Gold ETFs vs Physical Bullion: The Real Cost Comparison for UK Investors

A gold ETC (exchange-traded commodity) such as iShares Physical Gold or Invesco Physical Gold holds allocated bullion in a vault and trades on the London Stock Exchange like a share. Its cost is an annual ongoing charge — roughly 0.12% to 0.25% — plus your platform's dealing fee and a small bid-offer spread.

Physical bullion — a Royal Mint Britannia or Sovereign — has no annual fee. Its cost is front-loaded into the dealer spread: you buy a few per cent above the spot price and sell a little below it. On a £3,407 ounce, a typical 4–5% round-trip spread is roughly £140–£170 you lose the moment you transact, regardless of what gold does next.

The shapes are opposite. The ETC bleeds a little every year; bullion takes its cut once, at the round trip. Which is cheaper depends entirely on your holding period.

Over a decade, a 0.20% ETC costs roughly £200 on £10,000; a 4.5% bullion round trip costs about £450. Over thirty years the ETC's annual drag compounds and the gap narrows or reverses. Time horizon, not preference, is the deciding variable.

This is where the two routes stop being comparable. A gold ETC can be held inside a Stocks and Shares ISA or a SIPP. Physical coins and bars cannot go in an ISA at all.

Inside an ISA or SIPP, all gains are sheltered — there is no CGT to plan around. That single fact makes a low-cost gold ETC the default for most investors who have ISA or pension allowance available, because it removes the tax question entirely. See our Stocks and Shares ISA guide and investing hub for how a gold sleeve fits a wrapped portfolio, and the SIPP and pensions hub for the retirement-account route.

Hold gold outside an ISA or SIPP and the comparison inverts. A gold ETC is a chargeable asset: gains above the £3,000 annual exempt amount for 2026/27 are taxed at 18% (basic rate) or 24% (higher rate).

Physical UK legal-tender coins are not. Gold Sovereigns and Britannias are exempt from CGT without limit because HMRC treats UK currency disposals as outside the scope of the tax. On a £20,000 gain, that is up to £4,080 of tax avoided entirely — a one-off edge that dwarfs a decade of ETC fees.

So the rule is not "ETC good, bullion bad". It is: inside a wrapper, low-cost ETC; outside a wrapper for a large long-term holding, CGT-exempt coins. The deeper mechanics of the coin exemption are covered in our UK gold investing guide.

Cost is not the only axis. A physically-backed ETC carries issuer and custodian risk — small for the major LBMA-vaulted products, but not zero, and it is regulated as an investment, so FCA investor protections and the £85,000 FSCS investment limit apply rather than deposit cover. Physical coins in your possession have no counterparty at all, but you carry storage and insurance cost and risk, and selling means finding a dealer rather than clicking once.

Liquidity favours the ETC: you can deal it in seconds at a tight spread during market hours. Bullion is liquid but slower and wider. For a 5–10% portfolio hedge that you rebalance, the ETC's frictionlessness matters. For a long-term store-of-value holding you never intend to trade, the coin's zero ongoing cost and CGT exemption win. Gold pays no income either way — while you hold it, UK gilts yield about 4.8%, so size the position as insurance, not a core asset.