What is paper gold made of?

On the other hand, paper gold is the term that applies to investments covered by exchange-traded funds or gold ETFs. If you're familiar with how mutual funds work, gold ETFs won't let you get carried away with your head. Basically, your fund buys a certain amount of gold and issues shares in that fund. When most people think of gold, they picture traditional gold ingots or coins.

Paper gold is an investment asset that represents a certain amount of gold. Exchange-traded funds (ETFs) are a common example of gold-backed investment that rises and falls with the price of gold. Gold on the ground is held in the form of jewelry (50.5 percent), private investments (18.7 percent), government reserves (17.4 percent) and various industrial applications (13.4 percent). If the derivatives market collapsed, the sharp rise in the price of their physical shares would more than offset the losses of speculative gold on paper.

Investments in paper gold only offer rewards in certain places, while physical gold is beneficial regardless of where you are going. Also involved should be gold mining stocks, which have been seriously depressed by the fall in the price of gold in four years. The brief exposure to gold that can be easily achieved through the synthetic market would be impossible to achieve in the physical market. The nuclear winter of the gold mining industry will have unavoidable effects in the medium and long term on the future supply of mines.

In economic recessions, when the stock market crashes, you may experience losses in value, even though physical gold may maintain its status. We believe that the incapacity of the gold mining industry is extremely optimistic for future gold prices. At first, it may seem irrelevant, since you usually can't exchange your stocks for gold with the ETF. In addition, paper gold allows you to invest in gold even if you don't have enough capital to buy an ounce of gold.

During the height of the gold standard, the United States used gold certificates as a convenient form of money. In addition, we must always remember diversification: in this case, it would involve keeping both physical gold for long-term investments and non-physical material (futures, options, ETFs, common accounts, certificates) for small and fast transactions. Thanks to the alchemy of financial engineering, gold has become an index, a political lever for transmitting information.