Physical Gold vs. Gold ETFs: Which Is the Better Investment in 2025 and Beyond?

Physical gold and gold exchange-traded funds (ETFs) are two popular ways to invest in precious metals. While both allow investors to diversify their portfolios with gold, they operate in different ways.

When it comes to physical gold versus gold ETFs, neither is inherently better than the other as an investment. Each has its pros and cons, and each will appeal to different investors. Those who want a tangible asset should buy physical gold, while those seeking convenience and liquidity likely are better off with gold ETFs.  

In this guide, we’ll break down each investment option, compare gold ETF vs. physical gold returns, and discuss how you can decide which is right for you.

🌟 Gold Watch: Gold prices rose past $3,000 an ounce in April 2025 as investors hedged against inflation and economic uncertainty surrounding concerns of a global trade war.

Table of Contents

1. Physical gold vs. gold ETFs: Key differences
2. Prices and costs
3. Returns
4. Tax implications

Physical gold vs. gold ETFs: Key differences

Before we get into the details, let’s define what we mean by each term:

• Physical gold: This refers to coins, bars, or rounds that you own. They may be stored in a depository (required if it’s part of a gold IRA) or at home or another accessible location.
• Gold ETF: This is an exchange-traded fund backed by gold. The fund will own physical gold or gold derivatives. Gold ETFs are bought and sold like stocks, and there are many to choose from.

When you buy bars, rounds, or coins, you own the gold. When you buy a gold ETF, you own a share in the fund but not the gold itself.

That’s only one difference between these two investment options. Here’s a more comprehensive summary.

	Physical gold	Gold ETF
Price	$3,000 per ounce	$30 – $286 per share for the 10 largest gold ETFs
Costs	Retail markup; shipping; storage	Brokerage fees; fund expense fees
One-year return	33.35%	35% for most large ETFs
Type of ownership	Tangible	Digital
Liquidity	Must find buyer to liquidate physical gold	Can be traded through brokerage firms during market hours
Tax implications	Subject to capital gains tax unless held in a gold IRA. The capital gains tax rate can vary depending on whether the gold is deemed collectible; gold in an IRA may be subject to regular income tax or be tax-exempt, depending on whether a traditional or Roth IRA is used	Subject to capital gains tax unless held in a retirement account; gold ETFs in an IRA may be subject to regular income tax or be tax-exempt, depending on whether a traditional or Roth IRA is used

Gold ETF vs. physical gold prices and costs

If you want to invest in gold, you’ll need significantly more money to purchase physical gold than to buy gold ETF shares. What’s more, the ongoing costs of physical gold outweigh those of ETFs.

Physical gold

With physical gold, you can expect to pay the following prices and costs.

• Spot price: $3,000 per ounce*
• Markup: 7% – 150% depending on the dealer and type of purchase
• Shipping: Varies depending on the dealer used; some offer free shipping for minimum orders. American Hartford Gold, for example, does not charge shipping fees.
• Storage: Free for home storage, but could be several hundred dollars per year for storage in a depository, depending on the amount stored.

*As of April 7, 2025.

Gold ETFs

The cost for gold ETFs can be lower, in part because you aren’t buying a physical product.

• Share price: $30 – $286, depending on the fund*
• Brokerage fees: $0 at many major brokerages unless making a purchase through a broker-assisted trade
• Expense fees: 0.09% – 0.60% for major gold ETFs

The share prices for gold ETFs can vary depending on how much gold is tied to each share. For instance, shares for some gold ETFs might represent 1/10 of an ounce of gold, while others represent 1/100 of an ounce of gold.

*As of April 7, 2025.

Gold ETF vs. physical gold returns

Gold ETFs are designed to track the price of gold. And since they hold gold themselves, it’s not surprising that returns on these funds closely mirror those of gold.

Some gold-based ETFs contain securities, such as stocks for mining companies or gold derivatives. These can affect a fund’s overall return, and its expense fees can affect its total gain.

For these reasons, you should investigate any gold ETF before investing. Confirm what the fund contains and the annual fees it charges.

