To The Moon

With Gold Prices hitting new highs almost every week, I believe investors have been wondering whether it would be more appropriate to hold physical gold or digital gold, but among my peer groups, there are two school of thoughts. So in this article I would like to share why I think a blended approach is usually sensible — hold some Gold ETFs for liquidity, low cost and easy trading, and keep a smaller allocation to physical bullion (bars/coins) as “insurance” and for non-financial diversification. In the next few section we will try to explain why, the key trade-offs, major risks to watch, and a simple checklist you can use when deciding how much of each to hold. Why A Blended Approach Makes Sense Price action & demand drivers — Gold has been making fresh highs (above ~$4,300/oz in recent sessions) as investors seek a safe haven amid macro uncertainty; central banks and institutions are still buyers, which supports the uptrend. This macro backdrop supports both ETF and physical demand. ETFs = efficiency & liquidity — Large physically-backed ETFs (e.g., GLD/IAU) let you buy/sell quickly on an exchange, avoid storage headaches, and benefit from relatively tight bid/ask spreads and big daily flows. There have been meaningful inflows recently into major gold ETFs. Physical = ultimate ownership & insurance — Bullion gives you direct ownership of metal (useful for geopolitical or severe financial system stress scenarios), can be kept privately, and may be preferred by investors who want something outside the financial system. In Singapore and many jurisdictions, qualifying investment-grade bullion can be GST-exempt, improving the tax/fee picture for physical purchases. Main Trade-Offs (ETFs vs Physical) Liquidity & Trading Cost ETFs: trade like a stock (minutes to convert to cash). Low visible transaction cost (broker commission + spread). Good for tactical moves or rebalancing. Physical: selling involves dealer spreads, premiums/discounts, and often takes longer (especially for larger bars or outside market hours). Storage & Insurance ETFs: custodian stores bullion; you avoid personal storage/insurance costs. Physical: you must pay for secure storage (vault, bank deposit box) or accept home-safe risk + insurance — those costs erode returns over time. The Entrust Group Costs & fees ETFs: expense ratios (e.g., GLD ~0.40% as of Oct 2025) and tiny tracking error. Also possible bid/ask on trades. Physical: premiums above spot when buying, and dealer commissions when selling — plus storage/insurance Counterparty / Structure Risk ETFs: most major funds are physically backed but rely on custodians and authorised participants; in extreme stress, liquidity could be impaired. Know whether an ETF is physically backed vs synthetic/futures-based (futures ETFs have roll/contango risk). Physical: you avoid custodian counterparty risk, but face theft/ authenticity/transport risk. Tax treatment Varies by country. In the U.S. “physical precious metals” and many gold ETPs are treated under collectible tax rules (potentially higher long-term rates up to 28%). Other jurisdictions (e.g., Singapore) treat qualifying investment precious metals differently — Singapore exempts qualifying investment-grade precious metals from GST. Check local tax law and whether ETFs are classified as trusts/ETPs for tax purposes. Major risks & pitfalls to avoid Buying the wrong product: not all “gold” ETFs are physically backed — some use futures or swaps. Read the prospectus. (If futures-based, be mindful of roll/contango or backwardation effects.) Paying high premiums (physical): Jewellery and small retail coins often come with big manufacturing/margin charges; if you want investment exposure, prefer investment-grade bars/coins (99.5%+ purity) and reputable dealers. Ignoring storage/insurance costs: they reduce net returns; cheap home storage increases theft risk. Tax surprises: not checking local tax rules (capital gains vs collectible rates, GST/VAT on purchases) can be costly. Example: Singapore exempts qualifying investment precious metals from GST, but you must ensure the item meets the IPM criteria. Liquidity at extremes: in crisis scenarios, ETF market structure and AP behaviour matter — ETFs generally are liquid but extreme stress could widen spreads or delay redemptions. Practical Suggestions / Checklist Decide our objective — short/medium-term trading or long-term hedge/portfolio insurance. ETFs work best for trading/liquidity; physical for long-term non-financial insurance. Suggested Split: Note: This is just an example Tactical/liquidity focus: 80% ETFs / 20% Physical. Long-term insurance focus: 60% Physical / 40% ETFs. Small allocation (3–10% total portfolio) is typical for hedging; adjust to our risk profile. Remember that these are illustrative, it is tailor to the situation we are with our risk profile) If buying physical: buy investment-grade bullion (99.5%+ gold), use reputable dealers, compare premiums, and arrange secure storage (insured vault or bank safe). Keep paperwork for provenance. If buying ETFs: pick large, physically-backed funds with transparent holdings and low expense ratio; check AUM and recent flows (large AUM + steady inflows = better liquidity). Consider tax-efficient wrappers (IRAs, SIPPs) where available. Tax check: verify how gold (physical and ETF) is taxed in