Gold ETF vs Physical Gold: What’s the Difference?

April 14, 2023
Written by Peter Anderson

Gold has been a symbol of wealth and power since ancient times, but it also takes many forms. For those looking to invest in gold, they have two primary options: purchasing physical gold or investing in an Exchange Traded Fund (ETF).

But what is the difference between these two methods?

In this article, we’ll explore the differences between Gold ETFs and physical gold so that you can make informed decisions about your investments.

The first major distinction between Physical Gold and a Gold ETF is in how ownership is determined. When buying physical gold bars or coins, buyers are taking possession of their investment; with an ETF purchase, however, there is no direct possession of the asset.

Instead, investors own shares on a stock exchange which track the price movements of gold bullion held by financial institutions.

This allows for greater liquidity as well as more flexibility when trading than if one were to buy physical gold.

Another key factor to consider when deciding between physical gold and an ETF lies in storage costs.

Investing in physical gold requires secure storage facilities like safety deposit boxes or vaults - meaning additional fees must be taken into account. With an ETF however, all transactions are virtual so there are no extra expenses associated with storing it securely.

In conclusion, both Physical Gold and a Gold ETF can provide investors with exposure to this precious metal – but understanding the differences between them will help purchasers decide which option best suits their needs and preferences when it comes to investing in this age-old commodity.

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What Is Physical Gold?

Physical gold has been treasured for centuries as a symbol of wealth and status, but it is much more than just an ornamental item.

Gold can be found in various forms, including coins, bars, jewelry and bullion. As one of the rarest elements on Earth, physical gold is highly sought after by investors who see it as a reliable store of value.

The purity of physical gold is measured in carats with 24-carat being the purest form. That said, most pieces are made from 18 or 22-carat gold which have other elements added to increase durability and strength.

For example, 14-carat gold will contain 58% gold while 10-carat contains 42%. Each country also has its own standards when it comes to grading the purity of gold so buyers should take note before making any purchases.

When buying physical gold you may find yourself faced with different types; each offering their own advantages.

Coins are popular amongst collectors due to their historic designs however bars tend to be cheaper per gram because they lack intricate detailing. Jewelry is great for those wanting something that’s both aesthetically pleasing and practical but if your goal is simply investing then bullion will offer greater returns in the long run.

Gold Bullion

Well, now that we've discussed the basics of physical gold and its respective attributes, let's take a closer look at what gold bullion is.

Gold bullion refers to the physical form of gold available in bars or coins.

These are tangible assets which reflect the current spot price of gold, meaning they have an intrinsic value based on their weight and purity.

Bullion is one of the most popular ways for investors to acquire exposure to gold assets due to its convenience and liquidity.

Gold bullion can be purchased from various dealers across the world who offer different sizes ranging from 1 gram up to 400 ounces (or more).

Prices for these products vary depending on their size, however larger pieces typically come with lower premiums per ounce compared to smaller denominations.

Some specialty items like collectible coins may carry higher premiums than those offered by standard bullion products.

It’s important to note that while there is no shortage of supply when it comes to physical gold, demand often exceeds availability during periods of market volatility – so it’s best practice to purchase your desired product sooner rather than later!

With all this said, understanding how much you will pay for each ounce of your chosen item prior to making any purchases is key in order ensure you get the best deal possible.


Cost of Buying Physical Gold vs. The Spot Price of Gold

When considering the cost of buying physical gold versus the spot price of gold, it's important to consider a few things. Physical gold can be purchased in many different forms, including coins and bars that range from 1 gram up to 400 ounces.

The price you pay for physical gold will depend on its purity or “fineness”, which is measured in karats; 24-karat being the most pure, followed by 22k and 18k down to 10k.

It also depends on whether you purchase bullion or collectible coins as well as what type of bar or coin you buy.

The spot price of gold refers to the current market value of one troy ounce (31.1 grams) of standard .999 fine gold bullion.

Prices are typically quoted in U.S dollars per troy ounce and can fluctuate throughout the day based on political events, economic news, and other factors that influence demand for this precious metal.

