In all the years I've recommended owning precious metals, I've preferred people buy and store actual gold, silver, or platinum.
But this is not always possible or convenient for at least some
portion of people's money. That's why since the first gold exchange
traded fund (ETF) came out a few years ago, I spotlighted it.
Since then, both good and bad things have happened. Take the bad
first: There have been repeated rumors and warnings that the storage
facilities for the ETFs do not contain all the metals that are supposed
to be there. Second, these ETFs have been attacked by metals bulls for
being able to use their metals to short them, or loan them out.
The first ETF and the most popular is GLD. Aside from all the
questions raised above, this is clearly more of a "tracker" ETF than a
place where you can decide easily to buy and then claim physical gold.
In fact, you can take physical delivery of the gold in GLD, but only if
you hold at least 100,000 shares of it. Since each share of GLD is equal
to one-tenth of an ounce, this means you have to have the equivalent of
at least 10,000 ounces.
At current prices of about $1,400 per ounce, this would mean you'd
have to have $14 million worth of gold to take delivery of any actual
gold with GLD. I say if you've got that kind of money to put into gold,
there are far better and safer ways to go.
Up to now, even the best ETFs I've been able to find have not been
perfect. Two newer funds, SGOL and SIVR, are probably all right for gold
and silver. But people have pointed out that they never say exactly
where the metals are stored, just "London Bullion Market
Association-approved storage vaults." But I've heard bad rumors about
banks in this LBMA system. I have no way of knowing how serious these
rumors are, but I've been looking around for alternatives.
Another potential problem with these two ETFs is that they carry no
government guarantee in case they indeed turn out to be frauds.
There are the Canadian closed-end funds Central Fund of Canada, CEF
for a mix of gold and silver and GTU for just gold. These are honest,
easy to buy, and come in share prices that are small enough for the
average investor. The problem is that you often pay a premium for all
this. Buyers just have to hope that the premium they pay holds up when
they want to sell. But there is no guarantee of that.
Switzerland is divided into cantons, similar to the 50 U.S. states.
In fact, the far smaller nation has about half the number of cantons.
Nearly all of these cantons, or state governments, have long had a
The largest of these is the one for the canton of Zurich. It is
called the Zürcher Kantonalbank or ZKB. This bank, which few outside
Switzerland have ever heard of (they don't encourage foreign clients),
is now the third largest bank in Switzerland, behind UBS and Credit
Suisse. But very much unlike those other two, ZKB is charged by law to
operate in a very safe manner and not make the kind of crazy investments
in, for example, the credit default swaps that have brought down many
In fact, ZKB is wholly owned by the cantonal government of Zurich.
(Zurich is both a city and a canton.) This is a bank with a legal public
service mandate to fulfill. However, don't let the "public utility"
aspect of this bank fool you. Even though it employs nearly 5,000
people, it made a net income of CHF 750 million last year (US$700
The average Zuricher has an account there, and with over 100
outlets in the small canton, no one is very far from the bank. Needless
to say, this is one of the few triple-A-rated banks in the world given a
top rating by S&P, Fitch, and Moody's. One big reason for this
safety rating is that, unlike many other banks, under the law the canton
bears responsibility for all the bank's liabilities should ZKB's
resources ever prove inadequate.
You may see what I'm getting at here. ZKB offers ETFs in gold,
silver, platinum, or palladium that trade on the Swiss stock exchange.
You don't have to be a client of the bank to buy and sell them. They are
publicly traded ETFs.
Even better, they must be matched by actual physical storage. So
many bars of actual precious metals have been pouring into ZKB's vaults
that they have had to drastically expand their storage facilities.
Perhaps best of all, the ETFs do not carry any premium or discount
to the metals prices. They are worth what their weight of metals is.
The only downside for all these ETFs is the price. They are not
priced in one ounce shares, like for SIVR in silver, or in one-tenth
ounces as for SGOL for gold. Each share of the ZKB gold ETF will cost
you one ounce of gold (about US$1,400) and the silver ETF share is
priced at about US$2,750 right now (each share equals over 96 ounces of
So you might only have enough to buy a few shares. And then you
have to find a broker who is good enough to buy them. In theory, any
broker can buy these ETFs (my readers have told me that Scottrade is
able to buy them, and Schwab cannot). But there are good brokers and bad
brokers, just like there are in every profession.
There are many more details to this situation (like pricing
specifics, currency issues, and trustworthy specialty brokers who can
buy shares for you), but they are outside the scope of this essay. Just
know that these new funds strike me as excellent vehicles for the global
investor. Never again do I have to worry about recommending any ETFs in
gold, silver, or platinum.
Chris Weber is one of the best investors
we know – and definitely someone you should listen to. We've never seen
him be wrong about a major market call, ever. Right now, Chris is
recommending a simple way to hold gold (this was the investment that
started his multimillion-dollar fortune)... and a currency savings
account that's made him 1,700% over the years. For more on what Chris is
doing with his own money,