By Mark Ferguson and Charles Morgan for CoinWeek …..
Using gold as an example, the first investing decision you need to make is whether to invest in “paper gold” or “physical gold.” Paper gold is an investment instrument purchased through the securities market. Physical gold is the tangible asset—you can hold it in your hands. Investing in paper gold offers ways to earn potentially higher profits than physical gold, but it also carries greater risk, meaning you can lose more money. Conversely, by investing in physical gold, you take possession of the real metal, typically in coin or bar form, and store it in a secure location, such as a safe-deposit box, commercial depository, or private safe.
Understanding Paper Precious Metals
“Paper” investments for gold, silver, platinum, or palladium can be comprised of instruments such as mining stocks, Exchange-Traded Funds (ETFs), or futures contracts. They generally cost less to acquire than physical metals.
- Mining Stocks
Mining companies can often produce precious metals for far less than the metal’s market price, allowing investors to reap significant rewards. However, these investments are subject to specific business risks: management failure, uncontrollable expenses, poor corporate decisions, or adverse changes in government mining laws in the country where the mine is located. You have little to no direct control over your investment’s performance. - Exchange-Traded Funds (ETFs)
ETFs allow you to own shares in a fund that typically invests directly in the precious metals. You generally receive an investment that tracks the dollar-for-dollar share of the metal’s price (gold, silver, etc.), less management fees and commissions. This is often recommended by traditional investment advisors for ease of access. However, these investments carry counterparty risk—the risk that the managing fund or its custodians could fail, as well as risks from changing government regulations, tax rates, or trading exchange laws. The core distinction is that you own shares, not the physical metal. - Futures Contracts
Futures contracts are financial instruments generally reserved for sophisticated investors or speculators. They are usually highly leveraged, meaning you can control a large dollar amount of metal with a small amount of capital. While this offers high-profit potential, it also entails extremely high risk and is not recommended for the average investor.
The Appeal of Physical Precious Metals
For investors concerned about systemic financial instability—such as the events experienced in 2008 or heightened geopolitical and debt concerns in 2025—or who simply want an asset outside of the traditional financial system, taking ownership of the actual physical metal is the only option. This is the primary reason most people invest in physical gold, silver, platinum, or palladium.
Gold and silver are the two primary financial metals investors use for protection. Gold is primarily considered a financial metal and a central bank reserve asset (such as for the United States Treasury), while silver, often called “poor man’s gold,” is both a financial metal and is increasingly in demand for industrial applications like solar panels and electronics. Platinum and palladium are more specialized, with their values tied closely to industrial usage (e.g., automotive catalytic converters), making them more “exotic” for most general investors.
Buying Physical Bullion
While investing in the physical form of precious metals often costs a little more (due to premiums for manufacturing, distribution, and storage), it provides the most assurance of an investment truly outside the financial system.
The common way to own bullion is in coin or bar form. To ensure you are receiving a genuine product, it is essential to purchase from a reputable source. The coins are typically manufactured by sovereign government mints, such as the United States or Canada, and are legal tender coins. Their face values, however, are worth far less than the market value of the precious metal they contain.
- American Eagle Coins
The United States created the American Eagle bullion coin program in 1986. The program mints gold, silver, and platinum coins in various sizes (e.g., one-ounce, half-ounce) and denominations (e.g., the one-ounce gold coin has a $50 face value; the one-ounce silver coin has a $1 face value). Investors cannot purchase these coins directly from the U.S. Mint but must buy through authorized dealers. - Canadian Maple Leaf Coins
The Canadian government mints the Canadian Maple Leaf coins. These are often purchased by American investors because they are sometimes less expensive than the American Eagle coins, which typically command a slightly higher premium due to their domestic popularity. - Bullion Bars and Other Forms
The U.S. government does not manufacture precious metal bars for investment. However, the Royal Canadian Mint, private mints in the U.S. and globally, and some major international banks do. In times of high demand or financial turmoil, bullion coins have experienced shortages, leading some investors to purchase bars, which can carry lower premiums, or other alternatives like circulated silver coins. - Circulated U.S. Silver Coins (“Junk Silver”)
Circulated U.S. silver coins, often known as “junk silver,” are a way to acquire smaller denominations of physical silver. These are used dimes, quarters, and half dollars minted in 1964 and before that are composed of 90% silver. They are often traded in “bags” of $1,000 face value, which contain 715 ounces of silver.
Precious Metals in Retirement Accounts (IRAs and 401(k)s)
It is important to know that many of these physical precious metal products qualify as investments that are allowed in tax-advantaged retirement plans, such as IRAs (Individual Retirement Accounts) and potentially certain 401(k)s via a rollover into a Self-Directed IRA.
- IRS Rules: To be held in an IRA, the physical metals (gold, silver, platinum, or palladium) must meet specific IRS purity standards. For example, gold must be 99.5% pure (e.g., American Gold Buffalo coins or specific bars), and silver must be 99.9% pure (e.g., American Silver Eagles).
- Storage: The physical metals cannot be stored at home. They must be held by an IRS-approved custodian in a secure, insured depository.
- 401(k) Access: While a traditional 401(k) generally does not offer physical bullion, funds can often be transferred into a Self-Directed IRA (SDIRA), which allows for the purchase and secure third-party storage of IRS-approved physical precious metals as a potential hedge against economic turmoil.
To learn more about investing in gold, check out our handy 2025 Precious Metals IRA Investment Guide.
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This article was updated by Charles Morgan on September 30, 2025.
The post Paper vs. Physical Gold: The Essential Precious Metals Investment Guide for 2025 appeared first on CoinWeek: Rare Coin, Currency, and Bullion News for Collectors.
