How to get Gold Exposure (In & Out of Crypto)
Today I wanted to discuss gold exposure. With the markets generally being so rubbish investors have been seeking out uncorrelated safe haven assets. While most simply move into USDT or USDC (Not UST, LOL), there does remain the old standby of gold.
Something that I have steadily been buying for my portfolio for a while now. So what are the different options when it comes to holding your wealth in gold, and what are the pros and cons?
1. Physical Gold – Self Custody
Physical gold self custody is the option that I tend to go for. There is just something about being able to hold the actual pieces of metal that I like. That being said, security of the assets becomes an important issue and requires investment in a vault.
You will also end up paying a premium on the gold you buy. Depending on what you buy this can be quite small though. For example my local gold dealer only charges about a couple percent premium to buy 1 ounce gold coins. If you want to buy smaller units like 1/10th ounce coins expect to pay a higher premium.
2. Physical Gold – Vault
Physical gold vault is a very popular option for many investors. You buy the gold. Some professional management company keeps it in their vault. They handle security and insurance all for a small fee.
Charges can be a set fee for a vault space, to set fee for size of deposit, to a yearly percentage charge of deposit. So there is a constant charge, but also a certain peace of mind. BUT you don’t have it, they do. And your access will be limited to when they allow you to see or take it.
3. Gold Stocks
Gold stocks… err well not stocks exactly, but different products that give you direct exposure to the spot price of gold like an ETF. You can buy gold via your local equity broker account.
Popular ETFs like GLD allow you to easily get access to gold with a few button clicks in a place where you already go shopping for stocks and other investments.
You will pay a management fee here though, GLD for example charges 0.4% annually.
4. Gold Backed Crypto
By now you might be thinking, WTF Lark, this is a crypto newsletter man. What gives? Why all the talk about shiny boomer coin. Well, now let’s talk about crypto gold.
There are two primary gold backed crypto assets. Paxos Gold and Tether Gold. My favorite of which is Paxos Gold simply because of the higher trading volume and wider adoption. These gold backed crypto coins are issued out with one ounce backing each crypto token kept in a vault somewhere.
Obviously you need to trust the providers of these crypto tokens to actually hold the gold. In the case of Tether Gold, we must remember that Tether company has often been less than transparent regarding the backing of their stablecoin. Paxos has not had this problem.
Paxos Gold can be bought on most major exchanges and often keeps a very close peg to the spot price of gold. There is no annual management fee so it is free to hold. It can also be redeemed for physical gold although the process is not very straight forward.
The biggest benefit of PAXG is that unlike all the other options you can actually earn some pretty juicy rates on it. For example Celsius is giving 5.5% on Paxos Gold. Which is INSANE!!! And while less common in defi, there still exist some opportunities.
What Option is Best for You?
Now all of that being said. I personally do not hold Paxos Gold, although I do think it is the best and offers good opportunities.
No, I prefer to and will continue to buy and hold physical gold. I already have so much invested into the crypto markets I really don’t need another asset linked to these markets. But your portfolio may not look like mine. For you this may end up being a useful tool.