In the diverse world of gold investing, paper gold and physical gold have very different cost structures because of their different characteristics.

According to 2025 market data, using 10,000 RMB as an example, the differences in transaction cost, holding cost, and liquidation cost can create a gap of more than 1,600 RMB in total annual cost. Investors should choose based on their purpose and holding period.

1. Transaction Cost: Spread vs Premium — Very Different Starting Points

The main transaction cost of paper gold is the bank spread.

For example, in July 2025, ICBC paper gold had a spread of 0.8 RMB/gram. With the day’s Au(T+D) price at 772.76 RMB/gram, 10,000 RMB could buy about 12.94 grams.

If the gold price stayed unchanged and you sold immediately, the actual loss would be only about 4.8 RMB, or 0.05% of principal — almost negligible.

Physical gold, however, includes premium and fees

For example, when buying ICBC “Ruyi Gold Bar,” the price on that day was 799.9 RMB/gram, which was 27.14 RMB/gram above the benchmark gold price.

With the same 10,000 RMB, you could only buy about 12.5 grams, and the premium cost alone reached about 340 RMB, or 3.4% of principal.

So in the very first step, physical gold is already much more expensive.

2. Holding Cost: Almost Zero vs Multiple Layers of Cost

Paper gold has no physical delivery, so there is no storage cost.

Some banks may charge a small annual management fee of 0.01%–0.3%, which means for a 10,000 RMB investment, the yearly cost is only 1–30 RMB.

Physical gold has multiple holding costs:

• Bank safe-deposit box annual fee: about 1%–2% of asset value, or 100–200 RMB
• Purchase tax: physical gold is subject to 13% VAT

If you buy 10,000 RMB worth of physical gold, the tax-related cost alone is about 1,150 RMB

(10,000 ÷ 1.13 × 0.13)

So even before liquidation, taxes already reduce your effective capital.

3. Liquidation Cost: T+0 Settlement vs Discount + Delay

Paper gold can usually be sold back to the bank in real time at the bank’s buy price.

That means:

• High liquidity
• No extra discount loss beyond the spread
• Fast cash-out

Physical gold is different:

The buyback price is usually 5–10 RMB/gram lower than the day’s gold price.

Using a 5 RMB/gram discount as an example:

• 12.5 grams × 5 RMB = 62.5 RMB loss from discount alone

If you mail the gold for buyback, you may also pay:

• Shipping fee: 20–50 RMB
• Time cost: 3–5 business days
• Logistics risk

4. Cost Comparison by Holding Period

Short-term holding: 1 month

• Paper gold: total cost ≈ 4.8 RMB
• Physical gold:
• Premium: 340 RMB
• Storage cost: 8.3 RMB (annualized at 1%)
• Buyback discount: 62.5 RMB
• Total ≈ 410.8 RMB

Cost difference: about 406 RMB

Long-term holding: 1 year

• Paper gold: management fee ≈ 30 RMB
• Physical gold:
• Premium: 340 RMB
• Storage fee: 100 RMB
• Buyback discount: 62.5 RMB
• VAT: 1,150 RMB
• Total ≈ 1,652.5 RMB

Cost difference: about 1,622.5 RMB

5. Investment Advice: Choose Based on Purpose and Time Horizon

Best for short-term trading: Paper Gold

With low friction and T+0 liquidity, paper gold is better for catching intraday moves.

For example, if gold moves 1.5% in a day, a 10,000 RMB position could gain about 50 RMB in one day. Even after spread costs, there is still room to trade effectively.

Best for long-term preservation: Physical Gold

Although it has higher costs, physical gold is better for:

• Inflation protection
• Crisis hedging
• Long-term wealth storage

This is especially relevant when:

• Central banks continue buying gold
• The Fed rate-cut expectation is strong

Best for liquidity management: Paper Gold

Paper gold can usually be redeemed quickly into digital funds, often within 10 minutes.

Physical gold, by contrast, has a complicated liquidation process and is not suitable for emergency cash needs or short-term arbitrage.

Conclusion: Before Choosing Gold, Think About the “Use Case”

2025 market data makes one thing very clear:

Annual cost gap:

Paper gold vs physical gold = 1,600 RMB+

In simple terms:

• Paper gold is better for small capital, frequent trading, and high liquidity needs
• Physical gold is better for those who want:
• No platform risk
• Long-term preservation
• Asset inheritance value

The key is not just to ask “which gold is better,” but:

What is your purpose for buying gold?

Once your goal is clear, choosing the right gold product becomes much easier.