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Gold Stocks vs. Physical Gold — What Is the Difference?

You want to buy gold to help diversify your portfolio, but you’re not sure whether you should buy gold stocks or physical gold. You may be asking yourself: Are they essentially the same thing? Does your portfolio experience the same benefits if you buy physical gold as it would if you buy gold stocks?

The answer to both of those questions is “no.” Each type of gold asset is different, so it may be helpful to know the differences between buying physical gold and buying gold stocks to make the smartest decision for your portfolio.

What Is Physical Gold?

As the name implies, physical gold refers to tangible gold that you can hold in your hand.

But while the most common kind of physical gold is jewelry, the term is more often used to refer to wealth-related assets like gold coins and bars.

Another term you’ll often see when shopping for gold bars and coins is “bullion.” This refers to bars and coins stamped or struck with the weight and purity of the gold they contain and priced based on these factors. Among the best-known gold coins are the Gold American Eagle, the Canadian Maple Leaf, the Austrian Gold Philharmonic, and the South African Krugerrand.

Bullion does not refer to proof or certified coins, which display weight and purity but are priced based on factors like quantity and condition in addition to their precious metals content.

Who buys bullion bars and coins? Gold buyers include central banks, individual consumers, coin and precious metals dealers and distributors, and exchange-traded funds.

The market price of gold fluctuates daily based on factors including supply and demand, global income growth, the strength of the U.S. dollar, and geopolitical tensions.

Where Do You Buy Physical Gold?

You can purchase physical gold from established distributors like U.S. Money Reserve. U.S. Money Reserve sells both bullion bars and coins, as well as proof coins, certified coins, and exclusive offerings.

What Are Gold Stocks?

A share of a publicly traded gold-mining company is one example of a gold stock. The price of a gold stock rises and falls based on how the market views that company. Factors that may impact the price of a gold stock include a company’s revenue, profit, operating expenses, and growth outlook, Investopedia notes.

You can buy stocks of individual mining companies, or you can buy a collection of gold-mining stocks through an ETF or mutual fund. With an individual stock, you own a share of a company. With a gold ETF or mutual fund, you own shares of a group of companies.

The market price of a gold stock or ETF doesn’t necessarily rise and fall in tandem with the market price of physical gold.

The worldwide gold-mining sector comprises more than 300 gold-mining companies that are publicly traded, the World Gold Council reports. The market value of a gold-mining company can exceed $10 billion.

Where Do You Buy Gold Stocks?

Individual stocks, ETFs, and mutual funds are available through brokerage firms. As a leading distributor of physical precious metals, U.S. Money Reserve does not sell gold stocks.

Is It Better to Buy Gold or Gold Stocks?

Ultimately, the choice of whether to add physical gold, gold stocks, or both to your portfolio is up to you.

One factor to consider if you’re buying gold miner stocks, however, is that they “do not provide the same downside capture or diversification as physical gold itself,” according to U.S. News & World Report. Furthermore, the price volatility of gold miner stocks tends to exceed the price volatility of physical gold.

Gold ETFs and mutual funds are traded on the same markets that individual stocks are, so they’re also subject to market volatility.

Another factor to consider is that buying gold stocks, ETFs, or mutual funds does not mean that you own physical gold. These are paper-based assets that can’t replicate the same security that comes from owning a tangible asset like physical gold.

Physical gold has also historically offered the benefit of strong performance during an economic downturn compared with equities, which are more likely to experience wild price swings amid a decline. Gold’s appeal as a safe haven is one reason people often balance their portfolios with physical gold. Read more about the reasons people buy physical gold here.

Whether you choose gold stocks, physical gold, or both may depend upon your unique financial situation and goals, how you view the current state of the markets and the economy, how close you are to retirement, and the level of diversification in your IRA. If you're ready to buy physical gold, you can visit our website or call and speak to a U.S. Money Reserve Account Executive to learn more about our available gold inventory and prices.


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