your country — this can materially affect net returns. In Singapore, qualifying investment precious metals are GST-exempt; if you’re elsewhere, check local rules. Record keeping & rebalancing: keep receipts, serial numbers, ETF statements; rebalance periodically rather than trying to time the top. Quick Decision Flow Want fast entry/exit and low friction → Gold ETF. Want “outside the system” ownership and physical possession or vault insurance → Physical bullion. Unsure / want both benefits → hold both (majority in ETF, minority in bullion). Gold’s recent rally and institutional demand make both ETFs and physical bullion reasonable places to get exposure — but they serve different purposes. ETFs give low-cost, liquid exposure and are excellent for portfolio allocation and tactical trades; physical gold gives ultimate ownership and reassurance during extreme scenarios but comes with storage, premium and liquidity trade-offs. A modest, intentional blend with clear rules on allocation, storage, and tax treatment will capture the strengths of both while avoiding most common pitfalls. Some ETFs I have already started are $SPDR Gold Shares(GLD)$ $iShares Gold Trust(IAU)$ $SPDR Gold MiniShares Trust(GLDM)$ In the next section, we have come up with a simplified cost-comparison example for holding gold via a blend of a gold ETF vs. physical bullion — using round numbers so you can see the difference. These are illustrative only (costs will vary by dealer, jurisdiction, storage setup, tax situation). Assumptions We invest US $100,000 in total in gold. We choose a split: 80% in ETF, 20% in physical bullion. So: ETF portion = US$80,000; Physical portion = US$20,000. We hold for 1 year (for simplicity) and all else equal. For ETF: we pay an expense ratio, no major storage cost, minimal other costs. For physical: we pay a purchase premium above spot, then annual storage/insurance cost, and assume when we sell we accept typical bid-ask/spread cost (but for simplicity we will treat that as included in premium or a one-time earlier cost). ETF Cost Estimate Choose a major gold ETF such as GLD (SPDR Gold Shares) which has a gross expense ratio ~0.40% per annum. ETF Cost Estimate Choose a major gold ETF such as GLD (SPDR Gold Shares) which has a gross expense ratio ~0.40% per annum. On US$80,000 invested: 0.40% of 80,000 = US$320 in annual expenses. You may have trading commission/spread if we buy and sell, but we will ignore that for simplicity here. So for the ETF leg: ~US$320 cost for the year. Physical Bullion Cost Estimate Let’s break it down: Purchase premium: When buying bullion bars/coins, we often pay above spot. A rule of thumb from industry sources: bars ~2-4% above spot; sovereign coins ~4-8% above spot. Assume we buy US$20,000 worth of bullion — perhaps we pay a 3% premium. That means we pay US$20,600 (i.e., $600 extra). That $600 is a cost up front (we effectively start US$600 above “pure spot-value”). We will count that US$600 as an upfront cost in Year 1. Storage & insurance / annual holding cost: If we use a professional vault/depository, annual fees might be ~1.0% to 1.5% of value (depending on size) according to one provider. Some sources for segregated storage (in IRA context) mention US$150-US$300 per year for smaller amounts — but that was older data and likely for smaller holdings. For US$20,000, let’s assume a moderate storage/insurance cost of 1.2% of value = US$240 per year. Bid-ask/spread / selling cost: When we go to liquidate, you may incur a similar spread or discount to spot; for simplicity we will treat this as part of the premium or storage cost and not add a separate line item here. So for Year 1, total cost for physical: US$600 (premium) + US$240 (storage) = US$840. Combined Costs for Year 1 ETF leg: ~US$320 Physical leg: ~US$840 Total cost: ~US$1,160 on the US$100,000 portfolio = ~1.16% of portfolio value for first year. If we held for subsequent years (Year 2 onward): you would not pay the premium again (assuming we keep it), so the ongoing cost becomes roughly ETF US$320 + physical storage US$240 = ~US$560 → ~0.56% of US$100,000 per year. Interpretation & What It Means The physical portion has higher upfront cost because of the premium paid when buying. Over time the storage/insurance cost continues, so physical is “more expensive” in cost terms than the ETF leg. The ETF leg is relatively “cheap” and highly liquid. If our physical portion was larger (say 50% of portfolio) the cost difference would grow. If we keep the physical gold for many years and the storage/insurance cost remains, cost accumulates. What To Watch / Customise for Our Situation Premium variance: For small retail coins we could pay much more than 3% premium; for large bars (say 1kg or 400 oz) we may get better (lower) premium. Storage cost scale: If we have a very large holding, we may negotiate lower storage rate (e.g., <1%). The ~1.2% above is just a moderate assumption. Tax / jurisdictional costs: In some countries buying physical may incur VAT/GST; selling may incur higher tax. That can change the economics. (For Singapore where I reside, the GST currently sits at 9%). Liquidity / spread difference: The ease of selling an ETF is much greater; physical may have higher cost when selling (especially if needing to ship, assay, etc.). Opportunity cost: The physical bullion is physically