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Estably Blog | Gold

Physical gold or gold securities:
Which is better?

Published on 02.05.2024

Gold has fascinated mankind since time immemorial. The shiny precious metal has been a popular investment since ancient times and is a “safe haven” for investors, especially in times of crisis. But how should you invest in gold? Should you buy physical gold or are gold securities the better choice? Find out in this article how to make the right choice for your individual gold investment!

The most important facts in brief:

  • Between 1984 and 2024, the price of gold rose from € 450 to over € 2,170 per ounce of fine gold
  • Over 63% of Germans consider gold to be a safe and worthwhile asset class
  • Global gold production has stagnated since 2017 (but demand is increasing by over 18% per year!)
  • Physical gold in particular is considered a popular asset protection in times of crisis
  • With “Asset Protect” from Estably, you can skillfully combine currencies with investments in gold

The idea of investing in physical gold may sound a little antiquated at first, but it is experiencing a huge hype again these days. More and more investors are adding the popular precious metal to their portfolios – seeing gold as THE trusted tangible asset. After all, gold has been valued and revered by mankind for thousands of years.

"If you have gold, you always have money!"

It’s not called gold for nothing. Whether for jewellery production, in the electronics industry or as an investment in the form of gold bars, gold coins or gold securities: The fascination of gold is unbroken and should therefore be the subject of our article today! You can look forward to the following points in detail:

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    1 Why is gold so valuable?

    Although demand for the most popular precious metal in industry is limited, it has been synonymous with value, security, durability and stability for thousands of years. But why is that? First of all, gold is very rare – mankind has mined around 208,874 tones to date (sounds like a lot, but it would correspond to a gold cube with an edge length of just over 20 meters!) What’s more, the extraction of gold is very time-consuming, laborious and, above all, expensive.

    Eiffelturm Gold
    Figure 1: All the gold in the world would easily fit under the Eiffel Tower as a cube with an edge length of 20 metres.

    Throughout history, people have always taken great risks to get their hands on physical gold – and even today it is still mined in places in gold mines over 4 Kilometers deep, where ambient temperatures of over 60 degrees Celsius prevail. Find out a little more about the exciting history of gold, the extraction of gold and the development of the gold price in the following sections.

    1.1 History of gold

    From ancient Egypt to the discovery of America, the early modern gold standard to the high-tech industry – the history of gold is just as exciting and provides a good insight into how strong the motivation has always been in relation to the shiny metal.

    While the first coins date back several thousand years, it is only recently that gold has become increasingly popular among private investors.

    Gold im alten Ägypten
    Figure 2: The first gold artefacts
    were found in ancient Egypt over 6,000 years ago
    Timeline Gold
    Figure 3: From antiquity to the high-tech industry - all the important steps in the history of gold on its way to becoming the world's favourite precious metal

    1.2 How the extraction of gold works

    The extraction of gold basically follows these five listed techniques:

    1. Opencast mining (this is mainly used to mine near-surface gold deposits)
    2. Underground mining (gold is extracted from deeper ore veins)
    3. Mining (gold is separated from the rock by blasting and removal)
    4. Gold washing (gold is extracted from gold-bearing rock by gravity separation using special vibrating machines)
    5. River spades (gold is washed out of river beds and sediments)

    Underground mining by gold mining companies and gold panning (especially in North America) are by far the largest gold extraction methods used today. Mining via open-cast mining is much rarer, as it is too costly, and the river spade method is usually only used by private hobby gold prospectors.

    1.3 Gold price development from the origins until today

    Interestingly, the first gold coins (a “solidus” in the Byzantine Empire) had a current value of around €250. However, the development of the price of gold only really took off with industrialisation, as this was the first time that mankind produced large quantities of goods and commodities whose equivalent value was covered by gold.

    However, verifiable records of the development of the price of gold have only been available since around 1900, since when the price of gold has increased almost a hundredfold, as the following table illustrates:

    Tabelle Gold
    Figure 4: From the 1970s onwards, the price of gold rose almost exponentially
    (Status: April 2024, source: https://de.statista.com/statistik/daten/studie/156959/umfrage/
    development-of-the-gold-price-since-1900/
    Andreas Wagner Estably

    Our personal tip for you:

    “What stands out? Since the abolition of the gold standard by then US President Nixon, the price of gold has risen almost constantly (with a few exceptions). Money therefore loses its value compared to gold, while gold bars and coins retain their value. This is why you should also use this asset class for individual asset protection. Find out more in a personal consultation!”

    Estably Asset Management Ltd
    Schaanerstrasse 29
    9490 Vaduz
    Liechtenstein

    Curious about personalized advice and tailor-made strategies for your individual situation? Get your free and non-binding initial consultation with us now!

