You've decided to add gold to your investment portfolio, but you’re not sure what to buy — physical gold or paper gold? Take a look at the key factors that can help you make the choice.

Should I Buy Paper Gold?

GA News

The Spotlight

Newsdesk

Studies & research

If you’ve been looking at how to invest in gold, chances are you might have come across the notion of paper gold. To some it might look like an easier way to buy gold, while others see it as a riskier asset that isn’t actually always backed by the physical precious metal.

So what is paper gold, exactly? How does it work? And, most importantly, how is it different from physical gold?

Paper gold is essentially a catch-all term for different types of 

 that reflect the spot price of gold, but are not gold themselves. In other words, 

with paper gold, you don’t own the actual physical metal

Now, let’s see what are the key types of paper gold.

Basically, there are three main types of paper gold — exchange-traded funds (ETFs), gold futures and gold certificates.

 gold ETFs are commodity funds that act and trade like individual stocks. Gold-backed ETFs give investors exposure to the gold price without having to buy the physical metal.

 in principle, ETFs are shares of gold owned by the fund, and few of them actually hold physical gold. This basically means that 

even if you redeem a gold ETF, you won’t get the actual physical product.

Instead, you will receive the cash equivalent

. ETFs usually trade through online brokers and broker-dealers.

 to put it simply, gold futures are a financial contract between an investor and a seller where an investor agrees to buy a specific amount of gold at a preset price and date.

 buying a gold futures contract doesn't mean you actually take immediate possession of the physical asset. Rather, a

 futures contract gives a buyer the right to get a precious metal at a future date

. Gold futures usually trade on Comex — a futures and options market to trade commodities like silver, gold, aluminum, and copper. 

 as a type of paper gold, gold certificates are less popular today than gold futures or ETFs. While they are still being issued by some banks and companies, in the U.S., gold certificates now only have a collectible value.

gold certificates allow you to own physical gold without actually taking possession of it

. A certificate is basically a proof that you own a certain amount of gold, which is usually stored in a secure vault by the authority that issues gold certificates.

Indeed, paper gold has several advantages that might make it look attractive for some investors. Here they are:

generally, gold ETF shares can be converted for cash quite easily through a broker. They are usually traded on stock exchanges, and you can make a transaction any time during market hours. 

one can invest practically any amount of money

. The minimum investment limit is 1 unit, which is equivalent to 1g of gold. 

 with paper gold, you don’t pay shipping or delivery fees, only the commission a broker charges you for the transaction. The same goes for storage — ETFs don’t have extra storage costs because, like shares, they’re purchased on a stock exchange.

 unlike physical gold that has to be stored in a vault for safety, gold ETFs only exist in digital form. However, 

this digital form could possibly make them vulnerable to server issues or hacking

And yet, like any other asset, paper gold comes with a number of risks that are important to keep in mind, especially for beginning investors, before making a decision to invest in paper gold assets.

 this is one of the most common risks usually associated with paper gold. A company or broker in charge of your ETFs could go bankrupt or fail to live up to their obligations, misrepresenting the true state of their portfolio.

 in reality, the institution that sold you an ETF share might only hold a fraction of your asset’s value in physical metal. So, for example, if too many investors wanted to cash in their paper gold, the fund that sold it to them might not have enough of the physical metal to repay everyone.

tracking errors arise mainly due to transaction costs, cash amount held by an ETF as well as the expenses charged for managing the fund. A slight degree of a tracking error is somewhat natural in any ETF product, however, it may also lead to an unexpected profit or loss.

the gold futures market can be quite volatile, partly due to the speculative nature of gold futures assets. This basically means that if there is a chance to make 2,000 U.S. dollars, there is also a possibility to lose 2,000 U.S. dollars.

Is physical gold a better investment than paper gold? 

For an inexperienced investor, paper gold and physical gold might look like similar portfolio options but, they’re in fact very different.

Advocates of paper gold tend to highlight 

several risks of investing in physical gold

The costs and risks associated with storing and insuring your gold;

But in reality, you can easily avoid those risks by choosing the right 

And there’s a number of factors that actually make physical metal a much safer investment than paper gold:

 with physical gold you don’t rely on any third-party individual or company to hold and own your wealth for you. Whether you decide to store it at home at your own expense, or with free and insured storage with GOLD AVENUE, 

with physical gold, it’s you who hold it

 unlike paper gold, paper currencies, stocks, bonds, or mutual funds, physical 

gold is a tangible asset with an intrinsic value that cannot go to zero

. Also, when you own a gold coin or bar, it means you own a physical product that holds value as an investment as well as a form of currency.

