Precious metals have long been regarded a valuable and stable investment. However, with the price of gold reaching record highs in recent weeks, the market is drawing an increasing amount of interest from potential new investors. If you’ve been considering this option, first you must determine whether you should put your money into physical or paper gold. The type you choose can impact your investment in a variety of ways. The following guide explains how the two are different to help you make an informed decision.
What Is Physical & Paper Gold?
Physical gold refers to tangible gold products that can be owned outright. For investors, these typically come in the form of jewelry, bullion bars, coins, and ingots. On the other hand, paper gold applies to gold-backed investment instruments. These may include exchange traded funds (ETFs), gold certificates, or gold mining stocks. With paper gold, rather than receiving a physical asset, investors are getting a certain number of shares in the market that acquire their value from the fluctuating price of gold.
Pros of Physical Gold
Physical gold has intrinsic value and is an accepted form of currency around the world. Owners of gold jewelry, bars, coins, or ingots aren’t subject to broker or management fees and don’t have to worry about a third party mishandling their assets. Physical gold can also be used as collateral, is simple to pass on to heirs, and helps diversify financial portfolios beyond paper investments. Additionally, gold is an in-demand product for numerous applications, making it easy to transform into something else of value.
Pros of Paper Gold
Paper gold can be a more affordable investment upfront since it’s usually possible to purchase smaller amounts. When the market is accessible, it’s fairly easy and efficient to trade as well. Some people also find it beneficial that paper gold doesn’t take up space or require a secure place to store it.
What Is the Better Investment?
Physical and paper gold both have their merits as stable investment options, but what’s better for one person may not be for another. Yet, physical gold tends to offer more portfolio diversification since it’s not affected by the same factors that influence the price of paper assets. This can serve as a safe haven in times of economic crisis and help counterbalance other investments. The best way to choose the right investment for you is to evaluate exactly what you wish to get out of your gold investment and assess your risk tolerance.
At Steve’s Precious Metals, we aim to educate our customers on precious metals investing so they can leverage the market to their advantage. Serving the Redding, CA and surrounding communities for 40 years, we’re proud to be a trusted source for those looking to buy physical gold or silver. Our experts will spend time learning your investment goals so we can help you choose the products most suitable for your financial portfolio. Call (530) 223-0170 to make an appointment or visit us online to learn more about our services.