Gold ETF vs physical gold: which costs less, and what do you own?
A physically backed gold ETF tracks the gold price for a yearly fee, 0.12% to 0.40% at the funds we checked, and trades like a share. Physical coins cost more up front: 1.68% to 3.33% over spot at the cheapest dealers in October 2026, and about 6% to 7% to buy and sell back. In return you hold the metal yourself.
Both routes give you exposure to the same thing, the price of gold. What differs is what you actually own, what it costs to get in and out, how it is taxed where you live, and who you are relying on. This guide sets those out side by side with real, dated figures.
What is the difference, in plain English?
Physical gold means coins or bars you own outright, kept at home or in a vault. You pay a premium (the dealer's charge above the gold's value) when you buy, and usually sell back a little below the spot price, the wholesale price of gold.
A gold ETF (exchange-traded fund) is a fund listed on a stock exchange. A physically backed one holds gold bars with a bank custodian (a firm that looks after assets) and issues shares whose price follows the gold it holds. In the UK and Europe, similar products are often ETCs (exchange-traded commodities), which are technically debt securities backed by gold rather than fund shares. You buy either through a brokerage account, and you own the security, not specific bars.
Not every "gold fund" holds gold. Some use futures contracts, and others hold shares in mining companies. This guide covers physically backed products.
How do physical gold and gold ETFs compare side by side?
| Factor | Physical coins and bars | Physically backed ETF or ETC |
|---|---|---|
| What you own | The metal itself | Shares or notes backed by bars held by a custodian |
| Cost to buy | Premium: 1.68% to 3.33% at the cheapest sellers for 1 oz, more for small coins | Broker dealing fee plus the bid-ask spread (gap between buy and sell price) |
| Yearly cost | Nothing at home (but insurance and a safe); vault fees if stored | Expense ratio: 0.12% to 0.40% at the funds below |
| Cost to sell | Dealers usually pay below spot (3.28% below in our UK check) | Dealing fee plus spread |
| Who you rely on | Nobody, if held at home; the vault, if stored | Issuer, custodian, broker and other service providers |
| Selling speed | Arrange with a dealer, post or visit; payment after receipt | Sell in seconds during exchange hours |
| Minimum | Price of one coin (about £770 for a Sovereign in our check) | Price of one share, or less with fractional dealing |
| Tax wrappers | Mostly outside; special rules for US gold IRAs, UK SIPPs, Canadian RRSPs | Often allowed in ISAs, SIPPs, IRAs, TFSAs and super funds |
What do gold ETFs charge? Fees from issuer pages
An expense ratio (or TER, total expense ratio) is the yearly fee, taken out of the fund's gold, so it reduces the gold behind each share a little every year. These figures come from each issuer's own page, checked 12 October 2026. They are examples to show the range, not suggestions to buy any fund.
| Product (ticker) | Market | Yearly fee | Custodian and structure (as stated by issuer) |
|---|---|---|---|
| SPDR Gold Shares (GLD) | US | 0.40% | JPMorgan and HSBC; gold held in allocated form at end of each business day; launched 18 November 2004 |
| iShares Gold Trust (IAU) | US | 0.25% | Sponsor fee as stated in prospectus |
| iShares Physical Gold ETC (SGLN) | UK | 0.12% | JPMorgan, London; limited recourse notes payable only from the secured gold |
| WisdomTree Physical Gold (PHAU) | UK | 0.39% | HSBC; allocated, individually identified bars; Jersey-issued debt security |
| Perth Mint Gold (PMGOLD) | Australia | 0.15% | Gold held by The Perth Mint; covered by the Western Australian government guarantee |
Fees can change; check the issuer's current documents. Your broker may also charge dealing or account fees, which are not included.
What does physical gold cost? Our real price data
From the GoldVetted price check (10 and 11 October 2026, single-item prices from dealers' own product pages, cheapest payment method):
| Country | Seller and product | Price | Spot | Premium |
|---|---|---|---|---|
| Canada | Gold Stock Canada, Maple Leaf (wire) | CA$6,079.19 | CA$5,978.73 | 1.68% |
| UK | Chards, Britannia, best value | £3,259.95 | £3,171.03 | 2.80% |
| Australia | The Perth Mint, 1oz cast bar | A$6,184.39 | A$6,012.71 | 2.86% |
| US | SD Bullion, American Eagle (wire) | US$4,335.39 | US$4,195.60 | 3.33% |
Selling is the other half. Hatton Garden Metals offered £3,067.15 to buy back a 1oz Britannia on 10 to 11 October 2026, 3.28% below spot. Buying at Chards and selling to Hatton Garden Metals would have lost 5.91% of the price paid; buying and selling at Hatton Garden Metals, 6.52%. Check any quote with our premium calculator, and see gold dealer spreads for more on buyback.