Reliable hedge against economic downturns:

 physical precious metals have always been considered a hedge against economic and societal downturns such as a breakdown of the monetary system, for example. It’s not that we’re saying it will happen any time soon, but it will always be easier to pay for your groceries with a silver coin than an ETF. 🙃

Fundamentally, a decision of whether to buy paper gold or not largely depends on one’s investment goals and strategy.

If you are an experienced investor looking for a short-term exposure to the gold market and are ready to accept the risks coming from a possible higher volatility and counterparties, paper gold could be a choice. However, 

if you want to make sure your investment is protected, fully allocated (owned entirely by you), and will retain its value in the long-term, then physical gold could be a better choice

if you’re looking to diversify your portfolio, investing in both physical and paper gold might an option

. As we’ve explained, while it can help you get short-term exposure to the gold price, potential risks attached to paper gold could result in large gains just as well as severe losses.

 So, one way to protect oneself from such risk could be by hedging this riskier investment with a more stable and safe asset 

Gold offers several powerful advantages as a store of value. Discover why more and more investors are turning to this precious metal.

What are the advantages of gold compared to other investments?

A look at the strong changes in demand in the gold sector y-o-y.

A Shift in Gold Demand Trends

Good thing central banks can't print gold. 😉

21.9% Annual Inflation... and Counting

Despite slowing down, the frenzy around silver has kept prices up, and demand for physical bars and coins strong, while doubts over the state of the silver stocks emerge. Is Silver Setting the Stage for a Breakout?

Is Silver Setting the Stage for a Breakout?

We are thrilled to announce that our CEO Alessandro Soldati was invited for an open and lively discussion on a popular YouTube channel Frugalisme et Liberte Financiere.

How to Buy Physical Gold Online in 2022?

Choosing between gold and silver: A comparison to help you decide which metal might be right for you.

Should You Buy Gold or Silver?

What is “silversqueeze”? Learn how supply, demand, and investor behaviour affect silver prices – and why current market tension isn’t a true silver short or silver squeeze yet.

Silver Squeeze: What’s Really Happening in the Silver Market?

The Federal Reserve’s inflation goals are getting risky and could cause the rate to overheat dangerously if they were to push it too hard.

The Fed’s Dangerous Game

Meet GOLD AVENUE CEO, Alessandro Soldati, in our first Q&A video session!

Q&A with our CEO - Alessandro Soldati

The Fed desperately wants higher inflation that would exceed its 2% target. Will the ECB follow the lead? It looks like it. 

Does the European Central Bank Want High Inflation?

Russia’s decision to remove the US dollar assets from its sovereign wealth fund and partially replace them by gold boosts the yellow metal’s importance as a strategic asset.

Russia's New Move on Gold

After yet another central bank starts considering negative interest rates, we’re taking a look at how unlimited debt can impact physical gold investment.

Is Unlimited Debt Good for Gold?

World markets have taken a hit as the Russian invasion of Ukraine spooked investors around the globe. Here’s what you can do right now to protect your investment portfolio and gold savings.

Ukraine-Russia Conflict: What Impact on Your Savings?

You probably noticed certain industries and communities aren’t bouncing back as quickly as others during times of recession or economic crisis. That’s what the K-shaped recovery is all about.

What the K-Shaped Recovery Means for Gold

You want to start investing but you don't know where to start? Here is a beginner’s guide to investing.

How to Start Investing in 2023? Here's What You Need to Know

The #silversqueeze movement took the investment world by storm and has the potential of shaking up the silver market. Will it be here for the long term?

#silversqueeze

Here’s a rare sneak peek into one of the world’s biggest gold refineries. 

How Do You Make Gold Bars?

In 2021, central banks continued buying gold, with emerging countries stepping up as key net buyers. Do you wonder why? Here’s what you need to know.

Central Bank Gold Buying Explained

With inflation soaring in Europe and the U.S, learn how to navigate higher consumer prices from this great personal finance video from Sorelle Amore.

5 Ways to Protect Your Wealth From Inflation

After Russia’s invasion of Ukraine, investors rushed to gold, the world’s oldest safe-haven asset, pushing its price to a new record. Why did this happen? Here’s what you need to know. 

Investor Gold Demand is Booming Right Now: Here's Why 

On August 15, 1971, U.S. President Richard Nixon possibly made the biggest monetary error in history. A video from Libre & Riche will tell you why.

All You Need to Know About the World’s Greatest Monetary Catastrophe

The U.S. Federal Reserve has announced its first interest rate hike since 2018. What could this mean for the gold price? Here’s what you need to know. 

