Investors can directly go to retail stores and purchase most precious metals. Especially for gold, its value is recognized globally which can be easily transportable and storable compared to other commodities. Gold is indestructible, serving as the tangible long-term store of value. Plus, gold is highly liquid and when you are in need of cash, you can simply trade with any gold retailer at the spot gold price minus transaction fees. Nowadays, with the advent of online bullion dealers, it is much easier for consumers to purchase high-quality precious metals and have it shipped home.

Worries of counterfeit metals and safekeeping may make consumers hesitate to own them physically. Even though physical gold is a mostly fear-free holding, investors may desire safer and more convenient investment vehicles such as exchange-traded funds and tokenized commodities.

Unlike physical gold, ETFs can be purchased in small shares on a stock exchange with quicker transaction speed and enhanced convenience. Compared to physical gold, the ETFs can be less costly for investors who only want small exposure to gold by eliminating the storage and insurance fees, transaction fees and markups associated with buying and selling the commodity. It not only lowers the investment threshold by pooling cash with other limited partners, but also grants more liquidity to narrow the bid-ask spread. On top of that, holding an ETF in a taxable account will generate less tax liabilities than traditional mutual funds, which can be more tax efficient for investors.

Commodity ETFs have been a popular instrument for investment. For example, BlackRock manages iShares Gold Trust, which offers exposure to gold with $28 billion assets under management, allowing investors to free themselves from finding a safe for gold storage.

Tokenized commodities are digital claims of physical assets whose tokens are administered on blockchains similar to crypto. Blockchains guarantee your tokens’ identities with spotless transparency, no single authority can erase or alter your ownership — your ownership of that real asset will change only after you trade it with someone else.

With tokenization, investors are able to long and short a fraction of asset ownership bringing more liquidity and demand to the traditional commodities market. Moreover, it reduces the transaction cost and complexity by leveraging the decentralized ledgers, which settle transactions peer to peer, without going through a central clearing exchange. Because of decentralized ledgers, tokenized commodities overcome the time and border constraints of conventional investments. That is to say, investors can trade anytime, anywhere.

In the gold markets, Paxos introduced its asset-backed token (PAXG) to be traded at the equivalent value of one troy ounce of gold. Anyone who owns PAXG directly owns gold held in custody by Paxos Trust Company.