While most investors turn to ETFs and digital trading to invest in gold, the popularity of physical gold bars is increasing. Maleeha Bengali, CEO of MB Commodities Capital and contributor to The Pro Street discussed the potential advantages of owning physical gold as a long-term investment.
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Full video transcript below:
CONWAY GITTENS: In the United States we have a large chain called Costco. And they are selling gold bars. So what do you think about consumers going to a retail outlet and purchasing gold bars?
MEEHA BENGALI: Physical gold is one of the best ways to invest in gold because ETFs have another problem. You could be long gold, for example, or another ETF that is not backed by physical gold. And there could be a situation like we saw in 2008: a systemic crisis occurs. These ETFs fall even as the price of gold rises. So imagine you're sitting in an ETF and you say, wait, I'm not making money. The physical always has value. So retail investors can trade the ETFs, but make sure you have some physical ones stored in the vault somewhere.
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CONWAY GITTENS: But it is difficult to unload a gold bar.
MEEHA BENGALI: Yes, that's true. It's a very good point. But in the past, people kept it in the mattress or whatever. But that's why Costco bullion is selling out, because there's also a bit of a premium even in silver. So I can't say you put 100% of the wealth into that. It's hard to do that, but get exposure to ETFs, but also hold some gold bars.
CONWAY GITTENS: So for you, going to Costco is no laughing matter. It's real.
MEEHA BENGALI: We have physical gold and in London we have it too. There is a small premium on that, but that never loses value against the price of gold. ETFs can go offline because there is a trade between financials and swaps. And most people don't realize the risk. And if they are taking a risk, if the counterparty defaults, they could surely lose out. That's a very slim possibility, right? But there is an inherent risk to think about. So physical is always the best way to operate.
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