How Interest Rate Hikes Affect the Gold Price

It seems that the ongoing US presidential election has not changed the situation in the gold market so far as the macro backdrop remains quite favorable to the yellow metal.

Trump + Biden = Gold?

Do you want to buy gold bars but are not sure where to start? Here’s what you need to know to build your precious metals portfolio in a smart way.

How Do You Buy Physical Gold Bars? 

The backdrop of global inflation in the U.S. and Europe was already worrying. Now, Russia’s invasion of Ukraine is making the situation even worse, including sending gas prices soaring to record levels. Here’s what you need to know.

Here’s How Rising Gas Prices and Inflation Fuel Each Other

It looks like stagflation could be here soon. Here’s what you need to know to understand the economic phenomenon that stifled growth through the 1970s.

What Is Stagflation and Why Should We Worry About It?

Leading world banks say we should get ready for a new recession shock. What does it mean exactly, and what investments might be the best place to stash your hard-earned money?

Recession Risk is Rising, Economists Say. Here's What It Means for Investors

If you are a parent, you probably want to find the best way to set your kids up for financial success. Here’s how your gold savings will help you start building their lifelong wealth.

3 Ways Gold Savings Can Benefit Your Children and Family

Easy is always right. Especially when it comes to buying precious metals. If you still don’t know what’s the easiest way to buy gold, you’re in the right place.

The Easiest Way to Buy Gold and Precious Metals

If your children are the lucky ones to get a hoard of gold as an inheritance, there are 4 things you should do before passing it on to them.

4 Things to Remember When Buying Gold for Your Children

Here are the 4 handy tips you can immediately put into practice when buying physical gold for the first time.

How Do You Buy Gold? A Beginner’s Guide

Swissmint made history as they issued their first-ever 50-franc Vreneli gold coin on May 11, 2022, making a very special coin even more popular in Switzerland and beyond.

Swissmint Issues a New Limited-Edition Vreneli Coin

The end of Bretton Woods seems to be an essential reason behind the widening of the productivity-pay gap that reveals gold's influence as a source of stability.

What is the Productivity–Pay Gap?

A quick overview of the performance of gold versus some of the major commodities for the first half of 2020.

🔥 Gold VS Commodities 🔥

You read in the press that persistently high inflation has finally peaked and should be going down soon. But the latest CPI numbers show it might not be entirely true. Here’s why.

Has Inflation Peaked? Here's What You Need to Know to Understand Inflation

Since the start of 2022, the stock market has been on a wild ride, while gold was close to hitting a new record high in March. Which has performed better so far? We guess you already know.🙃

Gold Price Vs. Stock Market: 2022 Edition

While the Fed is taking a dovish stance, investors are fearing a real rise in inflation in the near future.

Is the Fed Moving Too Slow to Counter Inflation?

Have you been thinking of investing in platinum bars and coins? Here’s what you need to know about one of the world’s rarest precious metals.

Investing in Platinum: A Beginner’s Guide

Thanks to GOLD AVENUE, Tibo InShape was able to enter the famous gold refinery MKS PAMP. Watch the video and follow Tibo in his discovery of gold!

Tibo InShape & GOLD AVENUE: visit of a gold refinery in Switzerland!

GOLD AVENUE’s CEO Alessandro Soldati was selected by Bilan magazine as one of French-speaking Switzerland's most promising young entrepreneurs.

Bilan Chooses GOLD AVENUE Among Switzerland’s Top Young Startups

Country-specific guides to understand gold as an investment in 2021 from the World Gold Council.

The relevance of gold as a strategic asset: 2021

Famous precious metal skeptic buys gold as a hedge against accelerating inflation which he says is “reminiscent of the 1970s”.

Lifelong Gold Skeptic Makes Major U-Turn

While stocks and bitcoin went down sharply due to rising inflation and uncertain economic outlook, gold has retained its value, exactly when investors and savers needed it. 

Bitcoin, stocks, gold: What is the best investment today?

What does the future hold for gold? Here are the 4 trends that could make the yellow metal shine in the nearest future.

Is the price of gold going up next year? 4 main drivers explained

A gold hunt story that captivated thousands and inspired a decade-long obsession with the famous Forrest Fenn treasure.

The Mysterious Hunt for Forrest Fenn's Gold Treasure

Gold has been with us since pretty much the dawn of civilization, and yet there have been a number of harmful myths surrounding this precious metal.

5 Myths About Gold Investment

This is the incredible story of one of the biggest gold scandals in history which started in Canada and ended in the depths of the Borneo jungle.

