The moment you decide to add gold to your portfolio, you face a choice: buy physical gold – coins and bars you can hold in your hand – or an exchange-traded gold ETF that tracks the gold price but never actually lands in your pocket. Both have their place, and both come with trade-offs. In this article we walk through the pros and cons so you can make an informed decision.

What is physical gold and what is a gold ETF?

Physical gold means investment coins and bars that you own directly. You buy them from a dealer or shop, store them at home, in a safe or a safe-deposit box, and you can sell them whenever you like. Your asset depends on no intermediary – the gold is simply yours.

A gold ETF (exchange-traded fund) is a security backed by physical gold held in vaults, whose price moves with the gold price. You buy and sell it through a broker, just like a stock. It is hugely popular: according to the World Gold Council, global gold ETFs closed the first quarter of 2026 with US$606 billion in assets under management (AUM), 9% higher than at the end of 2025.

The pros of physical gold

  • Direct ownership with no counterparty risk. You hold the real metal – its value doesn’t vanish if a fund, bank or broker runs into trouble.
  • Privacy and simplicity. Buying and storing physical gold requires no securities account and no broker.
  • A tangible asset. Many investors value being able to actually hold and store their gold on their own terms.
  • EU VAT exemption. Investment gold (coins and bars meeting specific criteria) is exempt from VAT in the European Union, which makes buying physical gold cheaper than many other goods.

The cons of physical gold

  • Storage and security. Keeping it at home calls for a safe; a bank deposit box carries an annual fee. It’s all solvable, but it takes some thought.
  • The buy-sell spread. You buy physical gold slightly above the spot price (a premium) and sell slightly below – that gap is the real cost of the transaction. On smaller units the premium is proportionally larger.
  • Selling takes time. Unlike an exchange, you need to find a buyer or a shop willing to buy your gold back.

The pros of a gold ETF

  • Easy, fast trading. You buy and sell in seconds on an exchange, like a stock. Liquidity is high.
  • Small amounts and fractional investing. You can start with a modest sum and don’t have to buy a whole ounce at once.
  • No physical storage. No safe and no insurance – the fund takes care of custody.

Gold ETF flows swing actively with market sentiment. In January 2026 global gold ETFs saw a record inflow of US$18.7 billion, with Asia contributing more than half. April added a further US$6.6 billion, lifting total fund holdings by 45 tonnes to 4,137 tonnes. But there were also sizeable outflows in the months between – a reminder of how quickly ETF positions are opened and closed.

The cons of a gold ETF

  • Counterparty and structural risk. You hold a stake in a fund, not the metal itself. You depend on the fund manager, the vault and the securities-market infrastructure.
  • Management fee. An ETF charges an annual management fee that eats into returns over the long run.
  • Limited access to the metal. Most retail investors can’t redeem ETF units for physical gold – it simply isn’t a normal retail option.
  • Tax treatment. Taxation of a securities transaction differs from the VAT-exempt treatment of physical investment gold. The exact impact depends on your circumstances.

Which should you choose?

The short answer: it depends on your goal. If you’re after a long-term, tangible asset to hold yourself with no counterparty risk, the scales tip toward physical gold. Well-known, liquid products are a good starting point – for example a 1 oz Canadian Maple Leaf gold coin, or for larger amounts the lower-premium 100 g Argor-Heraeus gold bar. If you want to start with a smaller sum, a 1/10 oz Austrian Philharmonic gold coin is a good option.

If your priority is quick trading, liquidity and avoiding the hassle of storage, an ETF may be the more convenient tool. Many investors combine both: physical gold as long-term “insurance” and an ETF for flexible market exposure.

Frequently asked questions

Is a gold ETF as safe as physical gold?
Both track the gold price, but their risk profiles differ. Physical gold has no counterparty risk – the metal is in your hands. An ETF depends on the fund’s structure and intermediaries. Which is “safer” depends on what you’re worried about.

Do you have to pay VAT when buying physical gold?
Investment gold that meets EU criteria is exempt from VAT. You’ll find the detailed conditions in EU and Estonian Tax and Customs Board (EMTA) materials.

How much money do you need to start?
With physical gold you can start with a small fractional coin; with an ETF, a single unit is enough. Both allow you to build a position gradually.

This article is for informational purposes only and does not constitute investment advice or a solicitation to buy or sell precious metals. Precious metal prices fluctuate. Before making any investment decision, consider your own circumstances and consult a specialist if necessary.

Goldman & Sons editorial team