Investing in Gold - Physical vs ETF vs Contracts

Why gold?

Gold has served as a "safe haven" for thousands of years. In investment portfolio it has several roles:

• Inflation protection — historically maintains purchasing power
• Diversification — low correlation with stocks
• Crisis safety — rises when stock markets fall
• No credit risk — gold cannot go bankrupt

Most experts recommend 5–15% of portfolio in gold.

Option 1: Physical gold (bars and coins)

Popular forms

• Bars: 1g, 10g, 20g, 50g, 100g, 1 oz (31.1g), 1 kg
• Bullion coins: Krugerrand, Vienna Philharmonic, American Eagle, Australian Kangaroo
• Collectible coins: higher price, numismatic value

Where to buy in Poland?

• Polish Mint (mennica.com.pl)
• Goldenmark (goldenmark.com)
• Mennica Skarbowa
• Tavex (tavex.pl)
• Banks: PKO BP, Pekao (limited offer)

Costs

• Spread (dealer margin): 3–8% above spot price
• Smaller the bar, higher the percentage spread
• 1g bar: spread ~15–20%
• 1 oz bar: spread ~3–5%
• Storage: bank safety deposit box 200–600 PLN/year or home safe

Advantages

• Tangible, physical asset
• No counterparty risk
• Anonymity (to some extent)
• Satisfaction of ownership

Disadvantages

• High spread on purchase and sale
• Storage and insurance costs
• Theft risk
• More difficult liquidity — you need to find buyer
• No interest or dividends

Option 2: Gold ETFs and ETCs

Most popular funds

How does it work?

ETC (Exchange Traded Commodity) on gold is exchange-traded fund backed by physical gold in vaults. You buy fund units — each corresponds to specific amount of gold.

Costs

• TER: 0.12–0.39% annually
• Broker commission: depends on broker (0% at XTB)
• Exchange spread: minimal (0.02–0.05%)

Advantages

• Low entry and maintenance costs
• High liquidity — buy/sell in seconds
• No storage problems
• Easy portfolio inclusion
• Available on IKE (at some brokers)

Disadvantages

• You don't have physical gold "in hand"
• Counterparty risk (though minimal with physically-backed ETCs)
• Annual fee (TER) slowly "eats" gold

Option 3: Gold contracts (CFD, futures)

What are they?

Contracts are derivatives — you don't buy gold, just speculate on its price. Available with leverage.

Costs

• Spread: 0.3–0.5 USD per ounce
• Swap (overnight fee): charged daily
• No TER, but ongoing costs may be higher

Advantages

• Leverage — you can control large position with small capital
• Ability to short (profit from falls)
• Instant execution

Disadvantages

• Leverage works both ways — you can lose more than you deposit
• Overnight costs (swap) for longer holdings
• Not suitable for long-term investing
• High stress and risk

Gold contracts are tools for experienced traders, not for building portfolio.

Comparison — what to choose?

Recommendation

• Want to store wealth for years → Physical gold (large bars/coins)
• Want gold in investment portfolio → ETF/ETC (SGLD)
• Want to speculate on price → Contracts (at your own risk)

For most investors ETF/ETC is best option — low costs, high liquidity, easy management.

How Freenance can help?

Freenance tracks gold as part of your portfolio:

• Value in PLN — current gold value converted at current rate
• Allocation — what percentage of portfolio is gold
• Correlation — how gold behaves relative to rest of your portfolio
• Runway — include gold in Financial Freedom Runway calculation

👉 Add gold to your portfolio in Freenance — freenance.io