When it comes to investing in gold, there are two main options: physical gold and paper gold. Physical gold refers to gold in its tangible form, such as bars, coins, and jewelry, while paper gold is gold that is held on paper or electronically. On the other hand, paper gold is the term applied to investments that cover exchange traded funds or gold ETFs. If you're familiar with how mutual funds work, gold ETFs won't blow your mind.
Basically, your fund buys a certain amount of gold and issues shares of that fund. In theory, the value of your shares will keep pace with the price of gold and, as a result, will rise and fall. Compared to paper gold and fiat currencies, physical gold is much more stable. It can resist political and government interference, since its value extends beyond national borders. And while other investments and fiat currencies have come and gone, physical gold is still highly valued, even after thousands of years. Liquidity is also a concern that comes to the mind of most investors when comparing these two types of assets.
When it comes down to it, paper gold has greater liquidity than physical gold for retail investors, since it can be easily traded. This provides more flexibility when it comes to your investment strategies, since you can adapt more easily. Paper gold assets are designed to track the price of gold and offer investors exposure without having to worry about buying and storing physical assets. These investments are known as paper gold because they involve buying and selling contracts rather than physical assets. Some exchanges allow investors to exchange their paper gold holdings for physical gold with some specific stipulations.
The party that offers exposure to these assets usually has a certain amount of tangible gold to support their investments. Working with a precious metals advisor can make it easier to determine which gold assets work best for your investment objectives. Each approach comes with its own set of advantages and considerations, so choosing between physical gold and paper gold is an important decision for investors. Paper gold instruments, such as exchange traded funds (ETFs) or gold futures contracts, facilitate trading. Many investors are perplexed by the difference in value between the spot price of gold and physical assets in gold.
Depending on your investment strategies, using a gold ETF in your portfolio has a lot of positive aspects. In addition, the limited supply and high demand for physical gold contribute to its higher price compared to paper gold. In its physical form, gold offers true diversity because it is separate from factors that influence the price of paper assets, such as stocks and paper gold. Choose your path and begin your investment journey, guided by the golden secrets of physical gold and the paper footprints of your brilliant counterpart. If the costs or difficulties involved in physical or paper gold don't influence you in one way or another, many people find ways to allow their investment portfolio to include both.