Precious Metals Academy
Physical vs Paper
Understand the pros and cons of physical bullion versus listed funds such as GLD and closed-end trusts such as PHYS/PSLV.
In short
- Physical bullion offers true ownership and no counterparty risk, but 3–10% premiums and storage costs create a meaningful break-even hurdle.
- PHYS and PSLV are closed-end trusts holding allocated bullion, with a physical-redemption right subject to large minimums; GLD and SLV offer no retail redemption — not all precious metals vehicles are equal.
- US investors: physical bullion falls under the collectibles rules (28% maximum), while PHYS/PSLV can reach long-term capital-gains rates only if the PFIC requirements including a timely QEF election are met.
- Canadian investors: in a taxable account both are capital property. As of September 2026, CRA guidance reflects a one-half capital-gains inclusion rate — verify current CRA rules before relying on it; the choice then turns on storage, cost and liquidity.
- A hybrid structure can hold exchange-listed trusts for liquidity alongside physical bullion for direct possession — the weighting should follow the purpose of each holding.
When investing in precious metals, one of the most important decisions you'll make is whether to own physical bullion or paper-backed vehicles like ETFs. Each approach has distinct advantages and trade-offs.
The bottom rung is where two Voices draw a useful line. Rick Rule, a resource investor for five decades who was a senior executive at Sprott — the group behind PHYS and PSLV — until 2021 and now runs Rule Investment Media, describes physical gold as monetary insurance and mining shares as a speculative vehicle that rewards analytical work. Jeffrey Christian of CPM Group argues that the paper markets largely work as they appear to: futures and the London over-the-counter market are hedging and price-discovery mechanisms, not evidence of fraud. On that view, choosing physical over paper is a preference about counterparties and control, not a bet that the paper market will fail.
For a worked example of reading one structure term by term, see our article on the Royal Canadian Mint’s gold receipts. The receipts are a listed product that is neither a fund nor a trust, and the article goes through who owns the gold, how it is stored, the fee collected in metal, the premium or discount to net asset value, and what each way out costs.