The key main difference between the two forms of investment is that an investor only actually owns gold himself through physical gold. An ETF only offers an equivalent amount of gold, and if the trust that runs the ETF were to collapse, there is a chance that an investor will not get their original investment back. Gold ETFs and physical gold are different forms of investing in gold. Both lead to the same end goal, which is portfolio diversification.
However, both differ in terms of security and liquidity. Gold ETFs may be safer, but physical gold is generally accepted. Physical gold is very liquid compared to all other forms of gold. Gold ETFs are for investment purposes only.
While physical gold is intended for both investment and consumption. Buying and selling gold ETFs (investment funds) is more transparent. At the same time, physical gold poses no counterparty risk. It is therefore important for individuals to consider their needs and goals before choosing a form of gold investment.
As for taxation, physical gold is subject to wealth taxes and value added tax, both of which do not apply to ETFs. Another disadvantage of physical investments is physical storage. Buyers need to find a place to store their gold, and that often comes at a high cost. Physical gold is always at risk of theft at the time of transportation or storage.
For the gold ETF, however, the fund will take care of that. From an investment perspective, experts believe that a gold ETF is better than physical gold for a number of reasons. In India, gold is purchased in physical form in the form of gold coins, bars, jewelry and gold cookies. Investors keep the gold ETFs in a Demat account and don’t have to worry about their safety, as is the case with physical gold.
The GraniteShares Gold Trust ETF tries to reflect the performance of the gold price by investing in physical gold bars. In recent years, however, the government has introduced alternatives to physical gold in the form of gold ETFs and government gold bonds. In addition, the ETF can decide whether to pay you in gold or in cash, and only if it is backed by physical gold at all. The only counterargument to these benefits is that gold ETF shares are stored in a Demat account. So buying gold ETFs requires a Demat account, but even if you don’t have a Demat account, you can invest in funds that invest in gold ETFs.
The gold market is highly liquid and there are a number of ways investors can invest in this precious metal, including holding physical gold (in other words gold coins and gold bars) and exchange-traded funds (ETFs). Even if a gold coin is issued at a monetary face value, its market value is linked to the value of its fine gold content. The aforementioned SPDR Gold Shares ETF is designed to replicate the spot price of gold bars, and the fund holds 100% physical gold assets in HSBC’s vault in London. Purpose Investments offers this ETF, which is backed by both gold bars and gold certificates, the latter of which could pose a higher risk.
Before investing, however, everyone wants to know whether buying gold in the form of jewelry or coins is better or whether it is better to invest in a gold ETF. The transaction costs associated with gold ETFs are often lower than the costs of buying, storing, and insuring physical gold. Here are a number of reasons that prove that the hype about gold funds being better than managing physical gold is justified. The iShares Gold Trust is designed to generally match the daily price trend of gold bars, and the shares are backed by physical gold.
Online gold dealers make it easy to buy high-quality physical gold and have it delivered to your home or stored in a secure vault.