When purchasing physical gold coins or bars at a higher weight than an ounce, such as 100 grams or more, buyers usually get lower premiums over the spot price because fewer processing costs are involved compared with smaller purchases like 1-gram pieces.

On top of that, when dealing with larger quantities there may be discounts available if paying with cash instead of credit cards or bank wires due to risk minimization from sellers' side.

Investing in Gold Coins

Investing in gold coins can be a wise and exciting endeavor, offering both potential stability and the opportunity for long-term profits.

From rare collectibles to modern bullion pieces, these physical forms of precious metal offer an array of choices for investors:

  • Gold bars – A staple among gold investments, gold bars are available from many mints around the world in 1 oz., 10 oz. or even larger sizes.
  • Gold certificates – Many banks sell gold certificates that represent ownership in deposited gold without requiring you to store it yourself.
  • Gold coins – Historic gold coins such as U.S. Double Eagles may carry numismatic value above their melt value due to rarity and condition. Modern commemorative issues also have premium values associated with them based on the mintage and quality of the coin itself.
  • Other items – Jewelry, nuggets, dust and other forms of raw or semi-processed gold all have value associated with them depending upon market conditions at any given moment in time.

For those wanting exposure to the price movements of gold but who don't want to take possession of actual bullion or coins, investing in Exchange Traded Funds (ETF) is always an option as well; however this type of investment does not provide direct access to physical gold which must then be purchased elsewhere if desired after ETF shares are sold off later down the line.

Ultimately each investor should determine what kind of physical form best suits his or her individual goals when considering how to invest in gold whether through coins, bars or some other tangible asset form altogether.

What Kinds of Physical Gold Should You Invest In?

When it comes to investing in physical gold, there are many different forms of gold that investors can choose from. These include coins and bars, as well as jewelry and other items made with precious metals.

Coins tend to be the most popular form of physical gold because they are easy to store and transport, while also being widely recognized by buyers.

Bars come in a variety of sizes and weights, ranging from 1 gram all the way up to 400 ounces - which is why they're often referred to as 'paper gold'.

Gold certificates are another option for those who want to invest in physical gold but do not want to carry around large amounts of metal.

With these certificates, you own an amount of gold specified on the certificate itself, but you never actually take possession of the actual metal.

No matter what type of physical gold you decide to purchase, it's important to understand current market prices so you know how much your investment will cost.

Prices fluctuate based on supply and demand in the gold market, so keeping track of trends can help you make informed decisions about when would be best to buy or sell different types of physical gold.

Knowing where and how to purchase gold safely is also essential if you plan on buying larger quantities or more expensive pieces such as coins or jewelry.

Where Should You Purchase Physical Gold?

Now that you have an understanding of the different forms of physical gold to invest in, you may be wondering where is best to purchase actual gold.

The answer depends on a few factors such as budget and convenience.

There are various places available for purchasing physical gold such as local dealers, online stores, auctions, etc. Each has its own pros and cons.

When considering buying from a local dealer, it is important to consider their reputation and pricing. It can also be difficult to find certain types or sizes of bars at these locations so do your research ahead of time.

Some dealers charge extra fees on top of the current market price for gold which could affect your overall investment cost.

Online stores offer many more varieties than what is typically found with local dealers but often come with higher prices due to shipping costs and storage costs associated with secure vaults.

Auctions provide unique opportunities for investors looking for rare coins because they often sell hard-to-find items at lower prices compared to other sources.

However, caution must be taken when bidding since there usually isn’t any guarantee regarding the item's authenticity or quality condition nor will you receive assistance if something goes wrong during the transaction process.

No matter which route you choose when buying physical gold, always check current gold prices before making a purchase decision and ensure that whatever form of bars or coins you acquire meet industry standards (e.g., fineness).

Doing this will help make sure that your investment remains safe while helping safeguard against risks related to fraud or counterfeiting down the road.

Benefits of Investing in Physical Gold

Investing in physical gold offers a variety of benefits that can’t be found with investing in gold ETFs.

