Paper gold investment means acquiring an asset that is not tangible but is recorded on paper, giving you a notional amount of gold credited to an account instead of physical bullion. This form of exposure, supplied by banks to the market under pre-set contractual terms, lets investors buy and sell paper gold without any physical delivery, avoiding storage costs and logistical issues. Instruments like ETFs, gold futures and derivatives are typical examples; they mirror gold prices and are favoured for agile trading rather than long-term holding.
Expert behind this article
Thomas Goldfreburg
Thomas Goldfreburg is a gold investment advisor, author and founder of Goldfreed. Thomas's expertise is built on an academic foundation of a Bachelor of Science in Economics from Stanford University and complemented by market experience. Thomas specializes in gold IRA, ETF, 401k, and physical gold investments.
What is paper gold investment?
Paper gold investment refers to investing in financial instruments that represent ownership or exposure to the price of gold without physically owning the metal. Paper gold investment takes the form of spread betting on the gold market, gold mutual funds, individual mining shares, and gold futures.
Paper gold refers to non physical gold products. It is a financial instrument, a kind of asset that reflects the price of gold while not actually being gold itself. Instead of holding bullion, the investor holds a notional amount of gold credited to a paper gold account, and that account is a HKD-denominated account designated for transactions in HKD.
Common forms of paper gold include gold exchange-traded funds that track the value of physical gold, sovereign gold bonds that provide government-backed security and guaranteed returns. Gold futures that are actively traded every day on the gold markets and allow speculation on the price of the commodity for a future date, and gold-linked deposits that embed a call option over Loco London Gold with gold as the reference asset.
What are paper gold investment options?
The paper gold investment options are detailed below.
- Paper gold investments include gold certificates
- Paper gold investments include gold options
- Paper gold investments include gold stocks
- Gold ETFs are a popular paper gold investment option
- Paper gold investments can be bought through mutual funds
- Paper gold investments include gold mining companies
- Paper gold investments include sovereign gold bonds
- Paper gold investments include gold ETPs
- Paper gold investments can be purchased through post offices
- Paper gold investments - SGBs are government-backed bonds with interest and capital appreciation
- Gold futures are common examples of paper gold which allow investors to buy or sell a specific amount of gold at a specific price at a specific date in the future
- Gold certificates are example of paper gold
- Gold ETFs track the value of physical gold and offer affordability, liquidity and ease of trading
- Gold ETFs provide low minimum investments
- Gold futures are derivative contracts that allow you to buy gold at a specific price on a specific date
- Gold ETFs offer capital appreciation
- Gold futures allow taking physical delivery of the metal, although most gold futures traders do not take delivery
Sovereign gold bonds are government-backed bonds that provide 2.5 % interest on the principal plus capital appreciation. Gold certificates reflect the value of gold, while gold mining companies provide diversification, yet their share prices do not always track gold's long term performance closely. Mutual funds that track the price of gold are purchased in smaller dollar amounts than bullion and charge management fees.
Is paper gold a good investment?
Holding paper gold is deemed more useful for trading purposes, and it enables one to get exposure to the price of gold without having to possess physical bullion.
Paper gold is a low-cost gateway to gold price movements, yet it never delivers a single gram you can hold. Because the product is a claim on a counterparty-bank, exchange or issuer-it will sag or vanish if that party defaults, so it is not a safe haven in the literal sense. Physical gold eliminates counterparty risk, is tangible and is a safe haven in uncertain times. Paper gold suits traders who want speed and liquidity, and physical gold suits those who want the asset itself and the cultural or collateral options that come with it. Both options have potential for long-term gains depending on market trends, but only physical gold exposes investors to all the advantages gold has to offer.
Paper precious metal was a handy substitute that provided an ease of commerce and direct reveal to precious metal's value trends. The main appeal was removal of warehousing worries and coverage expenses missing from straightforward tangible possession. My venture's worth was conditional on fiscal condition and probability of publishing organization, establishing a level of counterparty hazard I had not amply recognized at the beginning. My view developed: the present aspect matched with my goal to take advantage of the stock exchange variations, yet the possibility of hazard remained.
Thomas GoldfreburgInvestor at Goldfreed
How to invest in paper gold?
A gold or commodity-focused ETF or mutual fund can be the simplest way to invest in gold. Investors can buy and sell shares of the ETF like a stock, and the price of a gold ETF is linked to the physical price of gold.
To invest in paper gold follow the steps explained below.
- Place an order for gold-related assets on broker's website
- Buy shares in gold funds like SPDR Gold Trust (GLD)
- Buy bars and coins as physical investments
- Buy gold in physical form like bullion
- Trade gold ETFs like any other stock or security
- Choose gold ETFs as a popular investment method
- Put money into publicly traded gold mining companies
- Own shares in multiple gold-related assets through funds
- Invest in gold futures
- Pick gold-related assets to invest in
- Buy gold stocks individually
To start, an investor must open an investment account with an online broker or investment platform. When investors buy a gold ETF, they own a share of the fund's total collection of physical bullion, and some funds, like SPDR Gold Trust (GLD), invest directly in gold bullion, while others hold baskets of gold-mining stocks or gold futures. Gold ETFs can be purchased inside a brokerage IRA, so the same order screen used for stocks handles the transaction. Investors who want leverage turn to gold futures, another way to invest in gold, yet gold futures are highly speculative and prove risky for beginning investors. Those preferring diversified equity exposure can buy shares in gold-mining companies individually or through a mining-sector ETF like Sprott Gold Miners ETF, which invests in a basket of gold-mining stocks. Buying gold-related assets requires an investment account, and once the account is funded, the investor places the order on the broker's website.
My first attempt started with considerable investigation. I devoted a substantial period to comprehending the financial tools accessible, then picked a respected securities firm corporation whose program offers real-time news on the metal cost. The account opening process needed the filing of required identification and financial papers through a protected website. Once my request obtained acceptance, permission awarded me direct entry to the commerce control panel and my record was operational. Next, I embarked to perform my initial buying of a precious metal ETF. The procedure involved defining the wanted venture total and looking for the particular stock's ticker sign, followed by placing a purchase bid. The deal was decided nearly instantaneously and portions showed in my portfolio. Finally, I observe the functioning of my venture through the securities firm's program.
Thomas GoldfreburgInvestor at Goldfreed