Worked example: about £10,000 held for ten years
- Coins at home: three Britannias from Chards cost £9,779.85. Sold straight back to Hatton Garden Metals they would fetch £9,201.45, a cost of £578.40. There is no yearly fee, but you need somewhere safe to keep them. For a UK resident, any gain is free of Capital Gains Tax.
- A 0.12% ETC: the same £9,779.85 would cost about £11.74 a year in fund fees at today's value, or about £117 over ten years if the price stayed flat, plus your broker's dealing and account fees and the spread. Gains above your allowance are taxable unless held in an ISA or pension.
So on cost alone, a low-fee fund is cheaper over most holding periods, and the gap is biggest for short holds. The answer can flip for a UK taxpayer with a large gain, because of the coin CGT exemption, and it ignores the main reason many people buy coins: holding the metal directly.
If you decide physical coins suit you, Chards had the lowest UK Britannia price in our October 2026 check. See Chards' Britannia price
How is each taxed in the US, UK, Canada and Australia?
Tax depends on where you live and on the product's legal structure. This is a summary, not tax advice.
| Country | Physical gold | Physically backed gold ETF or ETC | Key difference |
|---|---|---|---|
| US | Collectible: long-term gains taxed at up to 28% (IRS); some states add sales tax when you buy | Grantor-trust funds such as GLD are taxed like the gold itself: up to 28%, not the 20% top rate for most shares | Same federal rate; ETFs avoid state sales tax and fit in an ordinary IRA |
| UK | Britannias and Sovereigns are exempt from CGT (HMRC CG78305); bars are not; investment gold is VAT-free | CGT at 18% or 24% above the £3,000 allowance, unless in an ISA or SIPP | UK coins can be CGT-free outside any wrapper |
| Canada | One-half of a capital gain is taxable (CRA); pure bullion is GST/HST-exempt; frequent trading can be business income | Same one-half inclusion; ask your broker whether a fund is eligible for your TFSA or RRSP | Similar tax; only specific bullion, bought through qualifying institutions, can go in registered plans |
| Australia | CGT, with a 50% discount if held 12 months (ATO); no GST on investment gold of 99.5% purity or more | Same CGT rules and 50% discount | Similar tax; super funds face strict storage rules for physical metal |
US: SPDR Gold Trust tax information 2025 and IRS Topic 409. UK: HMRC and GOV.UK CGT rates for 2026-27. Canada: CRA. Australia: ATO. Rules for other ETF structures can differ.
For detail, see the US, UK, Canada and Australia gold tax guides. Account rules are covered in gold IRAs, gold in a SIPP or ISA, gold in an RRSP or TFSA and gold in an SMSF. In the UK, gold ETCs and funds are investments that can fall within financial regulation; the FCA register lets you check any firm you deal with.
What is counterparty risk, and how much does it matter?
Counterparty risk is the chance that someone you depend on fails to do what they promised. Physical gold kept at home has none: no company stands between you and the metal (though theft and loss are real risks). Gold stored in a vault depends on the vault, which is why allocated versus unallocated storage matters.
A gold ETF or ETC involves several parties: the issuer, the custodian holding the bars, the trustee or administrator, and your broker. Issuers describe the risks openly. iShares says its Physical Gold ETC's notes are "limited recourse obligations which are payable solely out of the underlying secured property", and warns that the insolvency of institutions such as the safekeeper could cause losses. On the other hand, the large physically backed funds we checked state that their gold is held as allocated bars, and many publish bar lists. The risk is real but different in kind: you are relying on structures and institutions rather than on your own safe.
Which is easier to buy and sell?
ETFs win on convenience. You can buy or sell in seconds whenever the exchange is open, in amounts as small as one share, and the price closely tracks gold. Selling physical gold means contacting a dealer, posting or delivering the item, and waiting for it to be checked before payment. In a rush, coin premiums and buyback discounts can both widen. The flip side is that physical gold does not depend on a broker's platform or the exchange being open.
What mistakes do people make?
- Comparing the coin premium with one year of ETF fees. Compare the full round trip over your likely holding period.
- Assuming every gold fund holds gold. Futures-based funds and mining funds behave differently.
- Forgetting platform fees. A 0.12% fund on a platform charging a yearly account fee may cost more than it looks.
