Economic uncertainty and market instability make diversification into gold a smart investment choice. Gold buyers buy physical gold for its tangible properties and proven value and freedom from digital systems; however, gold ETFs and digital gold can provide convenience, liquidity and negate the need for physical storage.
Explore the benefits of investing in physical gold, understand why do people invest in physical gold and review gold ETF vs physical gold to discover whether physical gold is the right investment for you. Whether it’s your first experience of buying physical gold, or if you’re considering purchasing digital gold, this article will help explore your gold buying options and help you build a balanced and resilient portfolio.
Types of Physical Gold to Invest In
Making your first physical gold purchase can raise questions – why buy a gold bar? Why buy gold jewellery for investment? Or why buy gold coins? What are your options and their benefits?
Gold bars come in a range of sizes and weights, enabling investors to purchase according to their budget and storage options. Minted bars are cut from gold sheets to give a uniform finish and are sold in smaller denominations from 1g to 100g. Minted bars are often sealed in packaging and accompanied by a certificate of authenticity. Molten gold is poured into moulds to give a more rustic appearance and tends to be produced in larger weights of 250g and upwards. LBMA bars are the standard used by central banks and institutions, like the Royal Mint. LBMA bars are typically 400 troy ounces (or 12.4kg)
Why Buy Gold Bars
- Gold bars offer high value per gram, as production costs are lower than coins
- Most investment-grade bars are 99.99% pure (24k) gold
- Gold bars contain significant value in a compact form
- Many reputable refineries, like the Royal Mint, produce easily authenticated bars that trade well globally
- Bars offer a good long-term investment opportunity for investors seeking stability
Why Buy Gold Coins
- Gold coins offer strong liquidity and are easy to sell
- Most investment-grade coins are 99.99% pure (24k) gold
- Coins give flexibility and the ability to sell in small packages
- Minted by trusted national mints, coins give guaranteed weight, purity and strong global recognition. Sovereigns, Britannias and Krugerrands are globally valued for purity, liquidity, minting credentials and suitability for long-term investment
- Collectible coins may hold additional collectible or historical value and financial worth
- Collectible gold coins, such as Sovereigns and Britannias, are Capital Gains Tax exempt
Investing in Gold Jewellery as an Investment
- Gold jewellery holds its gold value very well, but can often attract even higher premiums around craftsmanship, brand and design when looking to sell gold jewellery
- Purity will vary, which may impact gold jewellery’s value
- Jewellery offers a highly portable form of investment
- Gold jewellery is often easier to sell than investment-grade gold, as there is a higher demand, and people will buy it for more than just its investment opportunity. Learn how to sell your gold jewellery
Unlike gold ETFs or digital gold, physical bars, coins and gold jewellery are owned outright, without reliance on a third party.
Different Types of Physical Gold for Investment – Gold Bars, Gold Coins, Gold Nuggets
Buying Physical Gold as an Investment
Physical gold’s value rises in line with economic and geopolitical instability factors that contribute to a rise in supply, demand and value. Considered a robust long-term hedge against inflation, gold prices often move inversely to the U.S. dollar, meaning that a weak dollar drives up gold’s worth.
When there is low global trust between nations and markets, gold’s independence protects its liquidity and its reliable performance over centuries shows how it can protect wealth across generations.
Buying Physical Gold – Risks and Drawbacks
There are benefits to buying physical gold. It’s a strong investment performer, and it is one of the easier tangible investments to store, when compared to fine art and wines or whiskeys. There is a finite supply of gold, and recent global instability means central banks’ demand for gold makes it a strong investment performer. Gold pawnbroking performances reflect the gold market’s rising prices, confirming its investment credentials.
However, the decision to purchase physical gold does come with some associated risk. Physical gold requires secure storage at home or in a vault, which attracts additional costs. While highly tradable, selling gold can mean sourcing a reputable dealer and agreeing on a commission rate, with live gold prices in perpetual flux. Buying gold coins or gold bars will attract premiums above the spot price, which reflect production and distribution costs and market demand. As an investment, gold will not produce any interest or dividends, with returns solely reliant on market movement.
While gold prices can fluctuate, gold’s trading history evidences resilience, especially in uncertain economic environments.
