Physical gold, gold ETFs and mining stocks: three ways to invest
What you actually own with each option, how its price moves, and the risks of each.
When someone says "investing in gold" they can mean very different things. The three most common are physical gold, gold ETFs and mining company shares. All three are linked to the gold price, but they don't behave the same way.
Physical gold
Coins and bars you can hold. What you buy is the metal itself.
- Main advantage: it doesn't depend on a company or intermediary keeping its promises. If you store it yourself, you control it.
- Costs: you pay a markup over spot when buying (the "premium") and are paid below spot when selling. Storing it properly also costs money (a safe deposit box, insurance).
- Risks: theft, loss, counterfeits, and the difficulty of selling quickly at a good price.
- Who it tends to suit: people who want a reserve that doesn't depend on the financial system and plan to hold it for a long time.
Investment coins and bars are usually high purity. Jewelry, by contrast, costs far more than its gold because of the design work, and when sold usually only the gold is paid for.
Gold ETFs
An ETF (exchange-traded fund) is a fund you buy and sell on a stock exchange like a share. A gold ETF aims to track the gold price, and many say their shares are backed by physical gold held by a custodian.
- Main advantage: you can buy and sell in seconds through a broker, in small amounts, without storing anything.
- Costs: the fund's annual fee (expense ratio), your broker's fees and, where relevant, the cost of converting your currency into the fund's currency.
- Risks: you depend on the fund, the custodian and your broker. You don't hold the metal.
- Worth knowing: the country where the fund is domiciled can change the taxes you pay. See the tax guide.
Mining company shares
Shares in companies that mine gold. You're not buying gold: you're buying part of a business.
- Why they move differently: their profits depend on the gold price, but also on production costs, debt, management and the countries they operate in.
- Behavior: they often rise or fall more than gold itself, in both directions.
- Extra risks: operational, regulatory or political problems at the company, which don't affect gold itself.
How they compare
| Physical gold | Gold ETF | Mining shares | |
|---|---|---|---|
| What you own | Metal | A share of a fund | Part of a company |
| Tracks gold | Directly | Almost directly | Indirectly |
| Ease of buying and selling | Low | High | High |
| Storage cost | Yes | Included in the fund fee | No |
No option is best for everyone. It depends on why you want gold, for how long, and which risks you'd rather take.
FAQ
Is a gold ETF the same as owning gold?
Not exactly. It gives you exposure to the gold price, but what you own is a share of a fund, not the metal.
Are mining shares a cheaper way to buy gold?
No. They're a different investment with company-specific risks, and they can behave very differently from gold.
Which option has the lowest costs?
It depends on the amount, the time frame and your broker. See the costs guide for what to ask in each case.