Gold Stocks vs Physical Gold

Investing in gold has long been a popular strategy for individuals seeking to diversify their portfolios and hedge against economic uncertainties. Two common ways to invest in gold are purchasing physical gold, such as bullion bars and coins, or investing in gold stocks. This article will provide a thorough analysis of gold stocks vs. physical gold, examining the various types of gold investments, the benefits, and drawbacks of each, and guidance on where to buy physical gold. By the end of this article, you’ll better understand which investment option may be more suitable for your financial goals and risk tolerance.

Gold Stocks vs. Physical Gold

Gold stocks and physical gold serve different purposes in an investment portfolio, each offering unique advantages and disadvantages. Therefore, when considering an investment in gold, it’s crucial to understand the primary differences between gold stocks and physical gold to make an informed decision.

Gold stocks refer to shares in companies in the gold industry, such as mining, exploration, or production. Investing in gold stocks can provide exposure to the gold market and potential capital gains if the stocks appreciate. However, gold stocks are also subject to the same market risks and volatilities as other stocks, and their performance may not always be directly correlated to the price of gold.

On the other hand, physical gold, such as bullion bars and coins, is a tangible asset that investors can hold, store, or sell. Physical gold provides a hedge against inflation, geopolitical risks, and economic uncertainties. As a result, it’s often considered a safe-haven asset and can help preserve wealth during financial instability. However, owning physical gold also comes with the added responsibilities of storage, insurance, and the potential for theft or loss.

Gold Stocks

Gold stocks can be an attractive investment option for those looking to gain exposure to the gold market without owning physical gold. There are several types of gold stocks, including:

  • Gold Mining Stocks: These stocks represent ownership of companies that produce gold. Examples include Barrick Gold Corporation and Newmont Corporation. Investing in gold mining stocks can offer significant returns if the companies perform well, but these stocks are also subject to fluctuations in gold prices, operational risks, and broader market trends.
  • Gold Exploration Stocks: These are shares in companies that search for new gold deposits and resources. These stocks tend to be more speculative and carry a higher risk, as the success of exploration efforts is still being determined. However, if a company discovers a significant gold deposit, the stock may appreciate rapidly.
  • Gold Royalty and Streaming Stocks: These companies finance mining operations in exchange for a percentage of the gold produced or a fixed price per ounce. Examples include Franco-Nevada Corporation and Royal Gold Inc. Royalty and streaming stocks offer less direct exposure to gold prices, as their revenues are based on the gold production of the mining companies they finance.

Physical Gold

Physical gold, such as bullion bars and coins, is an attractive investment for those looking for a tangible asset that can store value and hedge against inflation. There are several types of physical gold investments, including:

  • Gold Bullion Bars: These are typically the most cost-effective way to invest in physical gold, as they have the lowest premiums over the spot price. Gold bullion bars come in various sizes, from as small as one gram to as large as 400 ounces.
  • Gold Bullion Coins: Issued by governments, gold bullion coins are legal tender and often have a higher premium than gold bullion bars due to their collectible value. Examples include the American Gold Eagle, the Canadian Gold Maple Leaf, and the South African Krugerrand.
  • Gold Numismatic Coins: These rare or historically significant gold coins carry a collectible value beyond their gold content. Numismatic coins can appreciate significantly over time, but their value is more subjective and dependent on factors such as rarity, condition, and demand among collectors. Examples include pre-1933 U.S. gold coins and ancient gold coins from various civilizations.
  • Gold Jewelry: Although less popular than an investment option, gold jewelry can still hold value due to its gold content. However, it is essential to note that the value of gold jewelry is often affected by design, craftsmanship, and brand factors.

Buying Physical Gold vs. Gold Stocks

When deciding between investing in physical gold or gold stocks, it’s crucial to consider your investment goals, risk tolerance, and each option’s unique benefits and drawbacks.

  • Portfolio Diversification: Both physical gold and gold stocks can help diversify a portfolio. However, physical gold is often considered a more effective hedge against inflation and economic uncertainty, as market fluctuations than gold stocks influence its value.
  • Potential Returns: Gold stocks can provide the potential for significant capital gains if the underlying companies perform well. However, they also carry the risks associated with investing in individual stocks, such as company-specific risks and broader market trends. In contrast, physical gold’s value tends to be more stable over time, providing a more conservative investment option with lower potential returns.
  • Liquidity: Gold stocks are generally more liquid than physical gold, which can be bought and sold quickly through stock exchanges. Selling physical gold may require locating a buyer, negotiating a price, and possibly incurring additional costs for shipping and insurance.
  • Ownership and Storage: Owning physical gold requires secure storage and insurance, which can be costly and cumbersome. Gold stocks, on the other hand, do not require physical storage, and the ownership is recorded electronically.

Where Do You Buy Physical Gold?

If you decide to invest in physical gold, knowing where to purchase it safely and at a competitive price is essential. There are several options for buying physical gold, including:

  • Local Coin Shops: Many cities have reputable coin shops that sell gold bullion and coins. Purchasing from a local coin shop allows you to inspect the gold in person and take possession of it immediately. However, prices and inventory may vary, so shopping around for the best deal is essential.
  • Online Precious Metals Dealers: There are numerous online dealers, such as American Bullion, JM Bullion, and APMEX, that offer a wide selection of gold bullion and coins. Buying gold online can be convenient and often provides lower premiums than local coin shops. However, it’s crucial to research the dealer’s reputation and ensure a secure and insured shipping process.
  • Gold ETFs (Exchange-Traded Funds): While not a direct investment in physical gold, gold ETFs are an alternative option for investors who want exposure to gold without the hassle of storing and insuring it. Gold ETFs are traded like stocks on major exchanges and are backed by physical gold held in secure vaults. Examples include SPDR Gold Shares (GLD) and iShares Gold Trust (IAU).


Whether through gold stocks or physical gold, investing in gold can be a valuable addition to a well-diversified investment portfolio. However, choosing between gold stocks and physical gold ultimately depends on your financial goals, risk tolerance, and investment preferences. By understanding the differences between gold stocks and physical gold and the various types of investments available, you can make a more informed decision and confidently invest in this timeless asset. 

If you are interested in learning more about gold and other precious metals, American Bullion is a great resource. They offer a wide range of products and services, including gold and silver coins and bars, as well as IRA services. They also have a team of knowledgeable professionals who can help you navigate the market and make informed decisions about your investments. Contact American Bullion today to learn more about how you can diversify your portfolio with precious metals.