in an agreement will default or fail to live up to their obligations. . .[O]ne of gold’s primary benefits is being the only financial asset that is not simultaneously somebody else’s liability. Therefore, these ETFs are a poor substitute.” – Mauldin Economics’ Olivier Garret
“While ETFs such as GLD are backed by physical gold, the process for an individual investor to acquire the actual bullion isn’t as simple as selling shares of the ETF. What happens if physical gold is in short supply and everyone wants to take delivery of their paper gold? They can’t squeeze blood out of a stone.” – Jeffrey Gundlach
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