Gold ETF vs. physical gold returns chart

The chart below compares the returns of physical gold to SPDR Gold Shares. Going by the stock symbol GLD, this is the largest gold ETF on the market, with nearly $94 billion in assets under management.

Return*	Physical gold	SPDR Gold Shares ETF
YTD	13.71%	13.04%
1 year	33.44%	27.22%
5 years	97.60%	75.41%

As you can see, the returns of the GLD fund start out similar to physical gold and then begin to lag. This could be the result of the expense fees charged by the fund. It’s worth noting, though, that physical gold can also have ongoing expenses, such as storage fees, that are not reflected in the gains above.  

Gold ETFs are generally for the retail investor who wants to have some gold but is not committed enough to purchase bullion. For bullion, you want to have a safe place to store it.

Type of ownership

With both physical gold and gold ETFs, you are investing in precious metals but in quite different ways.

Physical gold is often what first comes to mind when people talk about investing in gold. It is a tangible asset that you can pick up and hold. You can also store the gold in your home—assuming you purchase it outside an IRA—so you’ll always have access to it when you need it.

Gold ETFs, on the other hand, are a form of digital gold. You don’t get a tangible asset, and you don’t own the gold itself. Instead, you own a share in a fund that represents a certain amount of gold. You can’t turn that share into physical gold.

Liquidity

Liquidity refers to the process of turning an investment into cash. This is another important distinction between physical gold and gold ETFs.

To liquidate physical gold, you’ll need to find someone to buy it. Once you do, they will receive the physical gold in exchange for payment. The following are common ways to sell physical gold:

• Private buyers
• Coin dealers
• Gold dealers
• Online precious metals marketplaces
• Buyback programs from gold IRA companies

Gold ETFs, on the other hand, can be bought and sold in the same way as stocks. To liquidate, you simply place a sell order through your brokerage account, and the transaction will typically be completed by the next market day.  

Tax implications

All investments are subject to tax, but how gold is taxed depends on its classification. Here’s a quick look at the different ways gold can be taxed:

• Capital gains: This is the tax that usually applies to gold ETFs and physical gold purchased outside a retirement account. When you sell the gold, the gains—that is, the profit—is subject to a tax of up to 20%, depending on your income.
• Collectibles capital gains: If your physical gold is deemed collectible, it could be subject to a capital gains tax of up to 28%. Rare and old coins may be considered collectible. However, bullion and coins meeting certain purity and manufacturing standards are not collectible, according to the IRS.
• Income tax: If you keep your gold in a traditional IRA, you will pay income tax when taking a distribution. If you take the distribution before age 59½, a 10% penalty may also apply. Note that taking physical possession of gold stored in a depository qualifies as a distribution. Withdrawals from Roth IRAs after age 59½ are not subject to tax.   

How to choose physical gold vs. gold ETFs in 2025 and beyond

So with all that in mind, how do you decide whether to buy physical gold or shares in a gold ETF? Let’s take one final look at each option’s pros and cons.

Physical gold

Pros

• Tangible asset

• No third party involved

• Can be accessed at any time, if stored at home

Cons

• Liquidation can be inconvenient

• May be prone to theft

• Can come with high costs for shipping, storage and markups

Gold ETFs

Pros

• Easy to buy and liquidate

• No storage requirements

• Typically come with low fees

Cons

• No tangible ownership of gold

• Gains may lag behind that of physical gold

• Risk of fund mismanagement

It’s worth noting that the ETF only represents a small fraction of the actual amount of gold, so if there was a run on gold, the ETF holder could be adversely affected.

Tangible ownership vs. convenience 

When you consider these, it seems clear that your choice boils down to your reason for owning gold and your investing preferences.

If you want to use gold as an inflation hedge and to provide a sense of security during uncertain economic times, buying physical gold might be the right choice.

If you want to use gold to diversify your portfolio and benefit from gains in gold’s value, gold ETFs are the easiest way to do that.

Ready to learn more? Check out our guide on how to invest in gold for retirement.