UAE: Is buying physical gold better than price-tracked funds like ETFs or mutual funds?

Dubai: Gold has long held a special place in the hearts and portfolios of UAE investors. Whether as jewellery, a family heirloom, or a store of wealth, physical gold is seen as a safe haven in uncertain times. But in a market increasingly turning digital and efficiency-focused, more investors are starting to ask: Is there a better way to invest in gold?

Let’s break it down.

Why gold remains timeless in the UAE

Gold is more than just an investment here — it’s cultural. In the UAE, residents traditionally buy gold during festivals, weddings, and milestones. Beyond sentiment, gold’s role as a hedge against inflation and currency risk is especially valued in a region exposed to global oil and commodity cycles.

But holding physical gold comes with hidden costs: making charges, storage concerns, risk of theft, and lower resale value due to purity or design.

Enter gold ETFs and mutual funds

These financial products are designed to help investors gain exposure to gold without the hassle of owning the physical metal.

Gold ETFs (Exchange Traded Funds) track the market price of physical gold and are traded like stocks. You can buy and sell units on platforms like Dubai Financial Market (DFM) or the Abu Dhabi Securities Exchange (ADX), and even international bourses such as Nasdaq or the LSE. This makes them ideal for UAE-based investors who prefer transparency, liquidity, and low costs.

Gold mutual funds, meanwhile, typically invest in gold ETFs. They’re managed by professionals and suited for investors who don’t have a trading account or prefer regular investment plans like SIPs (Systematic Investment Plans). While convenient, these may carry slightly higher management fees and are priced only once daily.

Physical Gold vs Price-Tracked Gold: Pros and Cons

For many UAE investors, physical gold—whether in the form of jewellery, coins, or bars—remains the most familiar and culturally preferred way to invest. It carries a sense of tangible value and, in many households, is passed down through generations. But this traditional route also comes with challenges.

Owning physical gold involves making additional payments like making charges or premiums above the spot price, especially for jewellery. Then there's the cost and responsibility of safekeeping—either through home storage or paid locker services. There's also the risk of theft or purity issues if not purchased from a reputed dealer.

On the other hand, price-tracked options such as gold ETFs (Exchange Traded Funds) and mutual funds have become increasingly popular, particularly among younger or digitally-savvy investors.

These options allow exposure to gold prices without the hassles of physically owning or storing the metal. They're also more cost-efficient—there are no making charges, storage costs, or concerns about quality. In the UAE, such products are regulated, easy to buy online or through brokerages, and can be part of a diversified investment portfolio.

However, price-tracked gold investments aren’t without downsides. For instance, they don’t offer the aesthetic or emotional appeal that comes with owning real gold. Also, while ETFs are tradable in real-time like stocks, mutual funds are only priced once daily, which could affect timing for active investors.

Ultimately, choosing between physical and price-tracked gold boils down to personal preferences, investment goals, and comfort with digital financial tools. Some UAE investors prefer a blend—holding physical gold for legacy or emotional value, while using ETFs or mutual funds for practical wealth-building.

The clear takeaway? For pure investment purposes, paper gold options are far more efficient.

What about digital gold?

Digital gold, where investors buy gold online that’s stored on their behalf in secure vaults, is growing in popularity. But UAE regulators currently don’t oversee this product, and platforms may charge 2–3% in storage and trustee fees. That’s money taken away from your returns. Proceed with caution.

Don’t forget gold miner stocks and ETFs

If you’re comfortable with equity markets, owning shares in companies that mine gold can offer dual benefits: you profit if the price of gold rises, and again if the company boosts production or cuts costs. But these are stocks — and with that comes market volatility.

To reduce risk, you could explore ETFs that track a basket of gold mining companies. These are widely available on global platforms and offer diversification — though not insulation from overall gold market downturns.

So, which option is best for UAE investors?

There’s no one-size-fits-all answer, but here’s a simplified takeaway:

· Go for gold ETFs if you want real-time control, cost efficiency, and price transparency.

·  Choose gold mutual funds if you’re a passive investor without a brokerage account or prefer SIPs.

· Keep physical gold for cultural, gifting, or luxury purposes — not just investment.

· Avoid digital gold unless you're confident in the platform and understand the risks.

· Consider gold miners only if you’re seasoned with stock market investing.

Pro tip: Blend your gold investments

Smart investors in the UAE often mix physical gold with paper gold — like buying small amounts of gold ETFs during price dips, while still holding physical gold for ceremonial or personal use.

If you're building a long-term portfolio, consider keeping 5–15% exposure in gold. But whatever you do — don’t invest randomly. All gold investments, like others, should fit into a broader strategy that matches your goals, risk tolerance, and time horizon.