Gold vs ETFs: which is more profitable to invest in?


Investments in gold are considered one of the most reliable. Gold retains a stable price, it is not subject to market collapse, and in times of crisis, on the contrary, it only increases in value. Gold can be measured physically, if you invest your money in gold bars, gold coins, or jewelry. But there is an alternative option for investing in gold - gold ETFs. These are analogous to stocks in the stock market, meant to invest directly in physical gold. So which is better: gold or ETFs? Let's figure it out together.

5 reasons to invest in physical gold

  1. Psychological. We've already posted about how many people are hesitant about investing in virtual instruments (stocks, cryptocurrency, bonds. Physical gold is tangible, you can keep it with you or put it in a bank vault - but you can be sure that it is on hand and you can perform transactions with it without any delay when you need it.
  2. ETF contracts are equal to gold, of course. But you won't physically get the metal in your hands. What you'll get instead is the equivalent value of your gold savings in fiat money at the time of the exchange.
  3. ETFs are considered to enable investment in gold at a lower cost than buying physical gold.  If you take a brief glance, it would seem to be true. When you buy gold, you'll have to pay a transaction fee, find a secure vault and rent it, or at least buy a safe for the bars to set up at your home. You may also need to insure your investment, because this is a guarantee that if you lose your gold, you will be compensated. But it's not so simple with ETFs either. It's quite common for ETF contracts to cost more than the equivalent of the gold assigned to them. In addition, when investing in an ETF, you'll still have to pay transaction fees, your broker's fees, and cover the fund's expenses. Of course, experienced traders are able to minimize these costs, but for beginners, investing in an ETF can come at a steep price.
  4. ​​Liquidity is another reason why physical gold wins over ETFs. Gold fund contracts can be used when playing the stock market. You can both sell them and buy them. Not only can you sell gold at any time to a bank, pawn shop, or directly negotiate a contract with an industrial business interested in your gold supply. You can use gold as the base for jewelry creation, invest it for profit in a bank, accumulate it, or give it as a gift. Admit the fact that a gift of gold bar looks like a much more significant present than an ETF contract as a gift.
  5. And lastly, there is the question of possession. When you buy bars or coins, you become the owner of the gold without any reservations. ETF contracts do not make you an owner of the gold. And their independence from a market crash or crisis would be questionable.

Even though ETF contracts seem to be a more modern, convenient and liquid way to invest in gold, the traditional way of buying physical gold hasn't given up its position. It's a more conservative investment option, yet more reliable. It is worth buying ETF contracts if you enjoy playing the stock market and have already acquired considerable trading experience. In this case, your trades can be profitable. Those who want to diversify their investment portfolio, but are just beginning their journey as an investor, it is better to choose physical gold - it has less stress, and psychologically you can always be confident about the future, when your asset has a gold reserve that can be touched.