Physical ownership of gold involves a range of costs, including storage and insurance costs, as well as the transaction fees and markups associated with buying and selling the commodity. With gold ETFs and other paper money options, you can easily buy, sell, and trade anytime, without high costs or scheduling conflicts. Paper gold offers better flexibility than physical gold, especially if you don’t have a specific long-term plan. The tax treatment of profits from the sale of physical gold is similar to that of investments
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If you invest in physical gold over the long term, i.e. if you sell it 3 years ago on the other hand, the tax treatment depends on the tax bracket you fall into depending on your income bracket. In contrast, paper gold most often reflects the price of gold, but only in the form of a paper asset. In other words, a piece of paper is essentially a substitute for physical gold.
Types of paper gold include exchange-traded funds, gold futures, and gold options. Think of paper gold as a catch-all term for buying this type of gold-related asset. When you buy gold certificates, for example, you trust that the seller will provide the associated physical gold for purchase. The idea of paper gold dates back to 1870, when the United States and other nations adopted the gold standard policy
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I calculated my own figures for the gold in the ETFs, which I compared in the article, and the total would amount to around 1,052 tons, which is 45% of the gold stored ex-BE in the London Vaults. I’ve omitted “tiny” or highly illiquid ETFs such as the Physical Asian Gold Shares (AGOL) and Gold Futures ETFs. Exchange traded funds (ETFs) are a typical example of a gold-backed investment that rises and falls with the price of gold. At the height of the gold standard, the United States used gold certificates as a convenient
form of money.
One gold investor could prefer the security of owning the physical gold and another could choose to remain invested only in ETFs, and both could be right. We recommend weighing up the pros and cons of physical gold versus paper gold before making any decisions. Knowing the differences between physical gold and paper gold can help you make an informed decision about your savings. Overall, physical gold can offer a different level of protection for your portfolio than
paper gold.
Request your free gold information pack to find out everything you need to know about buying precious metals, including physical gold. Of course, the price can fluctuate, but given that gold is a scarce resource in the world, you can be sure that you will always get a certain value for it. In my opinion, the risk of gold falling from this point on is higher than the risk that gold will appreciate from that point on, particularly in relation to the USA. Paper gold only offers profits in certain places, while physical gold is beneficial regardless of where you go
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