How to Choose the Top 5 Ways to Invest in Gold? A Comprehensive Analysis of Costs, Risks, and Returns

Currently, the international situation is complex, and inflationary pressures persist. More and more investors are considering gold as an asset allocation option. However, there are many ways to invest in gold, from physical gold to derivative instruments, each with different costs, thresholds, and risks. This article helps you understand five mainstream gold investment methods, so you can find the most suitable trading path based on your own situation.

Is 2025 a good time to enter the gold market? Price trends and investment judgments

Before investing in gold, it’s helpful to review recent market trends.

International gold prices experienced intense volatility during 2022-2023, with highs surpassing $2,000 per ounce and lows dropping below $1,700. This was mainly due to geopolitical conflicts and aggressive rate hikes by the Federal Reserve.

In 2024, the situation shifted. As market expectations for US rate cuts increased and global central banks ramped up gold purchases, gold prices entered a new rally. According to statistics, global central bank net gold purchases in 2024 reached 1,045 tons, marking the third consecutive year exceeding 1,000 tons. Supported by these factors, gold prices broke through the $2,700 level.

By early 2025, the gold market was even more astonishing—annual gains reached 64.72%, with prices soaring past $5,600. This surge clearly indicates market recognition of gold’s value.

However, it’s important to note that gold prices are influenced by multiple factors, making short-term predictions difficult. Therefore, the key to gold investment is timing the entry rather than trying to predict every price fluctuation. If you plan to hold gold long-term for appreciation, entering at a relatively low point is crucial; if you aim to profit from short-term trading, you need strong technical analysis and risk management skills.

Comparing gold investment methods: from physical to derivatives in costs and returns

Want to know where to buy gold most cost-effectively? There’s no absolute answer; it depends entirely on your investment goals and trading style.

From this comparison, if you prioritize safety and long-term preservation, physical gold and gold deposit books are preferred; for cost efficiency and liquidity, ETFs are a good balance; if you want leverage to quickly profit from price differences, futures and CFDs offer more opportunities.

Choosing the right investment channel: long-term comparison of physical gold vs. paper gold

Physical Gold: The traditional safe haven

Physical gold includes bars, ingots, commemorative coins, usually purchased at banks or gold shops. If your goal is long-term preservation against inflation, physical gold is a reliable choice.

Buying tips: It’s recommended to buy gold bars directly rather than jewelry or commemorative coins. Jewelry and coins often include high premiums for craftsmanship and branding, and may lose value due to wear or discounts when reselling. For larger quantities, buy from reputable banks—such as Maybank, CIMB, Public Bank, RHB Bank in Malaysia—because their bars are more standardized, cheaper, and easier to buy back. In the US, JPMorgan Chase, Bank of America, Wells Fargo offer gold investment services; in Hong Kong, HSBC and Hang Seng are options.

Costs and returns: Main costs include premiums (1%~5%), storage, and insurance. Its unique advantage is that in extreme economic conditions, physical gold remains the ultimate hard currency, independent of any government, bank, or intermediary credit.

Be aware of drawbacks: Physical gold does not generate interest, has lower liquidity, and carries “difficult to buy, hard to sell” risks. Also, transactions exceeding MYR 50,000 must be reported to authorities.

Gold Deposit Book: The convenient paper gold option

Gold deposit books (also called paper gold) are bank-provided gold accounts where you don’t hold physical gold but record transactions via a ledger. The advantages are easier trading, flexible buying and selling, and the ability to convert to physical gold at any time.

Channels: Most major banks in Malaysia offer this service, including Maybank, Public Bank, HSBC, RHB Bank, CIMB Bank. In the US, while traditional paper gold is less common, similar gold savings accounts exist with automatic deductions. Hong Kong banks like HSBC also provide similar services.

Cost analysis: Transaction costs are moderate. Buying with Malaysian Ringgit involves exchange rate risk (since international gold prices are dollar-based); foreign currency purchases incur currency conversion costs. Frequent trading can accumulate higher fees, so it’s more suitable for low-frequency traders.