- Assuming US ETFs get the normal stock tax rate. Grantor-trust gold funds are taxed at the collectibles rate.
- Buying bars in the UK expecting CGT relief. Only UK legal tender coins are exempt.
- Treating mining shares as a gold substitute. They are company shares with company risks.
Who does each suit?
| If your priority is... | Physical gold tends to fit | A gold ETF tends to fit |
|---|---|---|
| Holding metal with no provider in between | Yes | No |
| Lowest cost for a short hold | No | Yes |
| Using a tax wrapper (ISA, IRA, TFSA, super) | Limited and complex | Usually straightforward |
| UK CGT-free gains outside a wrapper | Yes, with UK legal tender coins | No |
| Selling quickly in small amounts | Possible with small coins, slower | Yes |
| Giving or passing on something tangible | Yes | No |
Plenty of people hold some of each. Whether gold belongs in your finances at all is a separate question, covered in is gold a good investment? If you choose physical, our country guides compare dealers: where to buy gold in the US, where to buy gold in the UK, where to buy gold in Canada and where to buy gold in Australia, and how to buy gold walks through the steps. This page is general information, not financial or tax advice, and the gold price can fall as well as rise.
Frequently asked questions
Is a gold ETF better than physical gold?
Neither is better for everyone. A gold ETF is cheaper to buy and sell and easy to hold in a brokerage account, but you own shares or notes, not bars. Physical gold costs more to get in and out of, typically 6% or more for a round trip on coins, but you hold the metal yourself with no provider in between.
Do gold ETFs actually hold gold?
Physically backed ones do. GLD's custody agreements say all its gold is held in allocated form at the end of each business day, at JPMorgan and HSBC. WisdomTree says PHAU is backed by allocated bars at HSBC. Some other gold funds use futures or hold mining shares instead, so read what a fund owns before buying.
Can I swap my gold ETF shares for physical gold?
Usually not as a small investor. Large institutions can create and redeem shares in big blocks of gold, but ordinary shareholders normally sell their shares for cash. If having metal in your hands matters, buying coins or bars from a dealer is the direct route.
How are gold ETFs taxed in the US?
Physically backed gold ETFs organised as grantor trusts are treated like owning the gold itself. The SPDR Gold Trust says long-term gains are taxed at a maximum federal rate of 28%, the collectibles rate, instead of 20% for most investments. Physical gold held over a year is also taxed as a collectible. See our US gold tax guide.
Are gold ETCs free of Capital Gains Tax in the UK?
No. Gains on gold ETCs and funds are subject to Capital Gains Tax above the £3,000 annual exempt amount, at 18% or 24%, unless held in an ISA or pension. UK legal tender gold coins such as Britannias and Sovereigns are exempt from CGT for individuals. Read our UK gold tax guide.
What about gold mining stocks?
Mining shares are part-ownership of companies, not gold. Their value depends on the gold price but also on costs, debt, management and the wider stock market, so they can rise or fall much more than gold itself. They are a different kind of investment from a physically backed gold fund or coins.
Is digital gold the same as an ETF?
No. 'Digital gold' usually means buying gold through an app or online vault, where you own a share of bars held for you. Some, like BullionVault, hold it as your property on an allocated basis; others are unallocated. Read our allocated vs unallocated guide before choosing one.
Sources
We checked these primary and official sources when writing and fact-checking this page.
- SPDR Gold Shares: GLD fund page (0.40% expense ratio, custodians, allocated gold)
- SPDR Gold Trust: tax information 2025 (grantor trust, 28% collectibles rate)
- iShares: Gold Trust (IAU) fund page (0.25% sponsor fee)
- iShares: Physical Gold ETC (SGLN) (0.12% TER, limited recourse, counterparty risks)
- WisdomTree: Physical Gold (PHAU) (0.39% TER, allocated at HSBC, debt security)
- The Perth Mint: PMGOLD (0.15% management fee, WA government guarantee)
- IRS Topic 409: collectibles gains taxed at a maximum 28% rate
- HMRC Capital Gains Manual CG78305: Britannia gold coins are exempt as sterling currency
- GOV.UK: Capital Gains Tax rates (18% and 24%, £3,000 allowance)
- Canada Revenue Agency: update on capital gains inclusion rate (one-half)
- Australian Taxation Office: CGT discount (50% after 12 months)
Not financial advice. GoldVetted provides general information to help you compare options. It is not personal financial, tax or legal advice. Gold prices go down as well as up, and you may get back less than you pay. Check tax rules with the official source or a qualified adviser before you act.