Paper Gold Vs Physical Gold: Key Differences Explained

As you know, gold plays a vital role in Indian culture. This is because it has religious significance, as it is needed while performing rituals, or merely to flex your status in society. Gold is a symbol of prosperity and wealth. In the early days, people stored physical gold as a backup for financial security. For this reason, gold is one of the most preferred investment choices in India.

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Different Types of Paper Gold
Paper Gold Vs Physical Gold

Paper gold refers to a type of financial instrument that states gold ownership via paper and without physically owning it. You can invest in gold by purchasing physical gold or paper gold, such as gold exchange-traded funds, gold funds, or sovereign gold bond schemes. Both physical and paper gold are influenced by different market forces, which have led to price disparity.

Investing in gold may not offer the profits as high as you might expect. However, it is one of the safest ways to grow wealth. Before you proceed to invest in paper or physical gold, you must understand the key differences first. This is because financial literacy is the cornerstone of making well-informed decisions and managing your finances better. Mentioned below is a table that draws the differences between paper gold vs physical gold.

Characteristics	Paper Gold	Physical Gold
Value	The value of paper gold fluctuates with the market prices of physical gold.	The value of physical gold is assessed by its purity, weight and the current market price.
Ownership	It gives investors ownership of actual gold without the hassle of physically owning it.	Possession of physical gold gives you complete authority over your gold. It is an ideal option for the long term.
Types	Gold Exchange-Traded Funds, Sovereign Gold Bonds and Digital Gold are a few types of paper gold.	Gold Bars, Jewellery and Gold Coins are a few types of physical gold.
Risks	Risks involved here are subject to the issuer or provider, who is a third party.	Risks involved here are very minimal due to the investor’s total control over his or her asset.

Different Types of Paper Gold

At Muthoot Finance, we offer a wide range of options for those looking for how to buy paper gold. Below are some of them:

Gold ETFs (ETF)

It is a financial instrument which allows investors to trade gold on stock exchanges. Gold prices directly influence the price of ETFs. Investors need to have a demat account in order to invest in gold ETFs, which include brokerage fees.

Sovereign Gold Bonds (SGB)

SGBs are typically digital gold, which is issued by the Reserve Bank of India on behalf of the government. They are denominated in units that represent gold in grams, where 1 unit of SGB is equivalent to 1 gram of gold.

Gold Mutual Funds

Also known as gold funds, they are a type of open-ended investment that allows investors to directly or indirectly invest in gold reserves. Investments in gold funds are made in the form of bullion and in companies that are involved in gold mining.

Paper Gold Vs Physical Gold

Investors have reasons of their own, whether they want to invest in physical gold or paper gold. Find yours:

Storage & Cost – With paper gold, proof of ownership is in digital format, which eliminates the risk of theft or robbery, whereas physical gold needs secure storage that incurs additional cost.
Liquidity – Paper gold is highly liquid, unlike physical gold, which involves a lot of challenges to buy and sell in real-time.
Quality Check – Quality check for physical gold, i.e. purity and weight, is very important. However, paper gold does not require a quality check.
Barriers – Since the vast majority of trading platforms are open to investors for investing in paper gold, there are no barriers as such as in physical gold.

Possession of physical gold has its benefits, but it involves the storage cost of owning and the risks of robbery. However, physical gold gives the satisfaction of physical ownership and is considered a long-term investment asset with a very low risk of losing its actual value. Investing in physical gold or paper gold, and every other investment, has advantages and drawbacks of its own.

There is a wide range of options at Muthoot Finance for those who want to make investments in paper gold, such as gold mutual funds, gold ETFs, etc. Additionally, we also have a team of finance experts who can help you choose the right investment option that aligns with your financial goals. Besides, we also provide the best gold loan schemes with quick fund disbursal.