Physical Gold vs Gold ETF: True Cost Comparison
Physical gold and gold ETFs both give you exposure to the gold price, but they differ substantially in cost structure, liquidity, storage requirements, tax treatment, and what you actually own. Understanding these trade-offs is essential before deciding which vehicle fits your situation.
Physical gold costs more to buy (dealer premiums of 3–10%) and requires storage, but you own the metal directly. Gold ETFs are cheaper to trade and store, but you own a financial instrument with ongoing annual fees and counterparty considerations. For most investors, ETFs are more practical; for those who want true physical ownership, coins and bars are the only option.
- Is physical gold or a gold ETF better for a Canadian RRSP?
- Either can be held in one, on different terms. Units of a gold fund listed on a designated stock exchange, such as the PHYS closed-end trust on the TSX, are qualified investments for an RRSP or TFSA and are bought like any listed security. Gold bullion qualifies only on conditions (CRA Income Tax Folio S3-F10-C1): a Royal Canadian Mint legal tender bullion coin worth no more than 110% of its gold content, or a hallmarked bar from an LBMA-accredited refiner, each at least 99.5% pure, acquired by the plan itself from the Mint, the refiner or a regulated Canadian financial institution. The plan's trustee holds it, not you, and gold you already own does not qualify. For most plans the listed fund is the simpler route: it has no such purchase conditions, no dealer premium and no storage to arrange, though units of a closed-end trust can trade at a premium or discount to the gold behind them.
- How much does a dealer premium add to the cost of physical gold?
- At the six dealers GoldSilverPortfolio checked on 30 September and 1 October 2026, a single 2026 American Gold Eagle cost 5.5% to 6.5% over mid spot by check or wire. Premiums widen in stressed markets and on card payments, and larger bars (1 kg or more) run lower. Use the Premium Calculator against live spot to model the break-even price for a specific purchase.
- Does physical gold have counterparty risk?
- Physical gold held in your own possession has no counterparty risk — it is not dependent on any institution's solvency. Gold ETFs held with major custodians have minimal but non-zero counterparty risk. This distinction is a primary reason some investors prefer physical gold as a systemic hedge.