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Physical gold compelling to SMSFs

SMSF investors were buying between $150,000 to $200,000 worth of gold for their portfolios as they recognised the advantages of investing in the asset class, according to a precious metal and gold bullion specialist.

“A big reason to buy gold is the opportunity for large gains,” ABC Bullion chief economist Jordan Eliseo told the SMSF Association NSW State Chapter breakfast last week.

“This is because when you have environments like the ‘70s, where there was serious instability in the market, nothing else tends to do well and there’s a run to precious metals.

“As a way of visualising the potential there, as it stands right now if you were to break every asset in the global financial crisis pulled down into a $100 bill, there’d just be $1 in gold and the other $99 is in paper money, listed stocks, you name it.

“At the height of every precious bull market over the last hundred-plus years, the value of gold and gold mining stocks as a percentage of the total has been $20.”

Eliseo said no other asset class offered that kind of upside potential in the coming decade.

A kilogram bar of gold was worth about $50,000, he said.

“Our average SMSF client buys $150,000 to $200,000 worth of bullion with us, so they tend to buy between three and four kilos,” he said.

“If you look at the costs of buying a gold ETF (exchange-traded fund) versus a physical one kilo bar that’s privately vaulted or pool allocated physical bullion, which is not too dissimilar to what an ETF effectively is, you’ll find that the latter two are a cheaper way of going about it.

“That might seem a little bit strange because if you look at a bullion dealer’s website you’ll see a hundred different gold products and the small ones might have quite big margins.

“But if you’re actually buying kilo bars, it’s actually cheaper to get the exposure that way … particularly if you’re holding it for five to 10 years, than what it would be by buying an ETF.”

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