Posts tagged Gold

There are several ETFs now that claim to hold gold overseas in places like Switzerland (or even closer in Canada). They are marketed as a way to get geographic diversification for gold holdings. There is even a spin that you can show up and pickup your gold. These are all marketing claims. Let’s talk about them.

Street Name

When you buy a stock/ETF it is held in the street name (another definition) of the broker, not your name. The idea that you’re going to show up in Zürich or Alberta and pick up your gold from an ETF before hitting the slopes is pure marketing. The chances that the fund operator is going to know it’s you that owns the shares is almost zero. The shares are almost all owned by brokerages in their name. The brokerage then keeps track in their own records who holds what. You’d have to work with your broker to get actual stock certificates issued in your name which is going to be a pain. Then there is the issue about showing up and proving your identity, etc.

The idea that you’re going to show up in Zürich or Alberta and pick up your gold from an ETF before hitting the slopes is pure marketing.

Where the Money is Really Kept

Also many people are not aware that funds that hold money in US dollars likely have those assets in US banks/brokerages even if based in another country. So the liquid cash assets are not outside of the US. The gold may be, but that’s it! There are plenty of ways the US govt. could put pressure on these ETFs to comply with repatriation orders, etc. You are not going to be protected from this kind of threat if that is what you think (not that it is likely anyway).

What Gold ETF is Best?

The ETF from the Canton Bank of Zürich (Zürcher Kantonalbak) under the ticker ZGLD is probably the “best” of the bunch. This is an ETF from a very well established Swiss bank with solid backing by the Canton of Zürich. It is operated under strict Swiss banking laws.

Now for the bad news…

This ETF is not available for purchase by Americans. You could jump through some hoops to get it on a foreign exchange, but this is a bad idea because of potential tax and other issues not being registered here. So even if you can buy it, you should be aware that it is strongly discouraged.

Now, if you are a non-US person in a foreign country then by all means buy ZGLD. It is probably the best of the Gold ETFs out there.

ETFs Have Similar Risks

Many of these ETFs have similar risks. They almost always use the same vaults, etc. to hold their gold in places like Switzerland, just the name is different. The Canadian ETFs (GTU and CEF) are exceptions as they hold it in Canada. But again you get that street name issue again so good luck proving you own it if your brokerage has a problem.

Gold ETFs are convenient and good for a portion of your gold holdings if you want easier rebalancing. But if you want to hold gold overseas you’re going to need to do something more robust to get the higher safety. This is just the reality of the situation. These overseas storage ETFs may be marginally better than the big guys of StateStreet GLD or iShares IAU, but ETFs are all going to have similar risks no matter what the marketing department has to say on the matter.

Where Can I Find Out More?

Glad you asked! Did I mention that overseas gold storage options for all persons (including Americans) will be covered in the upcoming book? Accounts from a minimum of a single gold coin in allocated storage up to millions in value will have options. What a coincidence! Sign up for the book here and we’ll discuss the options available that will be a more robust way to handle overseas gold allocations than using an ETF:

Permanent Portfolio Book Announcement List