Gold investment strategies: Comparing physical ETFs and mining stocks

Gold serves as a traditional tool for portfolio diversification and inflation hedging. Historically, the metal has demonstrated price stability during economic instability and stock market volatility, often moving in an inverse direction to the US dollar.

Investors choosing between gold assets face different risk and reward profiles. Physical gold ETFs, such as the Global X Physical Gold ETF on the ASX, track the gold price through allocated bullion held in vaults. These funds do not generate income or dividends, as returns are strictly tied to the movement of the metal price minus management fees.

In contrast, gold mining companies like Northern Star Resources Ltd offer operating leverage. While miners can provide dividends and franking credits, they also expose investors to operational risks such as labor costs, diesel prices, and management decisions. Northern Star recently reported gold sales of 433,482 ounces for the June quarter, with all-in sustaining costs at $2,651 per ounce.