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What is More Affordable: Gold ETFs or Physical Gold?

What is More Affordable: Gold ETFs or Physical Gold?

When choosing to invest in gold, you have the option of choosing either physical gold, or gold ETFs. ETFs are exchange traded funds. These funds invest the money into standard gold bullion.

The value of the ETF depends on the price of physical gold in the market, and investors hold units of the ETF that they invest in. If you’re confused about whether to invest in physical gold or ETFs, this blog can help you make your decision.


In terms of prices, physical gold is never uniformly priced, and the rates continuously fluctuate. Apart from this physical gold is only available for purchase in 10-gram divisions, which makes it more expensive to buy. Also, when an investor buys gold, they need to pay 20–30% of the total buying value as making charges, which again increases its overall cost.

ETFs, on the other hand, prove much cheaper because there are no fluctuations in price as there is a set international price, which every seller must abide by.

Also, ETFs can be purchased for amounts as low as 1-gram, which makes it a more affordable investment for those who cannot afford to buy gold in large amounts. And brokerage charges cost investors 1% per annum. This is considerably less than the making charges of 20–30% that physical gold requires.


If the value of the physical gold exceeds a certain amount, the investor has to pay a 1% wealth tax every year. Also, if physical gold is held for less than three years, the investor needs to pay a short-term capital gain tax as well. And if it’s held for more than 3 years and then sold, the investor needs to pay a 20% capital gain tax along with indexation.

ETFs have the same policy when it comes to capital gain tax, but there is no wealth tax applicable to ETFs, which makes them the relatively cheaper option in this regard as well.


In terms of liquidity, ETFs are a much better investment as they are much easier to sell than physical gold, as there it is often difficult to find a good deal for it. Also, ETFs can be sold to almost anyone, whereas gold is normally only sold to jewelry shops, pawn shops or online buyers.

If you’re looking to invest in gold to make money, Orion Metal Exchange has the top gold IRA accounts as well as many other services relating to precious metals. Contact us to find out more.

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