Gold ETFs vs. Physical Gold: What Investors Need to Know After 2020
Introduction: ETF vs. Physical Gold — A Critical Choice for Modern Investors
When it comes to investing in gold and silver, you have two primary options: buying physical precious metals (such as coins or bullion) or investing in exchange-traded funds (ETFs) like GLD (SPDR Gold Shares) and SLV (iShares Silver Trust).
For years, ETFs were the go-to choice for investors seeking exposure to gold and silver without the hassle of storing physical metal. But according to Greg Allen, founder of Allen House Metals, a major shift occurred in 2020 that every investor should know about.
What Is a Gold or Silver ETF?
An ETF, or Exchange-Traded Fund, is a marketable security that tracks an index, commodity, or asset. In the case of GLD and SLV, these ETFs were designed to track the price of gold and silver respectively.
Traditionally, when an investor purchased shares of a precious metals ETF, the fund would back those shares with physical metal stored in vaults. This was supposed to ensure that the fund’s value moved in line with the spot prices of gold and silver.
What Changed in 2020? The Prospectus Loophole
In the wake of the COVID-19 pandemic, demand for gold and silver skyrocketed, creating a global supply crunch for physical precious metals.
As a result, the fund managers behind GLD and SLV quietly updated their prospectuses. One key change included:
- No longer requiring the fund to purchase or hold physical metal to back investor shares.
In SLV’s prospectus (as Greg Allen notes, see Page 7), the fund included language giving themselves the ability to suspend metal purchases or even liquidate the fund without investor approval.
This shift represents a fundamental break from what investors expected: actual physical metal backing their investment.
Why Physical Gold and Silver Now Outperform ETFs
Following the 2020 changes, real-world performance began to diverge. Greg Allen highlights a striking statistic:
From market bottom to peak, physical silver outperformed SLV by over 38% in just one year.
Why the Difference?
- ETF Value is Now Volume-Driven
Without physical backing, ETF prices are influenced more by market demand and volume of share purchasesthan the actual value of gold or silver. - No Metal Storage Costs = Higher Profits for Fund Managers
With no obligation to hold metal, ETFs reduced costs—benefiting the issuer more than the investor. - Less Accurate Price Tracking
As funds sell off metal and continue issuing units, they may no longer reflect real-time spot prices, especially in volatile markets.
ETF Liquidity vs. Physical Metal Ownership
| Feature | Gold/Silver ETF (GLD/SLV) | Physical Gold or Silver |
|---|---|---|
| Backed by metal? | Not necessarily after 2020 | Yes, always |
| Liquidity | Highly liquid (easily tradable) | Lower liquidity (sell to dealer) |
| Storage | No storage required | Requires secure storage |
| Performance | Can underperform spot price | Tracks spot price directly |
| Counterparty risk | Yes (issuer, custodian risk) | No (you hold the asset) |
| Use in IRAs | Allowed through custodians | Allowed through gold IRAs |
Should You Still Buy GLD or SLV?
If you’re looking for convenience and short-term price exposure, ETFs may still serve a purpose. But for long-term investors—especially those concerned about inflation, currency devaluation, or market instability—physical gold and silver offer greater transparency and security.
You know exactly what you own. You’re not relying on someone else’s books, vaults, or promises.
Final Thoughts: Physical Gold Reclaims the Edge
For many investors, gold and silver ETFs used to offer a reliable way to diversify a portfolio. But with prospectus changes, lack of physical backing, and underperformance compared to bullion, ETFs no longer deliver what most people think they’re getting.
If you’re investing for protection, inflation hedging, or long-term wealth preservation, consider the power of physical metal ownership. It’s not just about price—it’s about control, security, and transparency.
Learn More with Allen House Metals
At Allen House Metals, we make it easy to buy, sell, and store physical gold, silver, and platinum. We also offer Gold IRAs and personalized education to help you invest confidently.
✅ Transparent pricing
✅ Retirement account integration
✅ Real people, not robots
✅ No “collector coin” markups
Visit Allen House Metals to get started.
