Why Paper Gold Is Just as Good as Physical Gold

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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.

1 COMMENT

  1. It’s not “as good”, it is better. No premium, no storage, no delivery fees..Now it is not as good than equities but still better than physical gold.Rather than to put his money on physical gold, why wouldn’t someone contribute to Hilary’s campaign? The ROI is even better

      • Gold is an obsolete relic from a time before universal health care existed. When people had to hoard. Now we have limitless resources and “the rich” can simply pay for everything that everyone needs.

        I cannot believe that all of these insurers are dropping out of ACA, though…clearly they have shown their stripes as opponents of progress and the President It’s probably time to take Aetna and the others over for their claims that ObamaCare is a total failure. We can’t have that type of wrongthink standing in the way of history. It is the fucking current year, ok?

        • Obamacare may be a slight inconvenience for privileged middle class white Americans, but what conservatives fail to mention is that it has significantly increased coverage rates for minorities and women. Sounds like a worthwhile compromise to me.

    • Only crackpots want to use gold as a currency, but we need to move away from paper money too. First, we need a cashless society so that we can control illegal activities, such as corporate funding of the Republican Party through talk radio, etc. Then we need to move to a gift economy based on sharing resources equally.

    • Paper money has several uses but it is unaccountable and it’s flow is difficult to track making it a favorite of criminals around the World. Money needs to be digital under the authority of a Central Bank. Bitcoin is digital but also used by criminals and is out of control. The future will be a cashless society with sound planning by a Central Bank and accountable controls to eliminate criminal activity.

    • Typical heteronormative comment I would expect from a gold worshipper. This is why the world needs Hillary as President and Obama as Secretary General of the United Nations.