The Biggest Gold Mining Scandal in History

As the Fed raises interest rates and Russia squeezes gas supplies to Europe, it looks like the global economy is slowly but surely drifting into a recession. Will it happen by the end of 2022, and what does it mean for gold? 

Is a Recession Coming in 2022? 

If you are a beginner investor, choosing the right time to buy physical gold and silver may not look like an easy task. But in reality, it’s quite simple. Especially if you know the right investment strategy.

Is It a Good Time to Buy Gold?

Is today’s rising inflation mimicking a time when a sudden jump in inflation took investors by surprise? Top economic historian Niall Ferguson might have the answer.

Where is Inflation Going? An Economic Historian Gives His Answer

Did you know that gold came to Earth from outer space and grows on trees? If not, take a look at some interesting facts about the shiny metal. Some of them sound too unbelievable to be true.

13 Interesting Facts About Gold You Probably Didn't Know

Although economic downturns are a normal part of the economic cycle, you should still be prepared for them when they occur. Here are 5 tips to set you on the path.

How to Prepare for a Recession: 5 Things You Need to Know

Fort Knox holds more secrets than we will ever know, but the biggest one is: how much gold, if any, is there in America’s most famous bullion bunker?

The Golden Secret of Fort Knox 

The Russian central bank has announced it now holds more gold than U.S. dollars in its reserve, striking a blow to the American currency and confirming Putin’s strategy of exiting the greenback.

From Russia with Love

Can central banks keep printing money forever, no matter how deep into the red a country goes? In this new world, nothing is certain.

Central Banks Vs. The Old World

Consumer demand for physical gold increased in Q1 2021, with bar and coin investment up by 36% y-o-y. Take a look at the chart.

Consumer Demand for Physical Gold on the Rise in 2021

Summer is fun, but it can also be very expensive. By following these few simple steps, you will learn how to budget and retrain your brain to save money. 

Financial Detox: How to Save Money After the Summer Break

There are many myths about saving and investing. One of them is that they’re the same thing. As a matter of fact, it isn't true at all. Here’s what you need to know about saving and investing to secure your financial future.

Saving vs. Investing: Which One to Choose?

More than 150 years ago, one man found a gold nugget in a faraway land triggering the legendary California Gold Rush that changed the world forever. 

5 Weird But True Facts About the California Gold Rush

Gold emerges as a clear winner in a “battle” against fiat currencies that have considerably lost in value against the precious metal over the past 20 years. Take a look at the chart!

Gold vs. Fiat Money

You want to set and reach saving goals? Here are simple ways to manage your personal finance, start saving money, or work toward an emergency fund, all safe from inflation.

How to Save Money Each Month? 

Europe is experiencing its worst energy crisis in 50 years. Rising energy prices are fueling already high inflation that could seriously affect your savings. Here's how to protect yourself. 

Europe’s Energy Crisis: How to Prepare for Winter?

With a recession looming, 2022 will likely remain a rollercoaster for the stock markets. Now might be the time to rebalance your portfolio and focus on your long-term financial goals. Let's see how.

Tips for Navigating Stock Market Volatility

With inflation moving down at a slow pace and the possibility of stagnation looming in the U.K., let’s explore some practical tips on how you can protect against inflation.

How to fight inflation?

How can different emotional biases affect your investment decisions, and what can you do to avoid them? Here’s what you need to know.

How to Invest: 4 Tips to Avoid Emotional Investing

Worries among US top investors are mounting as the Fed is stuck between two bad choices: letting inflation spiral out of control or crash the markets.

Are Inflation Worries Mounting?

What is the story behind the Golden Fleece myth? And how is it related to gold mining? Come dive into this ancient story and learn one thing you probably didn't know about gold.

The true story behind the Myth of Jason and the Golden Fleece

Almost every European economy is now facing eye-watering inflation sparked by rising food and energy prices. And it seems that things will only get worse before they get better.

Why Is Inflation so High in Europe? Here’s What You Need to Know

How to invest in gold? As a precious metals investor, here’s what you need to know about gold, its uses, and its main price drivers when building your gold savings.

Investing in Gold: A Beginner’s Guide

With a recession looming and inflation still at decades-high levels, it may be a good time to start growing your gold savings. Here’s what you need to know about investing in gold in 2023.

Will Gold Be a Good Investment in 2023?

There has been a mysterious drop in silver stocks on major international trading platforms that created quite a buzz. Could it make the silver price surge next year? Here’s what you need to know.

Why Are Physical Silver Reserves Suddenly Dropping?

Gold purity plays a big role in its quality — but what do carats have to do with it? We break it down and explain the key differences between 24 and 18 carat gold.