Physical gold, a gold fund and a mining share are three investments

explainerPublished 19 October 20261 min readcommodities

Key points

• A bar has custody and fabrication costs and no management fee. It also has no mine.
• A fund adds a fee, a custodian or a futures roll, and sometimes a currency translation.
• A miner adds operating costs, geology, the equity market and the balance sheet.

What is going on

Physically backed products, where the documents say the metal is held, still depend on the custodian and on the ability to create and redeem. Futures-based products add the curve, which the contango note describes. Mining shares add the difference between the metal price and the cost of extraction, plus jurisdiction and financing. Equity indices can reprice the share even when the metal quote is quiet, because the share is an equity.

Why it matters

A rise in the metal’s price can lift a miner by more than the metal if costs are fixed, and it can hurt the miner if costs rise faster. That operating leverage is why miners are not a substitute teaching tool for bullion. Currency comes in because metal is often quoted in dollars while the holder’s accounts are in another currency. The hedging note separates that translation from the asset.

What to watch

Read whether the product is backed by metal, by futures or by shares. Read the fee and the custodian. For a miner, read the cost curve in the report, not the word gold in the name.

Risks

Custody can fail. Futures rolls can cost. Mines can flood, and equity multiples can compress. A collectible coin adds a collector’s premium that is not the bullion price. This note does not recommend a form of holding.