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Paper gold vs physical: Pros & Cons


Paper gold (equities or ETFs) vs physical - Let's start off with Paper First.

  • Liquidity

  • Cost

  • Tax efficiency

  • Options trading

Advantages of paper gold:

  • Liquidity: Paper gold is more liquid than physical gold, meaning it can be bought and sold more easily. This is because paper gold is traded on exchanges, while physical gold may need to be sold to a dealer or through a private transaction.

  • Cost: Paper gold is typically less expensive than physical gold, as it does not incur the costs of storage and transportation.

  • Tax efficiency: Paper gold is generally more tax efficient than physical gold, as it can be held in a retirement account.

  • Options trading: Paper gold can be used to trade options, such as covered calls and cash secured puts. This can be a way to generate income from gold holdings or to hedge against losses.

Ability to sell covered calls and enter paper gold through selling cash secured puts:

  • Covered calls: By selling covered calls on paper gold, investors can generate income from their holdings while still maintaining upside potential.

  • Cash secured puts: By selling cash secured puts on paper gold, investors can enter a position in gold at a lower price.

Disadvantages of paper gold:

  • Not a tangible asset: Paper gold is not a tangible asset, meaning that it cannot be held or possessed. This can be a disadvantage for some investors who prefer to own physical assets.

  • Subject to counterparty risk: Paper gold is subject to counterparty risk, meaning that investors are exposed to the risk of the issuer defaulting on their obligations.

  • Paper gold may be more volatile than physical gold: Paper gold prices can be more volatile than physical gold prices, due to the impact of market forces.

Pros of physical gold:

  • Tangible asset: Physical gold is a tangible asset that cannot be counterfeited or destroyed.

  • Store of value: Gold has a long history of holding its value over time, even during periods of economic turmoil.

  • Easy to transport: Physical gold is easy to transport, making it a good option for investors who need to be able to access their assets quickly.

  • Hedge against inflation: Gold is often seen as a hedge against inflation, as its price tends to rise when the cost of living increases.

  • Privacy: Physical gold can be stored privately, without the need to disclose ownership to any third party.

Cons of physical gold:

  • Storage costs: Physical gold must be stored securely, which can incur costs such as rent or insurance.

  • Transportation costs: Transporting physical gold can also be costly, especially if it is being shipped long distances.

  • Illiquidity: Physical gold can be less liquid than paper gold, meaning it may be more difficult to sell quickly.

  • Premium: Physical gold is typically sold at a premium to its spot price, which covers the costs of storage and transportation.

  • Vulnerability to theft: Physical gold is vulnerable to theft, so it must be stored securely.


  • Tangible assets: It is important to have a diversified investment portfolio, which includes a mix of different asset classes. Tangible assets, such as gold, can help to diversify a portfolio and reduce overall risk.


  • Asset protection: Some people like the fact that physical gold is invisible, meaning that it is difficult for others to know that they own it. This can be a form of asset protection.

  • Easy to transport: Physical gold is easy to transport, making it a good option for investors who need to be able to access their assets quickly.

Overall, physical gold has both advantages and disadvantages. Investors should weigh the pros and cons carefully before deciding whether to invest in physical or paper gold.

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This is not financial advice. Please consult with a qualified financial advisor before making any investment decisions. The information provided here is for educational purposes only.

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