GLD & SLV vs. Physical PMs

By Edwardelinski on Thu, Dec 26, 2013 - 1:45pm

First time poster with question and I apologize if this has been discussed previously:  Am I better off selling my GLD and SLV and taking the tax loss for 2013 and then buying physical gold?  I am in this for the long-haul but I am concerned about the continued reduction in levels of gold and silver the the ETFs have.  Your guidance is appreciated.   


Grover's picture
Status: Platinum Member (Offline)
Joined: Feb 16 2011
Posts: 913
Decisions, decisions


You have to determine what is best for you. You have the most to gain and the most to lose from your decision. "Best" has so many possible nuances that it would be difficult to determine what would be absolutely "best" for your situation.

If I were to decide whether or not to sell GLD or SLV and purchase physical gold, it would be easy. I have never owned either of these ETFs because of their shortcomings. In essence, you have the accounting balance that says "so much gold/silver is in your name," but you can only settle in cash. As a result, you don't really own anything other than an illusion of a promise. Of course, it is liquid with low premiums. It tracks the price profile of the underlying metal.

What is important to you - to have a monetary asset that is liquid or a hunk of metal that you hold in your hand (and must protect from thieves?) If you are only worried about the dollar value, the ETF is easier to store and sell. You should probably stay with the ETF. If you are selling these ETFs for physical, you must think that public perception of the price will reverse in the future. If so, does it really matter which form you hold? If you think everything will collapse, it probably doesn't matter which form you hold, although physical does have somewhat of an advantage. If you plan to offset gains in other stocks with losses here, could you buy a different ETF and avoid the time restriction on buying the same security?

These are some of the questions that I would consider before making a decision. There are likely to be many more. If you didn't think the underlying metals would make a rebound soon, you wouldn't ask the question. As there isn't any failsafe way to own PMs, you need to determine what solution(s) maximize the aspects that are most important to you and minimize the shortcomings.


joesxm2011's picture
Status: Gold Member (Offline)
Joined: Mar 16 2011
Posts: 259
Disclaimer - I'm no expert so

Disclaimer - I'm no expert so please take what I say here only as a pointer for more detailed research on the subject.

You need to understand that the ETF serves one purpose and the physical metal another.

If you want to be a trader and move in and out of metals as you would any other stock then the ETF has a structure that makes it easy to do so.  However, you should be aware that the ETF is taxed at the higher metal rate not at the stock rate, so doing the trading in a tax sheltered account might be a good idea.

If you want to hold metal as an insurance policy against some dramatic situation change or catastrophic event then you need to have physical metal under your direct control.

There is the concept of "counterparty risk".  That is whether the person on the other side of your investment is going to screw you somehow.  For example, a deposit in a savings account at a bank is really an unsecured loan you are making to the bank.

With the ETF, you are trusting that they really have the metal, will not do some sort of complicated financial transactions that blow up somehow, etc.  When you have the physical metal in your hand, you have no counterparty.  However, there is the risk that the company you bought the metal from did not give you the real thing and you now have worthless slugs.  That can probably be avoided by dealing only with the major metal dealers.

As far as harvesting the tax loss, you can sell the ETF and wait a month to buy it back assuming that things do not move to much.  Selling the ETF and buying physical might also require the one month wait to avoid the wash sale rule, but I am no tax advisor so I am not sure if the physical is close enough to the ETF to be considered a wash if you sell ETF and buy physical.

So if you want to just trade, then probably stick with ETF.  If you want insurance they you should research how to buy and store physical.  There are sections on this site that probably cover that information.  The issues related to what type of physical to buy and whether you should store it yourself or hire some company to hold it are more than I can cover here.

Good Luck.


davefairtex's picture
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5805
GLD, SLV tax loss selling

So two options:

1) sell GLD & SLV, buy PHYS and PSLV.  I believe (but am not 100% certain) that tax treatment on PHYS/PSLV is different - and better - than GLD/SLV.  PHYS/PSLV have ability for physical redemption in large quantity, and also will likely have premium expansion, if/when PM rallies.  PHYS/PSLV also have a more clear title to the metal owned by the ETF, which means if there is any sort of "gold bank run" these two should really pop.  However, with this trade, you remain in "paper" (advantages & disadvantages listed by others) - but as a trade-off, premiums are lower.

2) sell GLD/SLV and buy actual gold and silver, as you suggested.  Premiums will be higher, you'll be vulnerable to physical theft, but you will not be vulnerable to institutionalized (MF-global style) theft, or other "banking system" issues.

I believe that everyone should have some amount of monetary assets (gold definitely counts) outside the banking system, for insurance purposes.  How much - depends on you.  My feeling is, the answer should be larger than "none", however.

