Physical Gold or Gold ETFs? Weighing the Pros and Cons

As gold continues to shine in today’s markets, investors often ask—should I buy physical gold or invest in a gold ETF?
Each option offers its own set of advantages and disadvantages you should understand before investing.

What Is Physical Gold?

Physical gold includes gold bullion in various forms, often purchased from dealers or mints.
Many investors trust physical gold for its durability and real-world presence.

Advantages of Holding Physical Gold

  • It’s a physical, touchable asset that’s not dependent on digital platforms.

  • You don’t have to rely on any issuer or manager to access its value.

  • It offers peace of mind during economic or geopolitical instability.

  • Privacy and Control: Buying and storing physical gold privately offers more autonomy.

Drawbacks of Physical Gold

  • You’ll need to think about insurance, security, and potential theft.

  • Low Liquidity: Selling physical gold can take time and may involve extra fees or dealer markups.

  • It holds value but doesn’t grow through income.

  • Buying/Selling Costs: Premiums, dealer fees, and shipping costs can reduce profits.

Gold ETFs Explained

These funds typically hold gold in vaults and issue shares that reflect its market value.
They provide a modern, paper-based way to invest in the precious metal.

Gold ETF Advantages

  • You can enter or exit your position quickly, just like with any stock.

  • All gold is securely stored by the fund on your behalf.

  • Low Entry Costs: You can start investing in gold ETFs with minimal capital compared to buying physical gold.

  • Convenient Management: You can manage your ETF alongside other investments in your brokerage account.

What to Watch Out For With Gold ETFs

  • If the fund fails, you don’t control the underlying metal.

  • Management Fees: ETFs charge annual fees, which can reduce returns over time.

  • Your investment depends on how well the ETF is run.

  • They lack the anonymity of private gold purchases.

Gold ETF or Physical Gold: What’s Best for You?

Your choice should reflect how much control, liquidity, and security you want.
Diversifying between the two may offer the best of both worlds.

references:

https://www.raremetalblog.com/legacy-precious-metals/