One benefit is the potential appreciation of gold jewelry, which not only provides an investment opportunity but also allows you to wear your investments and enjoy them every day.

Another advantage of owning physical gold is that it eliminates storage fees associated with keeping your bullion safe since you are its own custodian.

By buying sovereign gold bonds or coins, investors are able to gain exposure to the underlying price movements of gold without having to pay any premium over spot prices for their purchases.

This means that investors have more control over the cost basis when they buy physical gold than when they invest in a gold ETF.

Overall, investing in physical gold gives investors greater flexibility and control over their investments while still allowing them access to one of the most profitable industries around - the global gold market.

What Is a Gold ETF?

Gold Exchange Traded Funds (ETFs) are a form of investment that gives investors exposure to gold without having to actually buy and store the precious metal.

ETFs provide an easy way for people to invest in gold, as they can be traded just like stocks on any major exchange.

While physical gold is held by its owner until it is sold or exchanged, Gold ETFs are bought and sold through exchanges throughout the day.

  • There are several forms of Gold ETFs available for investors seeking exposure to this asset class:
  • iShares COMEX Gold Trust (IAU): This fund seeks to track the spot price of gold bullion and holds physical gold bars in London vaults.
  • SPDR® Gold Shares (GLD): This fund is physically backed by around 1/10th ounce of gold stored in HSBC Bank USA’s vault in London. It tracks closely with the spot price of gold bullion.
  • VanEck Vectors™ Gold Miners ETF (GDX): This fund invests primarily in large-cap international companies involved in the mining and extraction of gold from ore deposits located around the world.
  • Sprott Physical Gold Trust ETV (PHYS): This fund offers investors direct ownership over allocated and segregated physical gold, which is stored securely at various locations around Canada.
  • GraniteShares Gold Trust (BAR): This fund also provides direct access to physical gold, but instead offers storage options within both Canada and Hong Kong markets.

The basic principle behind investing in Gold ETFs is similar to other types of investments such as equities - buying low, selling high.

By choosing the right type of ETF and understanding how each one works, you can gain exposure to this valuable asset while still being able to diversify your portfolio across different sectors and industries.

With more information about what these funds offer, potential investors can make informed decisions about their investments into this often volatile market sector.

Basic Principle Behind Investing in Gold ETFs

Gold ETFs, or exchange-traded funds, offer investors a new way of gaining exposure to the gold market.

Unlike physical gold and other types of investments such as mutual funds, Gold ETFs are traded on stock exchanges, which allows for much easier access than trading in actual gold bars or coins.

The basic principle behind investing in Gold ETFs is fairly straightforward: you're essentially buying shares of a fund that tracks the price of gold so that your return mirrors any changes in the spot price of gold.

Of course, like all investments, there's always some risk involved with these products; if the spot price of gold falls below what you paid for your shares, then your investment could lose value.

Many Gold ETFs invest not only in the metal itself but also in companies engaged in mining and refining it—so you get both direct and indirect exposure to the precious metal through these vehicles.

How To Invest in Gold ETFs

Investing in gold ETFs can be a great way to diversify your portfolio and hedge against potential wealth tax risks.

While there are many different types of gold investments, ranging from physical assets like coins or bars to mutual funds and gold miners ETFs, the primary benefit of investing in a gold ETF is that it provides easy access to the ever-popular precious metal without having to take on the physical storage risks associated with owning real gold.

When considering how to invest in Gold ETFs, one must first determine what type of investment profile best suits their needs.

For example, those who wish to hold onto their gold for an extended period may find passive index funds more suitable than actively managed ones due to lower fees over time.

On the other hand, investors looking for short-term gains might prefer actively managed funds as they often offer higher returns in exchange for higher management fees and commissions.

Some investors prefer Exchange Traded Funds (ETFs) over Mutual Funds because they provide greater liquidity and transparency when compared side by side.

It's important to do your research before making any long-term decisions about which option is right for you.

Whether you decide to purchase physical gold or opt for a Gold ETF instead will depend entirely upon your individual goals and financial situation. However, if you're seeking a low-risk investment alternative with relatively high returns then investing in Gold ETFs could be just what you're looking for.

