Physical Gold vs. Gold Stocks: Which is the Better Investment?

Gold vs Stocks

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You may be well aware that gold is an excellent investment when the markets are unstable, as they are right now, but uncertain as to whether physical gold is a better investment than gold stocks.

Let’s take a good look at physical gold vs. gold stocks so you have all the information you need to decide which will be the best investment for you.

Physical gold and gold stocks are both excellent investments for any investment portfolio. Which one is the better investment will depend on the stability of the market, global events, and the individual investor’s requirements.

The difference between physical gold and gold stocks is that physical gold is real gold in the form of coins or bullion, and gold stocks are shares in a gold company like a gold mining company, a gold mutual fund, or an exchange traded fund.

You don’t own the actual gold, but your investment is affected by the price of physical gold. Unlike physical gold, it is also subject to other fluctuations in the stock market.

Read on to find out which you should invest in, and when.

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How to Invest in Physical Gold & Gold Stocks

There is no doubt that gold is a good investment to add to your portfolio in turbulent times like we are experiencing in 2022 so let’s see how it is done.

Investing in physical gold

You can invest in physical gold in 2 ways: Buy gold bars or gold coins.

Gold Bars

Gold bars can either be cast or minted. Casting is the method that has been used to make gold bars for centuries. Molten gold is poured into a mold that holds a certain weight of gold.

Minted gold bars are made by feeding cast gold bars through a machine which compresses them into long strips which are then cut into specific lengths.

Minted gold bars have a smoother, shinier surface than their cast counterparts and tend to retain their appearance and their value more than cast gold bars.

They are more expensive because it is a multi-stage process that is far more time consuming than casting.

Gold Coins

Gold coins are made by mints all over the world and can sometimes be used as currency as they usually have a face value. This value is often far less than the value of the physical gold the coin is made from.

The coin may also have additional value if it is a collectible. You can buy gold coins from pawnshops, dealers, individual sellers, and even online.

Whatever you do you must ensure that the seller is trustworthy or registered as a dealer to ensure that you don’t end up with a forgery and that the gold that you are buying is as pure as the seller says it is.

Physical gold’s main benefit is that it has historically shown to hold its value through turbulent times and because of this, seasoned investors will use is as a hedge against inflation.

Investing in gold stocks

You can invest in gold stocks in 3 ways: Buy gold mining stocks, gold exchange-traded funds (ETFs), and gold certificates.

Gold Mining Stocks: These are stocks which, like any other stock, represent ownership of shares in a company, in this instance a gold mining company. Like other stocks, they are susceptible to the health of the market and not just the gold price. If you already have a stock portfolio it is very easy to add gold stocks to it. Gold stocks are far more liquid than physical gold which makes them a better choice for those interested in more immediate returns.

Gold ETFs: An exchange-trade fund is a mutual fund that invests in gold bullion or a range of gold mining companies. Your investment is in the ETF itself and not the physical gold or the mine. This enables investors to invest in gold without having to worry about the issues that go along with owning the asset like storage, security etc. Gold ETFs spread your risk and offer instant diversification.

Gold Certificates: In the days when currencies were backed by gold a gold certificate indicated that you owned gold that was held by a bank or a certifying company. Although there are some banks and investment companies that issues gold certificates they are not very popular because they are extremely risky because they will be worthless should the company issuing the certificate go bankrupt.

The main benefit of gold stocks and gold ETFs is that they can be bought and sold easily on the stock market and are a more affordable way of getting exposure to gold in your portfolio.

Advantages and Disadvantages

The table below provides a summary of the pros and cons of investing in gold and gold stocks.

PHYSICAL GOLD– Stable long term investment
– Cannot be printed
– Good for retirement and education funds
– No 3rd party liability
– Outperforms stocks in the long term
– Weakens when stocks strengthen
– Cost of storage and security
– No dividends
GOLD STOCKS– Appreciates like stocks
– Quicker loss or return on investment
– More leverage  
– 3rd party risk
– Potential for loss of capital
– Don’t own the actual asset
– Can be printed
– Not necessarily backed by physical gold

As you can see there are advantages and disadvantages to investing in physical gold and in gold stocks so your decision will depend on your specific circumstances and needs.


No matter whether you invest in physical gold or gold stocks you will be strengthening your portfolio because investment in gold, physical or stocks, provides solid diversification.

In fact, investing in both physical gold and gold stocks would be a wise move if you are in a position to do so as you can use the disparities to your benefit.

Gold stocks are more easily tradable but also more susceptible to the general health of the stock market. Physical gold does very well when the market is unstable and protects wealth in the long term.

Timing is key when investing in both. If you are to maximize your investment you should find an investment broker who has a good track record with gold investments.

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When it comes to customer service, fees, safety, and overall customer satisfaction, American Hartford Gold checks all of the boxes.