There are two broad ways to hold exposure to gold. You can own the metal itself, or you can hold a financial product that tracks the gold price. They are genuinely different things, and the differences matter in specific circumstances rather than all the time.
We sell physical metal, so treat what follows accordingly. We have tried to set out the trade offs fairly rather than argue for one side.
What each one actually is
Physical bullion is metal you own outright. A coin or bar in your possession, or held in your name in a vault. There is no issuer and no counterparty. The metal exists whether or not any institution continues to function.
Gold ETFs and similar products are securities traded on an exchange that track the gold price. Depending on the structure, the fund may hold allocated metal, unallocated metal, or derivatives. You own units in a fund, not metal, and your claim runs through a chain of institutions.
Where paper products are genuinely better
It would be dishonest not to say this plainly.
Liquidity and speed. An ETF can be bought or sold in seconds during market hours at a very narrow spread. Physical requires finding a buyer, verification and handling.
No storage problem. No safe, no insurance endorsement, no space. For large amounts this is a real advantage, particularly with silver.
Lower cost to enter and exit. Trading costs on an ETF are typically far below the premium and spread on physical metal.
Easy fractional exposure. You can hold a very small amount, and add in small increments, without the premium penalty that fractional bullion carries.
For someone whose goal is tracking the gold price efficiently within a portfolio, these are substantial points.
Where physical is different
No counterparty. This is the central distinction. An ETF depends on a fund manager, a custodian, a trustee and an exchange. Each is a link that must hold. Physical metal in your possession depends on none of them.
You can take delivery. Most retail-scale ETF holdings cannot be redeemed for metal. Redemption usually requires institutional-size holdings. If holding the actual metal is the point, a fund does not deliver it.
No ongoing fee. ETFs charge an annual management fee deducted from the holding, so the amount of gold each unit represents slowly declines. Physical metal has an upfront premium and then no ongoing cost unless you pay for storage.
Privacy and independence. Physical metal held personally does not sit inside the financial system.
The question that decides it
Ask what you actually want the gold to do.
If you want price exposure, easy trading and no storage burden, a fund does that efficiently and physical metal is a clumsy substitute.
If the point is owning a tangible asset that exists outside any institution, then a security tracking the price is not the same thing and does not become the same thing by being cheaper.
Plenty of people hold both, for exactly those different reasons.
Reading the structure
If you do look at a paper product, the structure matters more than the ticker. Whether the fund holds allocated metal, unallocated metal or derivatives changes the risk considerably. Whether it is physically backed at all is the first question. The prospectus states this, and it is worth reading rather than assuming.
Frequently asked questions
What is the difference between physical gold and a gold ETF?
Physical gold is metal you own outright with no counterparty. An ETF is a security tracking the gold price, where your claim runs through a fund manager and custodian.
Can I take delivery of gold from an ETF?
Usually not at retail scale. Redemption for metal generally requires institutional-size holdings. Check the specific product.
Is an ETF cheaper than physical gold?
Entry and exit costs are typically lower, but ETFs charge an ongoing management fee. Physical carries an upfront premium and then no recurring cost unless stored professionally.
Which is better?
They do different jobs. Funds suit efficient price exposure. Physical suits owning a tangible asset outside the financial system.
Browse physical gold
We stock gold coins, rounds and bars from one gram upward. See the range or read our gold buying guide.
This article compares two ways of holding gold exposure and is general information, not financial advice. We sell physical bullion and do not offer securities. Speak to a licensed financial adviser about your own circumstances.