Gold’s rally to over £3,000 per ounce has not only captured headlines but also reshaped investor behaviour. According to our internal data, inquiries for physical gold have risen 368% since this price milestone, while pension investors cashing out of exchange-traded funds (ETFs) have increased by 249% in a single month.
At the same time, the World Gold Council reports that central banks purchased more than 1,000 tonnes of gold in 2023, their highest total in modern history. This shift underscores a wider realisation: the risks of a gold ETF go far beyond short-term price movement.
As investors worldwide move from paper claims to physical ownership, the distinction between convenience and control has never been clearer.
The Numbers Behind the Shift
Global data reinforces this transformation. In 2025 alone, gold ETFs saw net outflows exceeding 240 tonnes, according to the World Gold Council. Meanwhile, sovereign purchases, led by China, India and Turkey, have driven official reserves to their highest levels in half a century.
Bloomberg recently reported that China’s state-driven buying spree is helping to build a financial world less reliant on the US dollar. For private investors, the message is similar: governments and institutions are increasing physical reserves, not paper exposure.
Gold Bullion Partners’ own figures mirror this pattern. More investors are liquidating ETF positions and reallocating into verified holdings of gold bars and coins stored in secure vaults. They are responding to a clear lesson from the data.
Understanding Gold ETFs vs Physical Ownership
Gold ETFs are market-traded instruments designed to track the spot price of gold. Instead of owning the metal, investors hold shares representing a portion of a fund’s holdings. The appeal lies in liquidity and accessibility, but ownership is purely financial.
ETF shareholders do not possess the gold coins or bars held by custodians; they own units in a trust that promises equivalent exposure. The largest ETF, SPDR Gold Shares, now holds around 870 tonnes of metal, down from over 1,300 tonnes at its 2020 peak. The trend reveals waning confidence in paper representation and renewed interest in physical control.
Custody and Audit Risk
One of the most overlooked risks of a gold ETF lies in custody. These funds rely on complex chains of custodians and sub-custodians across multiple jurisdictions. Investors rarely know where their metal is stored, how frequently it is audited or whether it is temporarily lent to other institutions for liquidity purposes.
Even minor lapses in audit transparency can damage trust. In contrast, private ownership of silver or gold stored in secure, independently verified vaults provides total visibility. You know precisely where your holdings are kept and that they cannot be reallocated without your consent.
Liquidity and Redemption Limits
Many investors assume ETF holdings can be exchanged for bullion. In practice, redemption is limited to large “authorised participants”, typically major banks or asset managers, who trade in blocks worth tens of millions. Retail holders cannot request delivery of physical gold.
During market turbulence, ETFs also experience tracking errors or liquidity mismatches, meaning their share prices can drift from the actual spot value. During the 2020 volatility, discounts widened by as much as 5%. Direct holders of pension gold, however, remain unaffected. Their assets can be transferred or sold instantly without dependence on market makers or fund liquidity.
Hidden Costs and Ongoing Fees
Unlike physical metal, ETFs carry management and administration fees, usually between 0.3% and 0.5% annually. Over a decade, these costs erode returns by up to 5%. Some funds also sell portions of their gold holdings to cover expenses, gradually reducing each investor’s exposure even when prices remain flat.
By contrast, once an investor acquires and securely stores silver, there are no ongoing deductions. The asset remains intact, free from the continuous drain of fund expenses or the structural decay of paper instruments.
Transparency and Regulatory Oversight
Gold ETFs are subject to financial regulation, yet oversight focuses primarily on fund management, not the physical integrity of the metal itself. Custody often spans several jurisdictions, complicating accountability.
Auditing standards vary and some ETFs rely on unallocated storage, where holdings are pooled rather than individually assigned. In such systems, investors technically own a share of a collective claim rather than specific bars. However, ownership of silver coins, for example, ensures direct, verifiable possession with no counterparties, no pooling and no uncertainty about what is actually held.
Counterparty and Structural Risk
Each ETF depends on a web of financial intermediaries to function properly: trustees, custodians, clearing agents and market makers. Should any of these entities encounter distress, investor value may be at risk.
The 2008 financial crisis exposed how quickly systemic issues can spread through interlinked institutions. Even with modern safeguards, counterparty risk cannot be fully removed. Physical assets such as gold coins are immune to third-party solvency concerns. Their worth exists independently of corporate balance sheets, credit ratings or market algorithms.
Most investors still hold their pension gold through ETFs, often unaware that physical bullion can be placed directly within a SIPP. Our experience shows that SIPP-related enquiries have risen by more than 323% in a single month, reflecting growing concern about counterparty safety and the long-term security of retirement wealth.
Why Physical Bullion Offers True Ownership
The evidence now points to a decisive shift toward physical control. Investors increasingly value privacy, autonomy and legal ownership over convenience. The 249% surge in pension transfers from ETFs into physical holdings demonstrates this re-evaluation.
Owning gold within a SIPP provides a direct link to real wealth, fully outside the reach of fund managers or digital intermediaries. Certain coins are also capital gains tax-free, a structural advantage no ETF can match. In a tightening global supply environment, possession is quickly becoming the ultimate protection.
The Psychological Advantage of Tangible Assets
Beyond the data, there is a human dimension. Investors who can see and verify their holdings experience greater confidence and clarity. Physical ownership transforms gold from an abstract number into a tangible legacy, one that can be touched, stored and passed on.
ETFs, by contrast, offer exposure without connection. For those managing intergenerational wealth, physical gold provides reassurance that no market closure, policy change or digital restriction can erase what is theirs.
Conclusion: The Data Behind the Risks of a Gold ETF
Market data, institutional trends and investor behaviour all point in the same direction. ETFs are losing favour as investors confront their hidden weaknesses. Physical holdings, by contrast, offer total independence and lasting value.
As finance becomes ever more digitised, tangible wealth stands apart. Holding gold and other precious metals, such as silver bars, provides something no fund can replicate: direct, unassailable ownership. The data makes it clear: the real risk of a gold ETF is mistaking access for possession.