Tax considerations: If your gold deposit transactions are deemed commercial activity (frequent trading), the gains must be reported as part of personal income tax.

Gold ETF: Low-cost long-term investment tool

Gold ETFs track gold prices via index funds, offering high liquidity and relatively low costs. They are among the easiest tools for retail investors and beginners.

Main options: You can invest in local or overseas ETFs. Malaysia’s gold ETF (0828EA) has an annual management fee of about 1%; US ETFs like GLD and IAU charge 0.4% and 0.25% respectively, making them cheaper. These ETFs support only long positions, suitable for long-term holding strategies.

Where to buy: Besides local brokers, overseas brokers allow direct trading of US ETFs. In the US, options include SPDR Gold Shares (GLD), iShares Gold Trust (IAU), VanEck Merk Gold Trust (OUNZ). Hong Kong offers Hang Seng Gold ETF (7800), China’s Huaxia Gold ETF, etc.

Cost comparison: Total costs = management fee + transaction fee + currency exchange costs, generally between 0.5%~1.5%, cheaper than physical gold and deposit books. Note that ETFs can only be long positions, and trading hours are limited to stock market hours.

Efficient trading: Pros and cons of futures and CFDs for short-term trading

If you seek higher returns and can tolerate market risks, gold futures and CFDs are designed for short-term traders. Both support leverage and two-way trading, but mechanisms differ.

Gold Futures: High liquidity but rollover costs

Gold futures are contracts based on the future price of gold at a specified date, allowing profit from price differences. Advantages include high liquidity, low trading costs, and 24-hour trading. Disadvantages are fixed expiry dates, requiring rollover, which incurs additional costs.

Trading venues: Bursa Malaysia Derivatives offers gold futures, but with limited trading hours. Overseas futures brokers provide near 24-hour trading with better liquidity. CME’s COMEX gold futures (GC) are the most popular globally, with high liquidity and minimal spreads. HKEX offers dollar-denominated gold futures with trading hours from 09:15-12:00, 13:00-16:30, and 17:15-23:30.

Risks: Futures use leverage, meaning small margin controls large positions, amplifying gains and losses. Strict risk management is essential. Also, futures are subject to capital gains tax, VAT, etc.

Gold CFD: Low threshold and flexible

CFDs (Contracts for Difference) track spot gold prices, supporting two-way trading without fixed expiry or delivery requirements. You can open positions with as little as 0.01 lots, making it accessible for small investors.

Platforms: Malaysia lacks dedicated CFD exchanges; traders usually go through regulated overseas brokers like IG Markets, Plus500, eToro. These platforms are licensed, ensuring safety and fund security.

Costs and returns: CFD fees are generally low, mainly from spreads and overnight financing. Leverage is flexible, allowing small initial investments, suitable for small traders.

Risk warning: CFDs also use leverage, increasing both potential gains and losses. Basic technical analysis and risk controls are necessary. In the US, CFDs are restricted due to strict regulation; in Hong Kong, they are more accepted, with platforms like Dukascopy, Saxo Capital Markets, Futu Securities.

Choosing the right investment channel based on your style

For preservation-focused investors: Long-term asset protection, not seeking quick profits. Physical gold or deposit books are recommended—costs are higher but risks are minimal, with less psychological pressure.

For conservative investors: Want to participate in gold appreciation without excessive risk. Gold ETFs are ideal—low cost, good liquidity, professionally managed, suitable for dollar-cost averaging.

For aggressive traders: Experienced with trading and risk tolerance, aiming for short-term gains. Futures and CFDs are options, but require mastery of technical analysis and strict stop-loss discipline. CFDs are more accessible for beginners due to lower thresholds and flexibility.

Start your gold investment now

No matter which channel you choose, the key is to align it with your capital, risk appetite, and trading cycle. Gold investment is not about chasing trends but about clear financial planning. If you’re interested but unsure how to start, consider small trades to gain experience and gradually increase your investment. As a timeless safe haven asset, gold will always have a place in your portfolio regardless of economic changes.