Some investors in gold prefer to trade in gold certificates rather than holding physical gold itself. They offer a way to own a holding in gold, without the need for accepting delivery of gold bars, or coins, and the cost of storing that gold. This, of course, also negates the need to insure against theft. They are very liquid securities, and so can be bought and sold easily – very often through the banks and financial institutions that issue them.
The downside of investing in gold certificates is that, at the end of the day, they are nothing more than pieces of paper. Although the holder has the ownership right of the gold applicable under the certificate, he doesn’t actually own the physical gold itself. Just like a shareholder in a public company, should the underlying institution cease trading the gold certificate holder has very little to no recourse for compensation.
Perhaps this is why the most popular gold certificate amongst investors is the Perth Mint Gold Certificate, the only gold certificate that is guaranteed by a government. Investors hold their certificates with rights to gold, and may select allocated, unallocated, or pooled accounts. The Perth Mint allows different types of orders in the certificates, such as stop loss and limit orders, and proceeds are settled within two days.
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