LOS ANGELES, June 12, 2017 /PRNewswire/ -- For folks who saw their life savings cut in half during the crash of 2008 today's overvalued market is sounding alarm bells. As the instinct to diversify into gold grows, many first-time gold buyers have a common question: which is better to hold – gold stock or physical gold?
First of all, if you're asking this question: you're already in the right place at the right time. Gold is protection against risk, and a store of value in times of economic uncertainty. With that said – gold STOCK carries a higher level of risk than physical coins and bars do.
When purchasing gold stock, or GLD, what you are really investing in is not a commodity, but a company. Gold mining stock could suffer a loss even when the value of gold itself is climbing – due to external factors such as poor management or poor mining returns.
Last week, for example, the Tanzanian government accused gold mining company Acacia Mining (64 percent owned by gold major Barrick) of understating the value of their gold exports by up to 10 times, and understating their royalties.
Acacia's share price fell 30 percent on the day the accusations were released.
Tanzania is one of Africa's top gold mining nations, and has been known to halt the exportation of gold-bearing concentrate during legal conflicts – much to the dismay of the investors who sunk their hard-earning assets into this stock.
At the time, it appeared the export blockade was a tactic to encourage Acacia to develop in-country upgrading of concentrates – a theme that's been spreading globally. But this week's official charge of under-reporting represents a significant escalation of the government's campaign.
The government refuses to compromise on this issue. With reports suggesting that Acacia management hasn't even been provided a full copy of the report, or details on the methodology the government used to calculate concentrate grades – the issue remains unresolved and the investment plummets.
Statements from Acacia and Barrick indicate that the Tanzanian mines may need to be shut down altogether. This would be a significant blow to production for both companies – and to the global gold supply.
This is one real-time example of how risk-sensitive mining stock can be. If something happens to the mining company, your GLD investment could become worth zero overnight. Physical gold has unique safe-haven status – it cannot be manipulated, and has never been worth zero. The only real way to guarantee your nest egg is holding it in your own hands, or even placing it in a gold-backed IRA. To avoid the many variables associated with investing in paper gold, choose physical gold and eliminate any uncertainty.
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SOURCE Capital Gold Group