Buying physical gold is very different from buying and owning gold ETFs, though one must admit that ultimately the value of both would remain the same, barring marginal differences.
Remember if you buy, you are owning gold, whether it is Gold ETFs or physical gold, though the costs, mechanism to sell and tax implications differ. Following are 5 differences between Gold and Gold ETFs.
Gold ETFs are held in electronic form
Gold ETFs are held in electronic form, in a similar manner you hold shares. It's like a bank account where you have a balance in your account, but do not hold the money physically. When you want the money from your bank you withdraw the same. Similar is the case with Gold ETFs, where you hold 1 Unit which is equal to one gram of gold and when you want the money you sell the same. In the case of physical gold, you hold the gold physically.
Wealth Tax on physical gold
Holding large amounts of physical gold will attract wealth tax, even if the same is in the form of jewellery. Gold ETFs do not attract wealth tax
Capital gains on Gold ETFs
Unlike shares, Gold ETFs are not exempted from long term capital gains. Similarly, for Gold physical gold.
No chances of theft in Gold ETFs unlike physical gold
There are chances that physical gold could be stolen and you very often hear cases of theft. There is no chance of Gold ETFs being stolen since they are held in electronic form.
Storage costs on physical gold
Physical gold is bound to attract storage costs, since many individuals hire lockers in the bank to store gold. Gold ETFs on the other hand do not attract storage costs since they are held in the electronic form.