You could always split half and half...


Edwardelinski's picture
Status: Gold Member (Offline)
Joined: Dec 23 2012
Posts: 347
Thanks for the feedback

Thanks for the feedback which responds to numerous thoughts I have had.  I guess my biggest concern is why are the GLD and SLV ETFs reducing their holdings?  I don't want to be the victim of another MF Global-style shenanigans.  But I also don't want to have to guard my own personal mini Fort Knox.  And I've lost faith in all financial institutions. 

KennethPollinger's picture
Status: Platinum Member (Offline)
Joined: Sep 22 2010
Posts: 671
Speaking of Buying and Selling

Please recall Off the Cuff: Self-Mastery, Dec 12, 2013 by Martenson.  They talked about have a Set of Targets:

gold in the ground; silver in the ground; land, etc.


Once again, I am trying to create a "Set of Targets" for placing my cash after THE CRASH.

As for investing in the silver sector, the SRSrocco Report recommends the following Top 12 silver miners:
Pan American Silver, PAAS
Coeur, CDE
Hecla Mining, HL
First Majestic, AG
Endeavour Silver, EXK
Silver Standard, SSRI
Fortuna Silver, FSM
Silver Corp Metals, SVM
US Gold and Silver, USGIF
Alexco Resources, AXU
Great Panther, GPL
Aurcana, AUN
plus Tahoe Resources, TAHO
Do any of you know about these? Or had experiences with them?
They are all GREATLY down--probably near the bottom. But who knows, some could
totally collapse, no?
Also, I refer you to the latest SRSrocco Report of Dec 27th--all about the oil-silver ratio--fascinating.
KennethPollinger's picture
Status: Platinum Member (Offline)
Joined: Sep 22 2010
Posts: 671
Latest email from SRSrocco: Helpful on juniors
Sorry for not getting back sooner.  As for the break-down in the different silver miners, I was going to put that in a paid report.  However, I can briefly say that my top 12 primary silver miners are actually the top silver producers in volume.  I do not include Fresnillo or Hochschild as they do not report financials quarterly and their stocks are not listed on the NYSE and etc. 
I believe in staying away from 99% of the juniors due to peak energy.  I know Greg McCoach just had to inform thousands of subscribers that he was finally capitulating and selling the bulk of his juniors.  This is the problem with gambling with juniors with the hope one is going to make it rich.
I have had conversations with David Morgan and he has a better plan.  Big currency on the majors, middle currency on the Mid caps, and little currency on the Juniors.  Because there aren't many primary silver miners, I believe one should put the majority of currency in those that are the LOWEST COST PRODUCERS.  Not lowest cash cost... lowest cost.... period.
Alexco Resources which has the highest silver grade in Canada and one of the largest in the world at 22 oz a ton had to put their Bellekeno mine on care & maintenance over the winter.  So there goes one company of my 12 out of the biz for now.  Unless prices head back north of say $27-$28, I don't see Alexco starting back production.
I will be adding Tahoe Resources to my group even though the bastards have been alleged in killing protestors and locals.  Looks like some of their contracted help in Guatemala got a bit out of hand by using deadly force.  I hear that they also threatened a local Priest who was aiding some of the local protestors.  This is some of the shit of the business that I can't stand.
Lastly, I will tell you the three lowest cost producers in my group are First Majestic, Endeavour Silver and Pan American Silver.  They can make money below $20.  Right now the rest are above $20.
Hope that helps,
Really nice of him to take the time to be helpful in trying to get a Set of Targets!  (Lowest COST of producers!!)
davefairtex's picture
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5805
silver miner charts

Over the longer term (weekly chart), the best silver mining chart is SLW - you can get a sense by using the ratio of SLW vs its silver miner index SIL.  On the weekly SLW:SIL has been steadily moving higher.  Of course, on the price chart, SLW has lost 50% since its highs in 2011 and 2012, but one might consider the loss to be "only 50%" rather than the loss to the SIL index of 60% over that same period.

Shorter term (daily chart), the best two charts I see are PAAS and SSRI.  They've clearly bottomed and are engaging in repeated breakouts higher.  Both have moved above their 50 MA, the 50 MA itself has now turned higher, and they both are knocking at the door of their 200 MAs.  These are all bullish signs.  If/when the 50 MA crosses the 200 MA (the "golden cross") it will likely be off to the races, assuming the metal can cooperate.  At current rates, that's likely month or two away.

Of course, that is coming off of some pretty steep declines.  SSRI is down 77% since its highs (from 30 down to 7...ouch) and PAAS is off 66% (from 35 to 11 and change).  Both have clearly done worse than the index on that ratio chart, but are now coming back.

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Login or Register to post comments