When people talk about investing in gold, it does not always mean the same thing. Sometimes they own real physical gold in the form of a bar or a coin. Sometimes they hold a financial product that is only linked to the price of gold. And in recent years, tokenised gold has also appeared, connecting the world of gold with blockchain.
That is why we often distinguish between physical gold, paper gold and tokenised gold.
- Physical gold
- Physical gold is a real precious metal. It can take the form of a bar or a coin, and its value is based on its weight, purity, origin and the current market price of gold. With physical gold, it matters who produced it, what purity it has and whether it will be easy to trade in the future.
- For many people, physical gold is the purest and easiest to understand form of gold. It is not just a chart, a contract or a record in a system. It is a specific asset that can exist outside an app, exchange or financial institution.
- Paper gold
- Paper gold is a general term for financial products that track the price of gold, while the user usually does not hold a specific physical bar. This can include funds, exchange traded products or other instruments linked to the price of gold.
- Paper gold can be easier to buy or sell quickly, because it is often traded in a similar way to other financial products. At the same time, it does not always mean that you have a claim to a specific physical bar that you can actually take possession of. It always depends on the specific type of product and its terms.
- Tokenised gold
- Tokenised gold is a digital token that is meant to represent a certain amount of gold. Such a token usually works on blockchain and its value is linked to the price of gold.
- At first glance, it can look like an interesting combination of two worlds. Gold brings a historically proven physical asset, while blockchain brings fast transfers, digital records and the possibility of holding the asset in a crypto wallet.
- Even with tokenised gold, it is important to look at what exactly the token represents. For example, it matters who issues the token, where the physical gold is stored, whether it is truly backed, how the reserves are audited and whether the token holder can get physical gold back.
- In other words, tokenised gold can be a practical digital form linked to gold, but it is not automatically the same as holding a physical bar in your own hand.
The difference between these forms of gold is therefore not just in the name. The main difference is what you actually own.
With physical gold, you own a specific metal or a share of physical metal. With paper gold, you usually own a financial claim whose value is based on the price of gold. With tokenised gold, you own a digital token that, according to the issuer’s rules, should be linked to a certain amount of gold.
Physical gold has several practical advantages:
- It is tangible.
- It is not just a record in a system. Gold exists as a real metal.
- It has clearly defined quality.
- With investment bars, purity, manufacturer, certification and origin are all important.
- It is easy to trade.
- Gold from trusted manufacturers can usually be sold not only to the original seller, but also to other gold dealers or jewellers.
- It does not depend on one type of system.
- If you hold physical gold under your own control, its value is not linked only to one app, exchange, blockchain or platform.
In the Littlebit app, we work with physical gold. This means it is not just tracking the price of gold in a chart, and it is not a token that only represents gold digitally. The gold is bought and held in physical form, and the user can physically withdraw it once the conditions are met.
Gold available for physical withdrawal is always provided in the form of bars from the Swiss refinery Argor-Heraeus. Purchase, sale and secure storage are provided by BESSERGOLD Trading s.r.o., the Czech part of the Bessergold group. Bessergold also guarantees buyback, so if a user decides to sell their gold, they can sell it back without a fee.
For users, this means that in Littlebit, they are not saving only into the price of gold or into a digital token. They are saving into a physical asset with clear origin, high quality and the option of physical withdrawal.