Gold or the yellow metal has attracted mankind since time immemorial. This metal has been considered ornamental and used in making jewelry items for the last thousands of years. This metal has been a source of investment for many people as the prices of gold have appreciated to give the individual attractive returns on investment. This beautiful metal has a certain aura and charm around it that keeps its demand high among the people all over the world. As gold is found deep inside gold mines and that too in very small quantities, it remains highly valued by the owners. Traditionally, people with surplus money have bought gold bars and gold coins as it is considered a safe commodity that can protect one’s money from inflation. It is also considered safer that investment in stocks that are volatile and jeopardize entire investment. In fact, nearly all experts today agree that everyone should have a little quantity of gold to meet unforeseen financial emergencies.
But what form of gold should one own? Should it be in the form of physical gold coins, bars, and biscuits or in the form of papers? Yes, gold is today available ion paper form that proves to be more convenient and quicker than investment in real gold.
What is paper gold?
Paper gold is not a variety of gold like white and yellow gold. It is merely an investment in golf bullion and reflected in a paper document. If you are the owner of paper gold, all you have is a paper declaring the fact that you have traded in gold or have a gold holding but you do not get a chance to flaunt your asset in front of your friends like you doo when you have physical gold in the form of jewelry, coins, or bars. Ownership of paper gold is devoid of the glamour and the sentiment that is always the hallmark of an investor having physical gold. Besides the physical presence of gold, an investor gas all the benefits or advantages of gold investing (and of course all the drawbacks of investment in yellow metal). But what are the pros and cons of investment in each of the two modes? Let us find out.
Pros of investing in physical gold
- Very high liquidity
- Has a great shell life
- Free from all time limits
- It is portable
- Asset for future generations
There are very few mines of gold around the world and thus there is huge demand of yellow metal and only as limited supply. What this means is that you can easily convert the gold you own (irrespective of its shape and size) into hard cash whenever there is an emergency and you need money. You will find a buyer of the jewelry, biscuits or the gold bars that you own at the market rate to get a higher value of the gold than its value at the time of purchasing.
Physical gold is a metal that retains its aura and charm besides its color and luster for a very long time. It is a hard metal that does not break easily. Also, it does not catch rust coming in contact with moisture like iron. In fact, gold is a rare metal that does not react with other substances easily.
Investment in physical gold goes on and on unlike insurance policy that is purchased with a maturity date. Your investment outlives you as it remains an asset for others in case you face an untimely death.
Gold is one investment that you can take from on e place to another without any difficulty. Small quantity of gold costs lots of money so you can carry your investment along with you.
Useful for grandchildren
Investment in physical gold proves to be an asset for future generations as it is very durable and lasts really long.
Cons of physical gold
- It is risky to flaunt gold
- You need to ensure its safety
- It is costlier than paper gold
- You have to pay for the delivery
Risky to keep
As I said earlier, there is heavy risk to you if you wear lots of gold jewelry to flaunt your wealth or status in front of others. You are inviting trouble and risk to your life as there is huge allurement for gold in the minds of people and they can harm you to get hold of gold in your possession.
Invest in ensuring safety
Theft and robbery to snatch away gold in the possession of a family or individual is a common news item. If you have lots of gold in physical form, you will need to ensure its safety and security by arranging strong and reliable storage for your gold.
Physical gold is more expensive than paper gold. There is often a premium on items made of gold that you need to pay to own them.
If you trade in physical gold, bullion will be handed over to you but you will be asked to pay an additional delivery charge. This charge is based upon the distance of your house from the bullion and the kind of security that needs to be deployed for the safe delivery.
Pros of paper gold
- Even more liquid than physical gold
- More convenient than buying physical gold
- You can buy and sell with small changes in price
- No risk of owning gold
As you are probably aware of the huge demand of gold, you know you will easily dispose off your gold belongings. But you can sell or buy paper gold even more quickly. You can convert your paper gold into hard cash in an instant by asking your broker to sell it off at market rate.
You do not need to walk off to the nearest gold dealer to buy or sell paper gold. You can do so by placing a call to your broker or doing it on your own using a computer and internet.
Can buy or sell with slightest of fluctuation in rice
You do not buy another coin or bar when the price goes down as all you have to do is to buy another share of the gold fund.
You can have peace of mind
You can sleep in peace no matter how much paper gold you have in your possession. This is because unlike physical gold, no one can steal your gold from you.
Cons of buying paper gold
- Not the real feeling
- You do not get to touch and see gold
- It is hard to convert paper gold into real gold
- Price often moves up and down without change in price of physical gold
You may own lots and lots of paper gold but you never get the satisfaction and pride associated with ownership of physical gold.
Do not see or touch gold
You know you have invested in gold but never actually touch or see gold in your possession.
Not easy to convert in physical gold
You need permission to convert your paper gold into real gold which is not easy to obtain.
Mismatch of price
You are often surprised to see price of share of gold fund going up or down without any change in price of physical gold.