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Historically, a "gold certificate" was a gold ownership title that could be exchanged for a fixed quantity of gold. In the United States, bank notes were backed by gold from 1863 to 1933.
Today, a "gold certificate" is a financial product generally offered by banks to customers wishing to invest in gold.
Banking regulations require banks to own a portion of their assets in a form allowing them to rapidly obtain liquidity in times of crises. Gold, being very liquid, fits that requirement perfectly. When you deposit cash in the bank, you become a lender to the bank, which then owes you that money. The same happens when you buy a gold certificate: the bank owes you some gold, but that gold is not yours.
For the bank, selling you gold is a win-win situation: it earns a commission on the sale and, at the same time, it adds gold to its reserves. It increases its speculative positions on the markets.
Perhaps you thought that gold was safe in a bank: that’s not the case. Your gold is used as collateral for the speculative positions of the institution. And if the bank were to go bankrupt, you could lose everything.
Other problems arise with this type of investment. For instance, the BNP Paribas “100% gold certificate” specifies that the bank may reimburse the lender after giving a ten-day notice. In other words, if the bank needs your gold, it can sell your position when it pleases without asking for your permission.
Before buying gold through your bank or another financial institution, make sure you obtain an ownership certificate. This certificate should clearly specify your first and last names along with the bars’ serial numbers. That’s the only guarantee that there is no intermediary between you and your gold.