stored, we do not get any yield; if we hold it for emergency liquidity we might accept that. Portfolio size & overhead: For smaller investors, minimums and fixed costs may mean the storage cost is relatively higher as % of value. If our split were different If we chose 60% ETF / 40% physical (US$60k ETF + US$40k physical): ETF cost: 0.40% of 60k = US$240; Physical purchase premium (3% of 40k) = US$1,200; Physical storage (1.2% of 40k) = US$480; Year 1 cost = US$1,920 → ~1.92% of 100k. Ongoing after Year 1 ~ US$240 + US$480 = US$720 → ~0.72% per year. If you reverse (20% ETF / 80% physical) costs are even higher. Our View Given the cost comparison, the ETF leg is much more cost-efficient, especially for the bulk of our allocation. The physical portion should generally be the smaller part of the blend — primarily for insurance/peace-of-mind, not as our main “investment engine”. The higher cost of physical means we want to keep that portion modest. In the following section we have build a 10-year cost scenario comparing Gold ETF vs Physical Bullion, using realistic assumptions and showing how the cost gap compounds over time as gold prices rise. This is to enable us to really understand the cost gap compounds over time as gold prices rise. Scenario Setup (Baseline) Step 1 – ETF Side ETF result: After 10 years, our $100k becomes ≈ $141,700 net of ETF expenses. Cumulative cost = ~4.2% of ending value. Step 2 – Physical Side Physical result: After 10 years, your $100k becomes ≈ $127,000 net of all costs. Cumulative cost drag ≈ 14% of ending value, more than 3× the ETF cost. Step 3 – Comparison summary Result: Over a 10-year bull run, the ETF beats physical bullion by roughly 1.1 percentage point per year purely due to lower frictional costs. That translates to ~$15,000+ more value on a $100k investment. Sensitivity Checks If gold rises faster (say +6%/yr), ETF still outperforms but the % gap narrows because price appreciation dominates fixed costs. If storage costs fall to 0.8%/yr, physical’s 10-yr value improves to ~$132k — still below ETF. If we hold for crisis insurance, the non-financial benefit of physical may justify that cost gap. Takeaway Gold ETFs are far more cost-efficient for long-term investment exposure and rebalancing. Physical bullion acts best as insurance or “outside-system” asset — worth perhaps 10–30% of total gold holdings. Over a decade, costs compound meaningfully; a small annual difference (0.8–1%) adds up to thousands of dollars. Here is the 10-year growth comparison between Gold ETFs (solid line) and Physical Bullion (dashed line). We can see how both rise with gold’s price trend, but the ETF line stays consistently above due to lower annual costs and no upfront premium or storage drag. By year 10, the ETF’s compounding advantage becomes visually significant — about $15 K+ more value on a $100 K investment. Summary With gold prices reaching new highs almost weekly, as per my own peer groups, we are increasingly weighing whether to hold physical gold, invest in gold ETFs, or adopt a hybrid approach. Physical gold offers the advantage of direct ownership and serves as a tangible store of value, immune to financial system risks such as counterparty defaults. It is ideal for long-term wealth preservation or as a hedge during extreme market stress. However, physical gold comes with higher transaction costs, including dealer premiums (typically 3–8%), storage, and insurance fees, which can erode returns over time. Liquidity can also be lower, and selling may involve delays or price discounts. Gold ETFs, on the other hand, provide easy market access, high liquidity, and low expense ratios (around 0.3–0.6% annually). They track spot prices closely, making them more efficient for shorter- to medium-term trading or portfolio balancing. Yet, ETFs are paper claims on gold — investors do not physically own the metal, and their holdings depend on custodians and fund structures. They’ are also exposed to market volatility, and in rare cases, tracking errors or counterparty risks. A balanced strategy can help investors capture both sides: holding some physical gold for long-term security and crisis protection, while allocating to ETFs for tactical exposure and liquidity. Key tradeoffs include balancing cost efficiency versus direct ownership, liquidity versus systemic safety, and short-term trading flexibility versus long-term wealth preservation. Avoiding overconcentration in one form and monitoring storage or fund management costs can help investors ride the ongoing gold uptrend more effectively. In summary, blending physical and ETF exposure allows investors to benefit from gold’s strength while managing risks tied to storage, fees, and financial intermediaries. Appreciate if you could share your thoughts in the comment section whether you think a blended approach to Gold would be more sensible and could help investors to really benefit from gold’s strength while managing risks tied to storage, fees, and financial intermediaries. @TigerStars @Daily_Discussion @Tiger_Earnings @TigerWire @MillionaireTiger appreciate if you could feature this article so that fellow tiger would benefit from my investing and trading thoughts. Disclaimer: The analysis and result presented does not recommend or suggest any investing in the said stock. This is purely for Analysis.