I Am NEVER Buying 'Gold' Again

Felix Nikolas Prehn•Sep 5, 2026

Summary

Felix argues that the primary purpose of owning gold is as insurance against institutional failure, yet most investors use products like GLD that rely entirely on those same institutions. Felix states that the GLD prospectus reveals the fund sells off physical gold annually to pay its 0.4% fee, meaning the amount of metal behind each share decreases over time. Felix points out that retail investors cannot redeem shares for physical metal, as this is reserved for major banks in minimum blocks of 100,000 shares, roughly worth $40 million.

Felix provides a breakdown of three better ways to invest in the sector:

GLD (SPDR Gold Shares): Felix argues that while GLD is acceptable for short-term price speculation, it is a poor long-term insurance tool due to counterparty risk. Felix states that the custody chain is opaque and that the fund's ability to take legal action down that chain is limited. Felix notes that for true protection, investors should avoid holding a mere promise from a bank.

GDX (VanEck Gold Miners ETF): Felix suggests that mining companies offer leverage to the gold price because their operational costs are relatively fixed. Felix states that if the gold price rises 20%, a miner's profit margin can expand significantly more than 20%. Felix warns, however, that this leverage works in both directions and introduces business risks like management errors or strikes.

FNV (Franco-Nevada Corporation): Felix highlights the royalty and streaming model as a superior way to gain leveraged exposure with lower operational risk. Felix states that Franco-Nevada provides upfront cash to miners in exchange for a percentage of revenue or a fixed-price stream of production. Felix notes that with only 40 employees and high margins, FNV avoids the heavy costs of diesel and labor that plague traditional miners.

Felix suggests a total gold allocation of 5% to 15% of a portfolio, with physical metal acting as the foundation and miners or royalties serving as a smaller, riskier addition.

Mentioned Stocks

GLD

Sentiment: SELL

Reasoning: Felix argues that GLD is 'paper gold' and unsuitable for insurance because the amount of gold backing each share shrinks annually to pay management fees. Felix states that the custody chain involving sub-custodian banks creates unnecessary counterparty risk and that retail investors cannot redeem shares for physical metal.

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FNV

Sentiment: BUYAction: RECOMMENDED

Reasoning: Felix highlights Franco-Nevada as a top-tier royalty company with a superior business model compared to traditional miners. Felix states that FNV captures the upside of gold price movements through revenue slices without the burden of operational expenses like labor and fuel, resulting in much higher profit margins.

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GDX

Sentiment: BUYAction: RECOMMENDED

Reasoning: Felix recommends GDX for investors seeking broad exposure to gold miners. Felix states that miners offer leverage to the gold price because their costs are fixed, though Felix warns that this introduces operational and business risks that should be managed by keeping the position size small.

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