Investing in Physical Gold vs Gold Stocks: Tale of the Tape

When new investors think of gold investments, they typically think of physical gold. It’s a common misconception that investing in physical gold is the only route to capitalize on the gold market’s investment benefits. The truth is that there are many ways to invest in gold, and each has advantages and disadvantages.

Our Oxford Gold Group team put together this guide to the advantages and disadvantages of investing in physical gold vs. gold stocks.

What Are Physical Gold and Gold Stocks?

Physical gold is exactly as it sounds. Investors holding gold bars, bullion, and gold coins or jewelry hold physical gold.

Gold stocks, on the other hand, are typically stocks in gold-focused companies or funds. The gold stock market comprises stocks from gold mining companies, stocks in gold ETFs, and stocks in gold mutual funds.

Both types of gold investments are equally valid. Deciding which is best for you is contingent upon your overall investment strategy. Read on to see the ways these two methods of gold investment could fit into your investment strategy.

Main Differences Between Both Gold Investments

liquid gold dropping

The main differences between physical gold and gold stocks are in their degrees of liquidity, volatility, and diversification, as well as how you should store them for best security.


Physical gold is less liquid than gold stocks because there are more steps involved if you want to sell it. For gold stocks, divestment is a click away.


While the price of gold fluctuates daily, physical gold is more stable than gold stocks over the long term.

Gold stocks’ volatility comes from their relationship to the stock market. Many gold investors’ sole reason for owning gold is to hedge their portfolios against market volatility. It’s important to consider your comfort with risk when comparing physical gold vs gold stocks’ role in your portfolio.

Storage and Security

Storage and security are two of the biggest barriers to entry for physical gold investors. Storing physical precious metals is expensive, but it protects you from inflation and market fluctuations. Security is also a concern. Investors have to store gold in their own homes or in locations where they can’t watch over their tangible assets at all times.

For gold stocks, storage and physical security are not concerns. However, gold stocks are subject to security threats in the market. If a gold company goes bankrupt, its stocks will be worth nothing. For physical gold, this is not as much of a threat. Technically, physical gold could be worthless someday, but history suggests physical gold’s worth will never go to zero.


Investors regard gold in general, be it physical or stock, as one of the best forms of portfolio diversification available. The main difference between the two is one of degree. Because of its historical stability, physical gold is the gold standard of diversification, whereas gold stocks inherently hold risk due to the nature of the stock market.

Transaction Costs

One of the major advantages of gold stock is its comparatively low cost. Thanks to middlemen and taxes, buying physical gold is much more expensive than investing in gold stocks. This reflects the differences in the durability of the investments. Gold sellers include commissions in their sales because they know they can charge a premium for physical gold’s long-term stability.

Advantages and Disadvantages of Physical Gold and Gold Stocks

woman comparing two options

Now that we’ve covered each category of the differences between physical gold and gold stocks, let’s gather the takeaways into a side-by-side comparison.

Physical Gold

Advantages of Physical Gold Disadvantages of Physical Gold
Excellent long-term stability Not very liquid
Excellent method of diversification Cost prohibitive
Tangible asset that holds value in or out of the stock market Short-term risk of depreciation

Gold Stocks

Advantages of Gold Stocks Disadvantages of Gold Stocks
Good long-term stability Gold company bankruptcy risks
Highly liquid Market risks
Good diversification benefits

Physical Gold vs. Gold Stocks: Investment Strategy

Now that you know the tale of the tape for physical gold vs gold stocks, let’s go over a few notes on investment strategies.

Which Is Better for Short-Term and Long-Term Investment?

Because gold stocks can generate a return, they are a more versatile short-term investment. With physical gold, most of the benefits of investing in physical gold are only evident in the long term.

Trading and Holding

Higher liquidity and lower transaction costs make trading gold stocks easier than trading physical gold.

Conversely, holding physical gold is more secure than holding gold stocks. Gold stocks’ volatility requires more active portfolio management, whereas physical gold can sit in storage and provide security for the rest of your portfolio.

Factors to Consider When Choosing Between the Two Investments

dart pinned on the center with a light beside of it

When deciding how you want to invest in gold, the best way to weigh your options is to evaluate your position in each of these four categories:

  • Investment Goals: What are your investment goals? If you want returns on your investment, gold stocks are usually best. If your goal is security, physical gold is best.
  • Risk Tolerance: What’s your risk tolerance? Are you in a position to take losses? If not, physical gold is the best investment.
  • Tax Considerations: If you plan on selling physical gold, you need to take into account the fact that those sales are taxed more heavily. Alternatively, if you make capital gains on your gold stock investments, you’ll be subject to capital gains taxes. Holding physical gold represents the lightest tax burden since there’s one taxable transaction.
  • Time Horizon: Are you securing your portfolio, or are you trying to build wealth? If you have time, you may adopt a riskier strategy. If time is short, investing in physical gold can secure your portfolio.

Which Form of Gold Investment is Best for You?

Physical gold vs. gold stocks: which is better for you? Ultimately, only you can decide. However, it’s immensely helpful to have a team of experienced professionals to help weigh your options and solidify your investment philosophy.

At Oxford Gold Group, we have the tools, relationships, and expertise to help you start your gold investment journey. Give us a call at 833-600-GOLD to learn more today.

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