Gold Market Challenges

Investing in physical gold poses several challenges, especially for retail investors. The high cost of purchasing large quantities is a major barrier. For example, an LBMA Good Delivery bar, weighing 12.5 kilograms, can exceed $1,000,000. Even smaller bullion bars require substantial capital compared to other assets. Once acquired, secure storage is necessary, adding further costs and complications. While central banks and large institutions store gold in professional vaults in financial hubs like London, Zurich, and New York, retail investors must either pay for secure storage or risk keeping it at home, with insurance adding to the expense.

Liquidity is another concern. Although gold is considered a liquid asset, converting it to cash can be challenging. Selling physical gold requires finding a reliable buyer, and the spread between buying and selling prices can be significant, especially during market volatility. This spread, coupled with the logistical difficulties of transporting gold, can reduce overall investment returns.