As I’ve stated in one of my previous articles, I believe gold hoarding is a selfish and economically destructive act. However, the fact is many professional traders still regularly reap profits by trading in and out of the gold market. And by far the most popular way to trade gold is to use derivatives such as futures and options. However, a large number of golbugs are spreading the idea that gold derivatives are somehow less safe to own than the physical metal, which is simply not true.
Goldbug conspiracy theorists have long argued that there is disconnect between the physical and derivative markets for gold, and that one day everyone will dump their derivatives and demand physical gold, making gold hoarders rich beyond their wildest dreams. But there is a problem with this theory: most traders and investors, both institutional and retail, have no interest in ever taking possession of the physical metal. These investors are only seeking profits in real money, such as dollars and euros. Handling the physical metal is both expensive and pointless. The metal would never be used by investors, it would simply be stored and transported.
The inconvenient truth for goldbugs is that apart from a tiny group of mostly insignificant radicals, nobody actually wants physical gold for anything other than jewellery. The vast majority of gold trading will always be in the derivatives markets, and these markets will continue to be the primary drivers of the gold price. Gold hoarders are mistaken to think that owning the physical metal offers any advantage over owning an ETF or a futures contract. The only thing owning the physical metal achieves is raising the cost and inconvenience of gold investing.