Gold Ring Being Inspected
Gold ETF vs Physical Gold vs Digital Gold
How does physical gold stack up against Gold ETF and digital gold?
What is a Gold ETF?
A Gold ETF (Gold Exchange Traded Fund) is a fund traded on the stock market that tracks the price of gold. Investors buy units in the fund rather than owning specific gold bars. Critically, the gold does not always need to be physically allocated to each investor, meaning holdings may not be directly matched to identifiable bullion. Gold ETFs also rely on third-party management and custodians, adding layers of counterparty risk. This was highlighted during periods of market disruption, such as the temporary shutdown of the London Gold Exchange in 2011, which restricted investor access.
What is Digital Gold?
Digital gold allows investors to buy gold online in small denominations, with each purchase typically backed by physical gold stored in secure, insured vaults. Unlike Gold ETFs, reputable digital gold platforms allocate physical bullion to the investor on a one-to-one basis. Ownership is recorded digitally, making it easy to buy, sell, or even redeem for physical gold, without the logistical challenges of storing bullion at home.
Which is Right for You?
| Factor | Physical Gold | Gold ETF | Digital Gold |
| Ownership | Direct, tangible ownership of the gold | Indirect ownership through fund units, with no claim to specific gold bars | Direct ownership of allocated physical gold is recorded digitally |
| Liquidity | May require a dealer to sell | Easily traded on stock exchanges during market hours | High liquidity; can be bought or sold online, often 24/7 |
| Storage | Secure home safe or professional vault storage | Held digitally by the fund via custodians | Stored in insured, professional vaults by the provider |
| Fees | Potential storage, insurance, and dealer commissions | Management fees and brokerage costs | Platform fees are usually lower than physical storage and ETF management fees |
| Risk | Loss, theft, and price fluctuations | Counterparty risk from fund manager, custodian, or platform | Reduced handling risk; counterparty risk depends on the provider and the custody model |
| Accessibility | Higher upfront cost for bars or coins | Requires a brokerage account and market access | Low minimum investment, accessible to first-time investors |
Physical gold appeals to those who value complete independence and tangible ownership. Gold ETFs suit investors seeking short-term exposure within traditional markets. Digital gold bridges the gap, offering direct ownership of physical gold with the convenience, flexibility, and lower barriers of digital investing, making it an increasingly popular choice for modern investors looking to buy and invest in gold without the complications of physical storage.
Is Physical Gold a Good Investment?
When weighing up buying physical gold as an investment, versus digital gold or another form of investment entirely, understanding your investment goals is essential. Buying physical gold targets long-term wealth preservation and offers a tangible investment, unlike stock and shares or gold ETFs. Gold offers robust investment portfolio diversification with physical gold offering a hedge against volatile market conditions. If you need investment returns at speed, then physical gold may not offer the access to liquidity that you need. Gold investments do not offer dividends or interest, meaning that there will be no regular returns or income streams from your gold investment. If you have a portfolio that is heavy with stocks and shares and non-tangible investments, you may find that you don’t want to deal with the costs of secure storage and vaults for owning gold.
Conclusion: Is Physical Gold the Right Investment for You?
Physical gold is one of the most robust and trusted ways to protect wealth through investment, especially against a backdrop of economic and geopolitical instability. A tangible investment, buying physical gold offers an additional layer of security that neither digital gold, ETF gold, nor traditional stocks and shares can. The rising demand for physical gold from central banks is helping to push gold prices up, which also makes it a good time to consider selling gold that you may already hold.
Whether you’re ascertaining where to purchase physical gold or you’re reviewing how to buy physical gold for investment as a beginner, buying physical gold bars, coins or jewellery and owning physical gold ensures that you are tangibly in control of your assets and offers a dependable hedge against inflation and market volatility.
For investors and gold buyers seeking a robust, reliable and globally recognised investment, buying physical gold is a highly compelling option. By understanding the differences between physical and digital ETF gold options and aligning your choices with your investment objectives, buying physical gold will see you join a wealth of individuals with a stronger, more resilient portfolio with their gold investments offering stability for the future and the ability to sell your physical gold investment for cash.
