Gold investments in comparison: shares, ETFs or bars?

 

Gold can be added to a portfolio in many ways: as coins or bars, via exchange-traded products such as ETFs and ETCs, or through shares in mining companies. For investors who do not want to commit to individual securities right away or are looking for uncomplicated access, these alternatives offer various opportunities. But which option is right for which goal? This overview shows the most important options, their advantages and disadvantages, and why gold stocks can be an exciting addition to many portfolios.

 

Physical gold – the classic hedge

 

Buying physical gold in the form of coins or bars is considered the oldest and most direct investment option. Those who purchase coins or bars own a tangible asset that is not dependent on banks or brokers. Physical gold is considered the ultimate hedge, especially in times of financial crisis or dwindling confidence in institutions.

 

Practical aspects
You can choose between bars, mostly from certified manufacturers, which offer the best value for money for larger amounts, or investment coins, which are easier to trade and also available in smaller denominations. The disadvantage is that storage and insurance incur costs, and tradability is also limited. Selling requires going through dealers and verification procedures, and often involves discounts. Unlike stocks or interest-bearing products, physical gold also does not generate any ongoing income.

 

ETFs & ETCs – flexible tracking of the gold price

 

Exchange-traded products have become established as an alternative to physical ownership. In Germany, these are primarily gold ETCs, which can be traded on the stock exchange at any time and reflect the gold price almost one-to-one.

 

Their advantage is high liquidity: market makers ensure tight spreads, enabling purchases and sales to be made quickly and cost-effectively. Many products are fully backed by gold and even allow delivery in physical gold.

 

Well-known products

  • Xetra-Gold (WKN: A0S9GB): The most liquid gold ETC in Europe, fully backed, with very low ongoing costs.
  • Euwax Gold II (WKN: EWG2LD): Also physically backed, with delivery rights, also without annual product fees.

 

ETFs and ETCs thus offer investors the ease of trading a stock combined with the security of physical deposit. The disadvantage is that they only track the price of gold and do not offer any additional sources of return.

 

Gold stocks – participation in value creation

 

Investing in gold stocks is more than just betting on the price of the precious metal. It is about participating in the business of mining companies. Investors benefit from two special factors:

 

  • Leverage on the price of gold: Since production costs are often fixed, price increases have a disproportionate effect on profits and thus also on the share price.
  • Dividends: Many established producers regularly distribute portions of their profits—an advantage that physical gold or ETCs do not offer.

 

Opportunities and risks

 

Gold stocks offer potential for higher returns, but also entail additional risks due to corporate governance, location factors, or financing. Those who do not wish to bear these risks individually can invest in broadly diversified mining ETFs.

 

The most important differences at a glance

 

return opportunity
  • Physical gold: rise in the price of the precious metal
  • Gold ETFs/ETCs: Rise in the price of the precious metal
  • Gold stocks: Price increase + leverage + dividends

 

main risk
  • Physical gold: storage, price losses
  • Gold ETFs/ETCs: Price losses, issuer risk
  • Gold stocks: Price losses, corporate risks

 

Running costs
  • Physical gold: High (storage, insurance)
  • Gold ETFs/ETCs: Very low (management fee)
  • Gold shares: No additional costs except for custody account management

 

Current income
  • Physical gold: None
  • Gold ETFs/ETCs: None
  • Gold stocks: Yes, potential dividends

 

tradability
    • Physical gold: Complex, high spreads
    • Gold ETFs/ETCs: Very simple, tight spreads
    • Gold stocks: Very simple, tight spreads

 

 

Tax differences

 

Tax regulations are a decisive factor when choosing the type of investment.

 

  • Physical gold and physically backed ETCs: Price gains are completely tax-free after a holding period of one year. This ruling was confirmed by a decision of the Federal Finance Court and makes physical gold and certain ETCs particularly attractive for long-term investors.
  • Gold stocks and mining ETFs: These are treated like traditional stocks for tax purposes. Capital gains and dividends are subject to a withholding tax of around 26.4%, including the solidarity surcharge, plus any church tax that may apply.

 

 

Which investment suits which goal?

 

  • Capital protection and tax-optimized hedging: Physical gold or physically backed ETCs are ideal for investors who prioritize security and value preservation.
  • Simple and liquid implementation: ETCs are a flexible instrument for those who want to participate in the gold price in an uncomplicated manner.
  • Return and growth: Gold stocks are attractive to investors who want to participate in corporate value creation and dividends in addition to the gold price.

 

 

The combination makes the difference

 

The three types of investment are not mutually exclusive. A smart mix can combine their respective strengths: physical gold or ETCs as a stable foundation, supplemented by gold stocks for return opportunities and growth. This creates a portfolio that combines security and performance.