Gold vs Gold ETFs: Which is better investment amid rising prices? Experts weigh in

Gold vs Gold ETFs: Gold prices have been skyrocketing since the start of 2025. The precious metal has risen over 11.35 per cent so far this year.

After rising for over two weeks straight, gold prices are finally hitting the downward rally on Wednesday. On March 5, the MCX gold rate opened lower at ₹85,931 per 10 grams and briefly reached an intraday high of ₹85,977 shortly after the market opened. However, the precious metal remains near its all-time high of ₹86,549 per 10 grams.

“Gold rates today are trading flat in early morning deals as investors await the outcome of Donald Trump’s most awaited speech in the US Congress. However, no surprise is expected in Trump’s speech, and US dollar rates hitting a three-month low is expected to provide confidence to fresh buyers,” said Anuj Gupta, Head — Commodity & Currency at HDFC Securities.

Amid ongoing market volatility, many investors turn to gold, gold ETFs as a safe-haven investment.

Few years back, gold investors had limited choices and primarily relied on purchasing physical gold. However, as the market evolved, new investment avenues emerged. Today, gold investors can choose from five options: Sovereign Gold Bonds (SGBs), Gold ETFs, Gold Funds, digital gold, and physical gold.

Gold or Gold ETFs – Which is better investment option?

According to experts, both physical gold and Gold ETFs offer similar long-term returns, but the difference lies in cost-effectiveness and convenience. Physical gold comes with additional expenses such as making charges, especially for coins and jewelry, which can eat into returns.

On the other hand, Gold ETFs involve lower transaction costs and can be bought in smaller denominations without concerns about purity or storage.

Jateen Trivedi, VP Research Analyst-Commodity and Currency at LKP Securities, said that Gold ETFs are a preferred choice for investors looking for liquidity, systematic investment options (SIPs), and safety through demat holdings.

“Gold ETFs provide exposure to gold without the hassle of physical storage, making them a more efficient investment avenue in today’s digital-driven investment landscape,” Trivedi said.

Gold return vs Gold ETFs return

According to data available, physical gold has outperformed gold ETFs, delivering a 20 per cent CAGR, whereas top ETFs provided returns between 13.8 per cent and 14.07 per cent, over the past five years.

In 10-year period, physical gold achieved a 12 per cent CAGR, while ETFs ranged from 10.02 per cent to 10.28 per cent. The difference narrows over 15 years, with physical gold yielding an 11 per cent CAGR and ETFs returning between 9.54 per cent and 9.62 per cent.

Although physical gold offers higher returns, gold ETFs provide greater convenience and liquidity, catering to different investor preferences. ETFs also offer advantages such as liquidity, transparency, cost-effectiveness, and ease of trading compared to physical gold.

Disclaimer: This story is for educational purposes only. The views and recommendations above are those of individual analysts or broking companies, not Mint. We advise investors to check with certified experts before making any investment decisions.