Investing in Gold - Physical vs ETF vs Contracts
Comparison of ways to invest in gold: bars and coins, gold ETFs and contracts. Pros, cons and costs of each option.
11 min czytaniaWhy 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.
Quick Answer
You can hold gold either physically (bars and coins, with a 3–8% dealer spread plus storage costs of 200–600 PLN/year for a safety deposit box) or via gold ETFs like SGLD that track the spot price with no storage hassle. Physical gold gives you a tangible asset and no counterparty risk; ETFs are cheaper, more liquid, and easier to sell in small amounts. Most experts suggest keeping gold to 5–15% of a portfolio for diversification and inflation protection.
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
| Fund | Ticker | TER | Type | Exchange |
|---|---|---|---|---|
| Invesco Physical Gold | SGLD | 0.12% | ETC (physical) | Xetra, LSE |
| iShares Physical Gold | IGLN | 0.12% | ETC (physical) | LSE |
| WisdomTree Physical Gold | PHAU | 0.39% | ETC (physical) | Xetra |
| Amundi Physical Gold | GOLD | 0.15% | ETC (physical) | Euronext |
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?
| Parameter | Physical | ETF/ETC | Contracts |
|---|---|---|---|
| Entry cost | High (spread 3–8%) | Low (0.1–0.3%) | Very low |
| Annual cost | 200–600 PLN (vault) | 0.12–0.39% TER | Swap (variable) |
| Liquidity | Low | High | Very high |
| Safety | Physical ownership | Counterparty risk (low) | Leverage risk |
| Horizon | Long (10+ years) | Medium/long | Short (trading) |
| IKE/IKZE | ❌ | ✅ (at some brokers) | ❌ |
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
FAQ
Is physical gold from Mennica Polska or IGLN ETC more cost-efficient?
For small allocations and short-to-medium horizons, IGLN (or SGLD) is usually more cost-efficient: spreads are minimal, TER is around 0.12% annually, and there are no storage or insurance costs. Physical gold from Mennica Polska, Mennica Skarbowa or Tavex carries a dealer spread of 3-8% on larger bars and up to 15-20% on 1g pieces, plus storage costs. Physical gold becomes more competitive at large size, long horizons and when "no counterparty risk" is the explicit goal.
Why is the spread on a 1g bar so much higher than on a 1 oz bar?
Production, certification and dealer handling costs are largely fixed per bar, so smaller units carry a proportionally higher markup. A 1g bar can carry a 15-20% spread while a 1 oz (31.1g) bar typically stays in the 3-5% range. For investment purposes — as opposed to gift-giving — larger units (50g, 100g, 1 oz) materially improve your break-even price.
Can I hold a gold ETC like IGLN inside an IKE account?
Yes, at brokers that route to foreign exchanges (LSE, Xetra, Euronext) within an IKE wrapper — for example XTB, mBank Brokerage or BM Pekao depending on current offer. Inside IKE the eventual gains are sheltered from the 19% Belka tax under the standard age-60 rules, which makes IGLN/SGLD a tax-efficient way to hold gold exposure long-term. Always verify with your specific broker that the ETC is on its tradable list.
Does a gold ETC actually own physical gold or is it just a derivative?
Physically-backed ETCs such as IGLN, SGLD, GOLD and PHAU are backed 1:1 by allocated gold bars held in vaults (typically in London), with auditable bar lists published periodically. They are debt securities rather than fund units, so they carry the issuer's counterparty risk — minimal in practice but not zero. They differ structurally from synthetic gold products that use swaps and do not hold metal.
What share of my portfolio should be in gold?
A commonly cited range is 5-15% of the total portfolio, with 5-10% being typical for younger investors with long horizons and more capacity for stock-market volatility. Gold pays no interest or dividends, so excessive allocation creates a long-term drag versus productive assets like equities. Past performance does not predict future returns; treat gold as a diversifier rather than a primary growth engine.
Related Articles
How many months could you live without working?
See your Freedom Runway — free