Gold ETF vs Actual Gold

The financial market has recently been through a rollercoaster of turbulences and unexpected fluctuations. From the stock plunge in 2020 to those associated with Fintech, geopolitical developments, and even Brexit-related impact, it can be extremely difficult for new investors to make well-informed decisions without reliable guidance. Fortunately, there's an option that almost always stays consistent and doesn't suffer too heavily due to external factors - gold.

If you are looking to invest, only go with a trusted company!

>> Click Here To See Our Top 5 Recommended Precious Metals Investment Companies <<

Currently our #1 recommendation is offering up to $10,000 in free silver!

Why Gold?

  • Gold is a safe haven asset: For ages, gold has been seen as a safe-haven asset that aids in protecting wealth during economic or political turmoil. The theory behind investing in gold is that it acts as a hedge against inflation and market volatility because its price rises when other asset classes fall.
  • Gold has a store of value: Unlike cash or paper currencies, gold cannot be printed or created out of thin air. This makes it an extremely valuable asset since its supply is limited, and its intrinsic worth remains intact during financial turmoil.
  • Gold is liquid: Gold can easily be turned into cash if the need arises, unlike other forms of investments such as stocks or property. It is easy to buy and sell gold on the open market, making it an attractive asset.
  • Gold is a hedge against currency devaluation: Gold's value is not tied to any particular currency, meaning it is not subject to the same risks associated with foreign exchange. This makes it a suitable asset for those looking to protect their wealth from the potential devaluation of currencies.
  • Gold provides diversification: Investing in gold can benefit portfolio diversification, as it is uncorrelated to the stock market and other traditional asset classes. This means it can help reduce your portfolio's risk, making it an excellent option for risk-averse investors.

As long as investment returns are carefully monitored over time, doing so with gold can be a low-risk but rewarding venture.

There are two ways to invest in gold - through an ETF (Exchange Traded Fund) or by purchasing physical gold. But how does one decide between the two? Which option offers the most secure and profitable returns? What is the difference between a Gold ETF and actual gold investments, and which should you choose?

What is Actual Gold?

Gold ETF vs Actual Gold

Actual gold is the precious metal gold in its physical form. It can come in various forms, such as coins, bullion bars, and jewelry. It has been used as a form of currency for centuries and continues to be an essential asset today.

You can buy physical gold from various sources, including banks, online dealers, and pawn shops. It is essential to ensure you are dealing with a reputable gold dealer to get the best price and guarantee your purchase is genuine.

Because the supply of gold is finite, some risk will always be involved when purchasing. Also, as gold prices can fluctuate quickly, buying from a reputable source and researching before investing in physical gold is essential.

On the other hand, purchasing actual gold entails no counterparty risk because there are no contracts or intermediaries. It is also a tangible asset, allowing you to hold it in your possession, making it easier to trade or exchange.

The returns on actual physical gold depend on market conditions and supply/demand, making it difficult to predict the returns.

You need to find a buyer or seller willing to trade with you to trade or exchange physical gold. This can be difficult as it is not always easy to find someone who wants to buy or sell the same amount of physical gold at the same time.

You also need to consider storage costs for your physical gold as it can take up a large space and require special security measures.

What is a Gold ETF?

Gold ETF vs Actual Gold

A gold exchange-traded fund (ETF) is an investment vehicle that tracks the price of gold and exposes investors to its movements without having to buy physical gold. It is a mutual fund traded on a stock exchange and holds gold as its primary asset.

Because gold ETFs offer investors a convenient and cost-effective way to gain exposure to the price movements of gold without having to purchase physical bullion bars or coins, this makes them an attractive option for investors who want to diversify their holdings or hedge against inflation.

Gold ETFs also provide liquidity since they trade like stocks, meaning you can sell them at any point during the day. They also typically have lower fees and taxes than other gold investments, making them a more cost-efficient option.

To trade in ETFs, one must use a trading and demat account, just like in stocks.

A trading and demat account is an electronic system that allows individuals to purchase, sell, or trade in securities such as stocks, commodities, mutual funds, and Exchange-Traded Funds (ETFs). It also enables them to store these securities in a digital form known as the Dematerialised Account (Demat Account).

To open a trading and demat account, one must fill out an application form with their basic details such as name, address, contact number, etc.

After completing the application process, a unique trading and demat account number is generated for the applicant, which can be used for conducting transactions in the stock market or exchanging securities through a broker.

The value of a Gold ETF is based on the current gold price. One unit of Gold ETF is equivalent to one gram of gold, and the ETFs are backed by physical gold.