    2 What are the options for investing in gold?

    There is basically no doubt that the price of gold is likely to continue to rise in the future. But how do you deal with this as an investor and what is the best and most effective way to invest in gold?

    There are a multitude of options for this, which can often paralyse the decision-making process. However, the options can initially be differentiated according to two main characteristics: Buying physical gold (direct investment) and gold securities (indirect investment):

    Physisches Gold vs. Goldpapiere
    Figure 5: Physical gold or gold securities: all options for gold investments at a glance

    Let’s take a closer look at the details of the options mentioned above and how they work.

    2.1. Physisches gold

    Physical gold is so called because it is real gold, i.e. gold that you can actually touch. These are, for example, bars and coins or (in their pure form) gold nuggets. They are all available from different mints and refineries and in different degrees of purity and coinage. And most importantly:

    "With physical gold, all that glitters is gold!"

    2.1.1. Gold bars

    Gold bars are the most common form of physical gold investment. They are available in different denominations, such as 1 gram, 5 grams, 10 grams, 1 ounce (approx. 31 grams), 50 grams, 100 grams, 250 grams, 500 grams and 1 kilogram. They all have a purity of 99.999 %. The best-known mints include Degussa, ESG and valcambi.

    2.1.2. Gold coins

    The denominations of gold coins are much more varied, but most of them are between 1/10 ounce, 1/2 ounce or 1 ounce. With some gold coins, you could theoretically even pay for your purchases as you would with normal money. However, the gold content of the coins varies, but is usually between 75 and 99.999 %. Well-known refineries include the American Eagle, Britannia, China Panda and Krugerrand. Gold coins are also very popular among collectors.

    2.1.3 Gold nuggets

    In addition to gold bars and gold coins, you can also opt for physical gold nuggets, which are naturally occurring pieces of pure gold formed by erosion and transport in rivers and streams. They are usually the size of dust or grains, but can be head-sized and weigh several hundred grams. Most gold nuggets are melted down and either turned into bars, coins or jewellery. However, some nuggets themselves are also used as an investment.

    2.2 Gold ETFs and Gold ETCs

    Gold ETFs (ETF for “Exchange Traded Funds”) are Index funds that hold gold as an underlying asset and are traded on stock exchanges. They enable investors to invest indirectly in physical gold without having to actually own it. Compared to a Gold ETF, Gold ETCs (ETC for “Exchange Traded Commodities”) are quite similar, but they represent a claim to a certain amount of gold held by an issuer. A well-known German representative of ETCs is Xetra Gold, for example.

    2.3 Gold certificates

    Gold certificates are securities that represent the right to a certain amount of gold held by a bank or financial institution and traded on the stock exchange. Investors acquire gold certificates in order to profit from the price movements of the precious metal without owning or storing physical gold. They offer flexibility and liquidity for gold investments on the financial markets, but also significantly more risk.

    2.4 Gold mining shares

    Last but not least, gold mining shares are shares in gold mining companies. These are shares in companies that specialise in the exploration, mining and sale of gold. The value of gold shares often depends on gold prices, production costs and operational efficiency, which also makes them a highly speculative form of investment.

    Markus Prodinger Estably

    Our personal tip for you:

    “In our view, it is advisable to invest in physical gold as it represents real value that you can touch. gold bars, gold coins and gold nuggets offer more security and flexibility, while ETFs, ETCs, certificates and gold mining shares are associated with higher risks. Estably therefore offers you a safe option for physical gold investments!”

    Estably Asset Management AG
    Schaanerstrasse 29
    9490 Vaduz
    Liechtenstein

    Curious about personalised advice and tailor-made strategies for your individual situation? Get your free and non-binding initial consultation with us now!

    3. What are the advantages of buying physical gold as opposed to gold securities?

    3.1 Intrinsic value and stability

    Physical gold has an intrinsic value based on its limited availability and its historical role as a store of value. This stability makes it an attractive investment option that is resistant to economic turbulence and currency devaluations or even complete currency crashes.

    3.2 Safe storage at the LLB

    Founded in 1861, the Liechtensteinische Landesbank (LLB) offers a secure storage solution for physical gold that meets the highest standards. Through state-of-the-art security systems and insured storage, the LLB ensures the protection and integrity of its clients’ assets. This provides investors with peace of mind for their gold investments. The Principality of Liechtenstein as a banking centre also offers you a crisis-proof banking system, AAA rating without sovereign debt and a stable social and economic order.

    3.3 Deliverable at any time

    If you wish, you can have your physical gold delivered securely and reliably at any time. The LLB employs courier services with the highest security standards for this purpose. A phone call to the Estably team is all it takes for us to order the delivery of your physical gold holdings to the LLB. The delivery itself then usually takes place within a maximum of 48 hours.