General Uses

Gold has long been a valuable asset for those looking to diversify their investments and hedge against market risks.

Whether investing in physical gold or through gold ETFs, both have unique advantages that can be tailored to any investment portfolio.

But what exactly is the difference between these two options?

Physical gold refers to actual coins, bars or jewelry made from pure 24 karat gold, while an exchange-traded fund (ETF) tracks the price of gold without actually owning it.

Here are some general uses for each:

  • Physical Gold:
    • Act as an investment tool by purchasing bullion such as coins and bars.
    • Can be used to create beautiful jewelry pieces.
  • Gold ETFs:
    • Allows investors to gain exposure to the underlying spot price of gold without having to store or transport it physically.
    • Gives access to a wide range of markets with low transaction costs and minimal counterparty risk.

The decision on which option is best comes down to individual preference when considering factors like liquidity, storage options and capital requirements.

The important thing is understanding how both physical gold and ETFs fit into your overall financial plan.

Advantages of a Gold ETF

Well, now that we've discussed the general uses of gold, let's move on to one of its most popular and preferred forms: a Gold Exchange Traded Fund (ETF).

A Gold ETF is an investment portfolio comprising cash backed by physical gold as well as yellow metal derivatives like futures contracts.

It allows investors to gain exposure to the price movements of gold without having to physically own it.

One important benefit of an ETF is that you can buy and sell shares in small denominations - meaning you don't need large amounts of money to join the market.

This makes them ideal for diversifying your investment portfolio or hedging against inflation.

The ease with which investors can access global markets has been instrumental in making gold ETFs attractive investment options.

The fund manager takes care of the underlying asset allocation and management so there's no need for investor involvement - allowing individuals to invest while ensuring minimal risk.

This type of wealth insurance provides investors with more liquidity than actual physical gold since they can be effortlessly traded on stock exchanges around the world at any time.

Some Drawbacks of ETFs

When looking at the differences between gold ETFs and physical gold, there are some drawbacks to consider.

Firstly, one of the biggest issues is expense ratios: many ETFs have an annual fee that can be higher than investing in a more traditional fund or investment vehicle.

This means investors will pay more for their exposure to gold through an ETF than they would by simply buying it outright. There may also be counterparty risks associated with the ETF provider which could leave investors exposed if something goes wrong.

Another key difference between gold ETFs and physical gold is minimum investments; often times when purchasing physical gold you don't need to make a large initial investment whereas certain ETFs require a minimum dollar amount before you're able to invest.

Also, depending on the type of ETF you choose, there may be management fees involved which further reduce your return on investment over time. While both options provide direct exposure to gold prices, only owning physical gold gives you full control over your asset without having to rely on any third-parties such as banks or brokers.

In short, while both types of investments offer potential benefits and returns, understanding all aspects should help determine what works best for individual investor goals and objectives.

It's important to weigh all pros and cons carefully before deciding where best to allocate funds into either form of gold investment.


Investing in gold can be a great way to diversify your portfolio, but there are two methods that you should know about – owning physical gold and investing in gold ETFs.

Physical gold is tangible metal that you own, such as coins or bullion.

The cost of buying physical gold is usually more than the spot price of gold due to premiums and taxes associated with its purchase.

When it comes to physical gold investments, many investors look towards coins for their high purity levels and varying sizes.

It’s important to do your research before committing to an investment in order to determine which types of physical gold are best suited for your needs.

On the other hand, if you’d rather not invest directly in physical assets then a Gold Exchange Traded Fund (ETF) could be worth considering instead.

These instruments trade on stock exchanges like a regular stock, allowing them to be bought and sold anytime during market hours.

ETFs offer greater liquidity compared to holding physical metals plus they benefit from lower fees than mutual funds; however some drawbacks include counterparty risk and potential tracking errors.

In summary, both owning physical gold and investing in ETFs have advantages and disadvantages so it’s essential that you understand each option thoroughly before making any decisions – after all it's your money!

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