This means that when an investor purchases a Gold ETF, they will own the same amount of gold as a physical gold investment without having to store it or worry about its security.

Physical Gold vs. Gold ETF: Which is Better?

While the answer depends on many factors and investors have different needs, there are some clear distinctions between these two types of gold investments. These include:


Gold ETF vs Actual Gold

If you opt for physical gold, you'll likely be confronted with different prices since these depend on local costs and fees.

On the other hand, if you choose gold ETFs, the pricing is uniform and follows international standards. This means no hidden expenses are involved, and everything remains transparent throughout the process.

In addition, when investing in gold ETFs, you benefit from market-linked prices, which help ensure your investment is profitable over time.


Physical gold has historically been one of the most popular investment strategies to attain passive income. However, a significant investment is often required if you choose this route.

Gold biscuits and coins are generally available in denominations of ten grams, which can mean having to part with significant quantities of money all at once.

For investors looking for a more convenient way to buy gold and reduce their risk, Gold ETFs are a fantastic option. One unit of ETF is equivalent to one gram of gold - allowing the average investor to purchase smaller amounts at lower costs.

With these funds trading on stock markets worldwide, you have flexibility when deciding how and where to invest your money.


Regarding physical gold, purchasing jewellery can be expensive since it typically involves 20-30% extra cost. This is because such items often involve intricate craftsmanship and design.

On the other hand, buying Gold ETFs comes with a much more reasonable expense ratio of 1% and brokerage charges that are usually close to 0.5%. So if you're looking for cheaper options when investing in gold, Gold ETFs offer exceptional value for money.

Wealth Tax

Wealth tax is a levy imposed on an individual's net worth above a certain threshold. The tax rate varies depending on the country. In India, for example, if a person owns more than INR 30 lakhs in actual gold, they must pay a 1% wealth tax on the total value of their gold assets.

On the other hand, no such wealth tax is applicable when investing in Gold ETFs. This can be especially beneficial for those who would otherwise incur a significant expense for their physical gold ownership.

Ultimately this could mean better returns and more significant capital gains for those investors who opt for Gold ETFs as part of their investment portfolio.


Gains obtained within three years of investing in physical gold are taxed at the investor's income tax bracket rate. If the holding term is more than three years, the gains are taxable at a flat rate of 20%, plus indexation advantages.

Short-term gains (investments kept for less than three years) are taxed at marginal rates, while long-term gains (investments held for three years or longer) are taxed at 20.8% (including cess) with indexation and 10% without indexation.


Physical gold's return rate is calculated by subtracting the buying price and making charges from the current market price of gold. This rate of return is usually less than the inflation rate, meaning that physical gold doesn't generate much in real investments.

Conversely, Gold ETFs have a different method for assessing returns; this involves subtracting the buying price and brokerage charges from the current trading price of a gold unit on the exchange. And because of the market-linked prices, it's possible to earn more from Gold ETFs than physical gold.


Physical gold can offer excellent liquidity as one can buy gold from banks or jewelers almost anywhere in the world. It can also be exchanged through jewelers in any country.

However, the advantage of Gold ETFs is their ability to trade on the stock exchange, making purchasing and selling as simple as trading stocks. That way, investors have a fair amount of flexibility when liquidating their investments in gold.


Gold ETFs and actual gold are great options when investing in gold. Gold ETFs offer the convenience of trading on the stock market, while physical gold offers tangible portfolio diversification and a secure store of value.

Ultimately, it is up to you as an investor to choose which asset best suits your investment strategy and risk profile.

At the end of the day, gold is a powerful addition to any portfolio and can help provide long-term stability and security. If you are considering investing in gold, we suggest researching and seeking advice from professionals to ensure that you make the right choice for your needs.

We recommend researching Gold IRA companies that specialize in helping people invest in physical gold and other precious metals. These companies can provide invaluable insight into which options best suit your goals.

They also offer comprehensive services that can help you manage investments more efficiently, such as secure storage options and tax advice.

Ready to start making gold investments? Give us a call, and we'll assist you in finding the ideal Gold IRA provider. Our team of professionals has examined and researched the leading service providers in the market to give you all the information you need to get going. Contact us today and start investing in gold.

If you are looking to invest, don't forget to checkout our highest recommended companies!

>> Click Here To See Our Top 5 Recommended Precious Metals Investment Companies <<

Currently our #1 recommendation is offering up to $10,000 in free silver!

Leave a Reply

Your email address will not be published. Required fields are marked *