    3.4 Hedging against the decline of the euro

    The euro, US dollar and Swiss franc are safe and stable global currencies in themselves, but can nevertheless fall sharply in times of crisisongoing inflation has the same effect. With gold, however, you secure your assets independently of central bank money (similar to cryptocurrencies).

    3.5 Diversification in the portfolio

    The integration of physical gold into your portfolio also enables effective diversification, as the precious metal has a low correlation to other asset classes. Diversification therefore reduces your individual overall risk and can contribute to a stable return in the long term, especially in times of economic uncertainty and market volatility.

    Markus Prodinger, Geschäftsführer von Estably

    Our personal tip for you:

    “Invest in physical gold to diversify your portfolio and protect your wealth. Due to its intrinsic stability and low correlation to other asset classes, it serves as reliable protection against currency devaluations and market fluctuations. With Estably and the LLB, you have a strong team and the opportunity to invest cost-effectively in this safe and stable asset class and benefit from the advantages in the long term!”

    Estably Asset Management Ltd
    Schaanerstrasse 29
    9490 Vaduz
    Liechtenstein

    Curious about personalised advice and tailor-made strategies for your individual situation? Get your free and non-binding initial consultation with us now!

    Asset Protect Estably
    Figure 6: Expand your portfolio with "Asset Protect" (a mix of currencies and different proportions of gold)

    4 What is the "Asset Protect" strategy?

    With our advantageous “Asset Protect” strategy, you now have the opportunity to invest your assets safely outside the EU. It combines physical gold investment in the form of bars (999.9 gold) with differently weighted currency components and therefore offers protection in uncertain times. Let us explain this coveted investment strategy to you in more detail in the subsections below.

    4.1 Asset Protect 20, 40, 60, 80 & 100 briefly explained

    With an average return of around 10.39%, the various “Asset Protect” portfolios from Estably offer attractive returns that come close to the US S&P500, but are also much safer and less volatile. Our portfolios 20, 40, 60, 80 & 100 offer different compositions, whereby the number in the name describes the percentage of gold (physical). The currency portion also includes the following currencies (which themselves are considered stable and low-fluctuation currencies):

    • Swiss francs
    • US dollar
    • Canadian dollar
    • Australian dollar
    • New Zealand dollar
    • Norwegian krone

    4.2 Conditions & fees

    You can invest in the various products of our “Asset Protect” strategy from a minimum investment amount of 50,000 euros. In terms of fees, we offer a convenient all-in fee of 1.19 % (including custody account fees, bank charges, service fees, storage and insurance costs and tax reporting costs): Custody fees, bank charges, service fees as well as storage and insurance costs and tax reporting costs).

    Andreas Wagner Estably

    Our personal tip for you:

    “Why take unnecessary risks when Estably’s “Asset Protect” strategy offers you comparatively low-risk investments? With returns of over 10 percent and a stable portfolio of physical gold and selected currencies, you can maximise your wealth without excessive volatility. Contact our team today and optimise your individual investment strategy!”

    Estably Asset Management Ltd
    Schaanerstrasse 29
    9490 Vaduz
    Liechtenstein

    Curious about personalised advice and tailor-made strategies for your individual situation? Get your free and non-binding initial consultation with us now!

    5. conclusion: Invest safely in physical gold for long-term asset protection with Estably

    For long-term asset protection and attractive returns, you should invest in physical gold. It offers stability, protection against currency devaluations and effective diversification in your portfolio. With Estably’s “Asset Protect” strategy, you can skillfully combine physical gold with currencies and maximize your assets with comparatively low risk. What’s more, buying gold gives you physical, “tangible” assets that you can deliver at any time and that are also highly motivating and attractive to look at.

    Estably, based in Vaduz in the Principality of Liechtenstein, offers investors not only access to high-quality portfolios, but also to the attractive benefits of a stable and flexible financial centre. Recognised in prestigious publications such as Forbes, Focus Money and wallstreet:online, Estably offers private and institutional investors a wide range of first-class financial services. Not yet an Estably client?

    We look forward to getting to know you free of charge and without obligation!

    Markus Prodinger Estably

    Let us advise you on the topics of finance, asset management, capital investment and much more!

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    About Estably

    Estably is the first digital asset management company from Liechtenstein to offer first-class wealth management through a blend of technology and human investment expertise. Thanks to the portfolio managers’ many years of experience in the field of value investing, the aim is to achieve above-average returns. The aim is to make professional asset management, which was previously exclusively available to major investors, accessible to everyone – conveniently, transparently and profitably.

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