Gold – Big difference between Physical Gold & Paper Gold


Over the last hundreds of years, gold has ruled the heart of Indians. Families have bestowed gold over generations on the confidence, that it won’t lose value ever due to its irreplaceable timeless nature. Gold in the form of jewellery has not been purchased just for ornamental purpose, but it also gives a financial security. The metal has acted as a means to take care of financial crises and gave a viable backing system. It has been linked to prestige, prosperity, security and protection. People in India purchase it on special occasions such as Diwali, Akshaya Tritiya, birthdays, anniversaries, etc. It is a metal which doesn’t rust and is exceptional for its durability.

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Investment in the metal

Gold has made a mark for itself and has developed into far different penchant. People now invest in their favorite metal either through gold ETF’s, gold mutual funds and gold-associated schemes. It is the safest asset and also decides the health of the economy.

It’s worth is determined by the market 24 hours a day and all 7 days in a week. Its trade is primarily a sentiment. Many investors look forward to buy the safest metal, especially when the market is ambiguous. One question remains in their mind – What is better buying gold stocks or physical form? Through this blog, you will get to know the difference between both the forms.

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The most important thing to remember is whether you invest in gold stock or physical form, it is the best form of investment. It is also used as a windbreak against a hostile market. When the market is down, buying the metal can be the safest and the most attractive option.

What is the difference between gold as a stock or physical form?

There is a big difference between both the investments.

Physical Form:

This provides the exposure to the gold directly. Bullion is a physical form of the metal, which an investor purchases in bulk. Buying the metal in the form of jewellery, bullions, coins or bars is the most common way of investment by the investors. So, people who prefer to buy physical form they go for these options. Investors are more attracted towards bar and bullions as they are very pure in nature. It is easy to find buyers for bullions and bars as they are very easily recognizable. The disadvantage in this form of investment is storage issue and its safety.

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People do buy jewellery also in the physical form. The ornaments are quite attractive and striking. They are also part of the investment plan. But, the major drawback is the making & design charges are high, which has to be borne by the buyer. There is a big risk of theft and losing it as well.

Gold Stock (Paper form):

Purchasing gold in the form of paper is another most popular form. An investor can buy them through Gold ETF – i.e. exchange-traded funds.

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An investor can buy ETF in the similar manner as a share on a stock exchange. You can easily trade them in the market. This even lets the buyer to purchase gold almost at the actual cost. ETF is also very transparent in nature. An investor can access the gold without any storage costs or safety risks of holding physical gold. For this, you need to open a Demat account with your bank or with a stockbroker. It is held in a digital form, so cannot be stolen. In  ETF, the buyer loses some percentage of their investment every year to the stock’s expense ratio. It is an annual fee against the management and administrative cost. Different types of paper form are: sovereign gold bonds, gold fund and digital gold.

In the end:

It is advisable to diversify your investment and don’t put your eggs in one basket. If you are planning to buy the metal, do proper research before you start to invest. Paper form and physical form have their own advantages and disadvantages. Though, gold is a safe form of investment.

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By Poonam

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