Physical gold vs. digital gold: What to know

Consumers have been flocking to gold in recent years to seek a hedge against inflation and a way to safeguard their wealth in challenging economic times. The uptick in demand has sent gold prices soaring, with the average price per ounce hitting record highs several times this year. 

Some forecasts expect gold prices to continue rising as we enter 2025, which could make now a smart time to add gold to your portfolio. But exactly how should you do that? Should you buy physical bars and coins from your local gold dealer? Or should you use one of the many digital gold investment strategies, like gold individual retirement accounts (IRAs), gold exchange-traded funds (ETFs) or gold stocks? 

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Physical gold vs. digital gold: What to know

Here’s how your physical gold and digital gold options compare.

Purchasing

With digital gold, you’ll typically need to open a brokerage account, which most companies allow you to do online. You can then purchase gold stocks or buy into gold ETFs or mutual funds through a digital dashboard.

Some companies also allow you to digitally purchase physical gold — fractional shares of gold bullion that are then stored off-site in a secure facility. With Argo, for instance, you can buy and sell gold around the clock using the company’s digital platform. Your gold is then stored at the Royal Canadian Mint in Ottawa.   

“The biggest differences would be that digital gold companies enable customers to purchase gold through a technology forward interface like a mobile app or online client portal,” says Ben Nadelstein, head of content at precious metals marketplace Monetary Metals. “These digital gold products often come with additional services such as storage, insurance, and constant tracking of the value of your metal holdings.”

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Sizes and weights

When you buy physical gold, you’ll need to commit to buying a specific coin or bar size (or piece of jewelry, in some cases). Digital gold often comes with more options when it comes to the size of your investment. 

“Companies that have these types of digital interfaces are often able to offer gold purchases in smaller denominations than conventional physical gold bullion dealers or coin shops,” Nadelstein says. 

Argo, mentioned above, is a good example. With that digital platform, you can buy as little as $5 in gold.

Taxes

Physical gold investments — including digital fractions of them — typically come with tax liabilities. There are capital gains taxes (at a higher “collectible” tax rate) to consider, which can increase your tax bracket, resulting in higher taxes all around.

If you choose a digital option that does not hold physical gold — like a gold ETF or mutual fund, for instance — you can avoid some of these taxes. A gold futures account can also be a smart way to increase your exposure to the precious metal, says James Cordier, CEO and head trader at Alternative Options.

If you opt for a future account, you’ll need a series three broker to help, but the process is “very easy,” Cordier says. “You won’t have the shiny coins to hold in your hand, but it delivers more gold bang for your buck.”

Liquidity

Gold offers high liquidity overall, but physical gold isn’t as liquid as digital gold. You’ll need to find a buyer if you want to cash in on your investments or head up to your local pawn shop to get some money for it, and that may not be a quick or easy task. You could also lose money in the process.

“What someone will sell gold to you for is not the price they will buy it back from you,” says Matthew Chancey, a certified financial planner and founder of Tax Alpha Companies. “Think of it as selling your gold at wholesale prices and buying your gold at retail prices.”

While there’s still the chance of financial loss with digital gold investing options, you’re typically able to cash in on your investments much faster. If you find yourself in a financial pinch, for example, you can sell your gold stocks or ETF shares online, getting the funds you need very quickly. 

Research

If you invest in physical gold, you get the satisfaction of holding your investments in your hand. You can store them safely at home or in a secure deposit box, and you know where it is at all times.

If you’re going to go the digital route, this level of control isn’t there, so you’ll need to do your research to ensure you’re working with the right companies. Research the mutual funds and companies you’re considering buying stock in, and do your due diligence on any gold IRA or digital gold companies you’re thinking about using.

“When investing with digital gold companies there is an additional level of trust required, because those companies are often acting as custodians of your gold, too,” Nadelstein says. 

The bottom line

There are many ways to invest in gold. If you’re not sure which type of gold investments are best for your portfolio, consult a financial advisor or investment professional. They can offer personalized guidance for your specific situation.