The Hidden Cost of Physical Gold

While gold has rallied 48% in 2025, investors holding physical bullion are discovering a painful truth: storage and insurance costs are eating 8–10% of returns annually. Costco's $2 billion gold bar sales phenomenon has highlighted this issue, with buyers paying 10–12% premiums over spot price and then facing ongoing storage fees. Meanwhile, gold ETFs like GLD and IAU have outperformed physical by 6–8% due to zero storage costs and perfect tracking.

The premium gap has reached record levels, with 1oz American Eagles selling for $180 over spot at dealers. Storage facilities are at capacity, and insurance rates have doubled. Many investors who bought during the 2024 rally are now face negative real returns after accounting for these costs. Gold ETFs, by contrast, trade at tiny premiums and offer instant liquidity.

The Smart Way to Own Gold

Financial advisors are increasingly recommending ETFs over physical for most investors. The convenience, security, and lower total cost of ownership make ETFs superior for portfolios under $1 million. Physical gold remains popular for privacy-focused investors and those preparing for extreme scenarios, but for wealth preservation and growth, ETFs are now the clear winner. The days of 'if you don't hold it, you don't own it' are being challenged by institutional adoption and regulatory clarity.