Paper Gold Vs. Physical Gold

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When people think about buying gold, they always picture a vault filled with gold bars, coins, and jewelry. And many years ago, this picture would have been accurate. However, these forms of gold are no longer the only ways to buy or invest in gold.

Another form of gold that is quickly gaining ground is paper gold. As you will see later in this article, paper gold might not be as tangible as physical gold, but it does come with its advantages.

The question becomes, which one should I buy? The answer is not as simple as I would like. It all boils down to your goal and what you want to achieve. Keep reading to see which option is best for you.

What Is Paper Gold?

You probably have an idea about what physical gold looks like. They usually come as bars, coins, and jewelry. They are tangible, and their value is based on their purify, rarity, and historical value.

But what is paper gold? If you are new to gold investments, you probably have not heard about the term.

Paper gold is gold investments through gold exchange-traded funds (ETFs). It’s like mutual funds but for gold and is a great way to invest in gold.

Let’s break it down further, shall we? When you join an ETF, the fund will purchase a certain amount of gold and give you shares in that fund. You have successfully invested in gold, and in a way, you own gold, even though you might not hold it in your hands.

The shares you get from the ETF work like actual shares, so they rise and fall with the changes in the price of gold.

ETFs usually have a fund custodian who is in charge of managing the fund. The great thing about ETFs is that you can track the price of your gold because they are on the stock market and can be traded publicly.

Where Can You Buy Paper Gold?

Buying paper gold is a very straightforward process. All you need is a trustworthy broker. Finding a broker you can trust is not easy, but if you already have one, they will do all the heavy lifting for you.

The broker will help you find a fitting ETF for your needs and provide insights on how to use it to balance your investment portfolio.

What Is Physical Gold?

Physical gold is quite common. You probably already know what it looks like and might even have some in your portfolio.

Physical gold is gold, as most people know it. The tangible object you can feel and touch. They come in bars, coins, and jewelry and have been around for centuries. They remain one of the best ways to invest in gold and diversify your portfolio.

Where Can You Buy Physical Gold?

With the internet, it’s now very easy to purchase physical gold. Some companies and individuals sell gold directly to you. You could also go through a go-between, even though this can be more costly.

I advise you to research properly before making any purchase. You already know how costly gold can be. It’s not an investment you want to take lightly. You could potentially lose a lot of money if you make a mistake.

Research the kind of gold you want. Do you want bars or coins? How pure do you want them to be? Are you opting for something rare? All these factors affect the price, so you must be sure about what you are getting into.

The most important thing to consider is if the company you want to buy from is trustworthy and reputable. What does their track record say? Can you trust them with your money?

Also, this video is very helpful to learn about paper gold and physical gold:

Which Should I Buy?

Let’s face the reason you are on this page. Which of the two options should you buy? To answer this question, we will look at the advantages and disadvantages of each one and together, decide which is better for you.

Advantages And Disadvantages Of Physical Gold


  • It will offer you the most direct approach to purchasing gold. It provides you with security that most other options do not.
  • Physical gold is probably the most stable and solid investment you can make. The price might fluctuate, but you can be sure that your gold will never be without worth. And if you are lucky enough to buy during a dip, you might make a huge profit.
  • It is highly liquid, so you can quickly sell them for cash. And because the supply for physical gold is less than the demand, you will always find a buyer.
  • The scarcity and stability add to the price of physical gold, which is a great indicator that the price will only grow higher or, at the very least, remain stable.
  • Gold is universally accepted, which means you can use your physical gold to carry out financial transactions no matter where you are.
  • It is stable even during economic uncertainty, so they are often used as a hedge, a form of protection against times like this.
  • When you buy gold, the transaction is private and confidential. You own your gold independently and do not need permission for any decision you make.
  • If you are hoping to hold your gold for a long time and maybe even bequeath it to loved ones, physical gold is the best way to do so. It is as easy as leaving directives in your will.
  • Banks prefer physical gold as collateral.

These qualities are why most investors turn to physical gold whenever they want to buy. However, it does not imply that physical gold is not without risks or disadvantages.


  • Physical gold comes at a premium. Depending on the form and purity, this premium can be higher. You also need to worry about tax, transportation, and insurance. These are all unavoidable costs that come with physical gold.
  • Physical gold has to be stored; unless you have the right facilities in place already, you might have to pay to store your gold.
  • Storing physical gold also means that they are at risk of getting stolen. This is a risk many gold owners have to live with.
  • Liquidity is slow for physical gold, especially if you have a lot. And if you decide to sell, you still have to deal with other costs like tax and dealer’s fees.

Advantages And Disadvantages Of Paper Gold


  • Paper gold is affordable and a great way to enter the gold market. There is no restriction on how small you can buy, and it doesn’t come with other costs like transportation and storage.
  • Paper gold is highly liquid, even more than physical gold and digital gold. You can trade them for cash or with several other options. This ease is something that other gold options do not have.
  • It offers flexibility for those who just want to invest in gold. An ETF is one of the most flexible ways to invest in gold.


  • With an ETF, you can’t make any claim on any physical gold because you do not own any. You only have the right to a cash settlement based on the number of shares you have.
  • Buying into an ETF also comes with all the risks that the form of gold you buy into has. When you buy into an ETF, you get shares on a gold bar, so you also face any limitation that the gold bar has.
  • ETFs are more volatile than buying physical gold. This is because the price depends on how many people are trading. Paper gold is subject to market whims.
  • When you buy paper gold, you run the risk of improper management. This is a risk you can avoid if you get a trustworthy manager, but you still need to ask if it is a risk worth taking.
  • Owning shares in an ETF comes with fees such as commissions and expense ratio.
  • You can’t bequeath your paper gold to loved ones. To gain access, they have to grow through very stressful processes.
  • While liquidation might be fast, it comes with many regulations that you must meet.

So Which Is Better?

Now that you have seen the advantages and disadvantages of each form, you can see that there is no clear better option. In this situation, what is good for the geese might not be great for the gander.

Study each form and decide which option would be better for you. What I can say is that both options offer a great way to stabilize and diversify your portfolio.

If you are not worried about the cons of both options and can afford them, invest in both to reap benefits from both ends. You should never have a portfolio that just has one form of gold. That’s investment 101!


Finally, the decision is in your hands. We can see why buying physical gold is a great idea: it has intrinsic value that will probably never wane and offers a level of stability that can’t be seen with paper gold.

However, paper gold also has great advantages that you shouldn’t ignore. Research properly, and you might find that paper gold might be the perfect complement to your gold portfolio.

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