Is it better to buy Physical Gold or Gold ETF ?

As an Investor is it better to buy Physical Gold or Gold ETF ?

The question is it better to buy physical gold or gold ETF is a very popular one. People looking to invest want little risk hence always weigh their options.

There’s a very big difference between buying physical gold and buying ETFs. Many online digital platforms will tell you to buy ETFs but the truth is 96% of these platforms are scams. They mimic the physical gold market where there’s a spread I.e. a different buying and selling price, GST. Their prices of Gold are always cheaper than the real thing. You buy this digital gold online and they tell you they have actual gold that is stored in your name so in case the company shuts down, that gold is still yours. The real question is if the company shuts down how do you get the gold?

They will tell you physical gold has safety issues but they too claim to store gold somewhere in your name. If you are looking to invest in Gold then also get the physical asset. You could get a deposit box at your local bank or simply keep it in a safe at home. You can touch and feel your physical gold unlike ETFs where all you have is a login to a digital platform. To better explain this, we will be looking at the difference between Physical Gold and Gold as ETF.

Physical Gold

Physical gold provides the most direct exposure to gold. You can touch and feel your investment. Gold in bulk form is referred to as bullion, and it can be cast into bars or minted into coins.

To get the best deal always go for Gold dore bars also known as raw gold which needs refining. You can buy them from local artisanal miners in Africa. It is through this means that the big corporations have been able to make billions buying cheap raw gold and reselling for a high price.

Gold bullion’s value is based on its mass and purity rather than a monetary face value. Even if a gold coin is issued with a monetary face value, its market value is tied to the value of its fine gold content.

Investors can buy physical gold from government mints, private mints, precious metals dealers, and jewelers. Prices vary greatly among dealers, so it’s important to do your research to find the best deal.

There are costs to buying physical gold, which may include transaction fees and dealer markups. There can also be processing fees for buyers making limited purchases.

There also are costs associated with owning gold, including secure storage and insurance costs.

Gold ETF

Gold ETF with full meaning exchange-traded fund is an option which allows you to purchase gold in the same type of way that you would purchase shares on the stock market.

Here’s how it works: most gold ETFs are structured like a trust. Each fund has a specific number of goal bars that are represented by each share that’s issued.

So when you buy one of these shares it represents your stake in the gold that’s being held by the trust. Investors like this option because it’s a good way to add gold to your portfolio without having to buy and store physical gold assets.

The price of your ETF will be directly tied to the market price for gold. Sometimes tracking errors can create some deviation from the market price. When this happens you can typically expect an arbitrageur to step in and take advantage of it.

As an ETF investor you lose a percentage of the investment’s value each year to the fund’s expense ratio, the recurring annual fee charged by funds to cover management and administrative costs.

Difference between physical Gold and Gold ETF

The first difference is the price. Gold ETF is less costly than physical gold this is because with physical gold, you may sometimes have to pay dealer commissions and taxes.

With a gold ETF, you purchase shares on a stock exchange. The second area is the maintenance that comes with it. The maintenance of physical gold can be intensive because you also need to store it safely and insure it.

And if you have a lot of gold this can get expensive. With a gold ETF, the specific fund is taking care of all the maintenance. All you need to do is pay an annual fee to cover the costs.

Third, there’s the liquidity. Physical gold is a liquid asset and there are plenty of buyers out there. That being said, you do need to seek out and find them. And unfortunately, there will be plenty of people along the way trying to rip you off.

As such, they aren’t as liquid as gold ETFs which can be traded throughout the day in the same way as stocks. The final area where they differ from one another is with returns.

With physical gold, the amount of money you get back will be determined by the price of gold at the moment. A gold fund, on the other hand, gets its value from the specific price of the gold fund.

Our Advice

Our advice as gold dealers is to always buy physical gold. In this way you are seeing and feeling your asset. With the ETFs you only have a login to a digital website and a claim that Gold has been stored somewhere in your name. This is not a good way to preserve wealth and we strongly advice against it. If you are looking for how to buy Gold online then contact us for more information.