"Do you think there is any counterparty risk when buying Gold ETFs?

"I read this recently and the 2nd paragraph concerned me!

"Another key point about an ETF gold bullion share is that unlike buying physical gold coins or bars, you don't actually own physical gold by owning a gold ETF share. Yes, you own shares in gold, but not the gold itself. Is that a problem? Well yes and no. It's not a problem at all if all you want to do is profit from price movements in gold. In fact buying a physical gold ETF is perfect for capitalizing on gold price movements since like all ETFs, it's simply a stock traded on a major stock exchange which can be bought and sold easily. However, if you're primary reason for buying gold is to hedge yourself from a large wide-scale monetary crises, you would be wise to consider buying physical gold bullion rather than the ETF, or at least in addition to it.

"The reason I say this is because if there was a large scale monetary crises in the US, let alone worldwide, it's very possible the banking institutions that are controlling these Gold Bullion ETFs could become bankrupt or insolvent. As a result they would likely end up liquidating the ETF and you would end up with no gold bullion and very little cash for your shares, if any."

Eoin Treacy's view Thank you for this question which crops up from time to time. ETFs that mimic the price of gold but do not actually hold physical gold bullion expose investors to counterparty risk in a worst case scenario. It is for this reason that we have long exhibited a preference for ETFs which hold allocated physical gold bullion.

In the UK Lyxor Gold Bullion Securities and ETFS Physical Gold hold physical gold and have Pound and US Dollar versions.

In the USA SPDR Gold Trust and Sprott Physical Gold Trust both hold physical gold bullion and are denominated in US Dollars.

In Australia ETFS Physical Gold holds physical gold and is denominated in Australian Dollars.

In Switzerland the ZKB Gold ETF holds physical gold and is denominated in Swiss Francs. The Julius Baer Physical Gold Fund also holds physical gold and has Euro and Swiss Franc versions.