Why buy physical gold and not virtual gold?

Companies and banks can go bankrupt. Governments can change their contractual obligations. But when you buy physical gold it’s yours. You don’t take on covering risks and don’t depend on the performance of the issuing institution to guarantee the possession of your investment.

The usual statistics you might see would tell you that a gold account, a gold tracker or ETF which is following the gold price, are just as good as buying physical gold. None of these securities, however, will give you the same certainty as possessing your own, guaranteed, real-life gold.

Why is this? It’s to do with how bankruptcy is handled by the financial system, often leaving creditors at the back of a long line of people and institutions waiting for their money to be repaid.

Gold is listed on the balance sheet of the bank or company that has issued the financial product and the product’s structure is usually set up so that the issuer is entitled to lend out the gold to third parties or use it as collateral for other obligations. What’s more, gold lent out by the issuer to a borrowing party is often not subject to mandatory insurance.

Credit and solvency risks that come from this (in other words, the risk that the bank or company’s capital or guarantee capital is not enough to meet obligations in the event of a bankruptcy) are, in the end, held by the investor. That might mean you. In the event of bankruptcy, the owner of such a financial product (you) would not be able to demonstrate which specific gold is his or her property; the owner of the gold simply has to join the line of creditors that come forward during the bankruptcy. It could be a long wait.

That could never happen when you buy gold with GoldRepublic. When you buy physical gold with us, it’s yours. No matter what happens to the company in the future, regardless of whatever troubles it may go through, your gold investment is always secure.