One drawback to buying physical precious metals is the associated storage and insurance costs. Investments such as stocks and bonds do not incur any storage costs. Physical gold is an expensive commodity in any form. Storing it requires a safe space, such as a locker at home or in a bank, because of the risk of theft, and that entails a cost.
In addition, every time you need the gold, you'll have to physically go looking for it. It will not “come” to you like other financial products do. Any investment is made for the purpose of making a profit. In recent years, gold yields have been much lower than, for example, stocks.
Over the past decade, in rupees terms, with a compound annual growth rate (CAGR) of 5.7 percent, physical gold yielded much lower yields than Nifty's 15.5 percent. Every investment has advantages and disadvantages. If you object to having physical gold, buying shares in a gold mining company may be a safer alternative. If you think gold could be a safe bet against inflation, investing in coins, bars or jewelry are paths you can take to gold-based prosperity.
Finally, if your primary interest is to use leverage to benefit from rising gold prices, the futures market could be your answer, but keep in mind that there is a reasonable amount of risk associated with any leverage-based holding. However, investing in gold and other precious metals, and particularly physical precious metals, carries a risk, including the risk of loss. While gold is often seen as a safe-haven investment, gold and other metals are not immune to falling prices. Learn about the risks associated with trading these types of products.
One of the benefits of investing in physical gold is that, if you need to cash it out quickly, you can. However, gold coins and bullion are often sold at a premium and bought at a discount, so you may not get the market price when you need to sell. Investors can invest in gold through exchange-traded funds (ETFs), buy shares in gold miners and partner companies, and buy a physical product. While this value may change, a key reason investors seek gold is that physical gold is easy to liquidate.
Given the difficulties associated with physical gold as an investment, it is best for an investor to look for other options, such as paper gold.