How to buy gold? A comprehensive analysis of the five major investment channels' risks and returns

Amid the backdrop of escalating geopolitical conflicts and persistent inflation pressures, gold continues to attract investors as a classic safe-haven asset. In 2024, international gold prices have broken new records, with global central banks net purchasing 1,045 tons of gold, directly supporting the price to surpass the $2,700 mark. Many investors are now asking—how can I buy gold most cost-effectively?

Besides traditional physical gold, modern gold investment has evolved into various efficient methods. This article will compare five major gold investment channels in terms of risk, cost, and returns, helping you find the most suitable trading plan.

Current Gold Price Fluctuations: Is Now Still a Good Entry Point?

The gold price trend over the past three years provides ample reference for investors.

Between 2022 and 2023, gold experienced intense volatility—dropping from a high of $2,000 to below $1,700, mainly due to geopolitical conflicts and the US Federal Reserve’s rate hikes. By 2024, the situation reversed: expectations of US rate cuts increased, geopolitical risks escalated again, and record-breaking gold purchases by central banks pushed prices to new highs. In early 2025, prices surged near $4,200, though they subsequently pulled back, the long-term upward trend remains unchanged.

Key insight: Short-term gold price movements are difficult to predict, with many complex influencing factors. If your focus is long-term preservation of value, the most important thing is to find a reasonable entry point rather than chasing highs. If you seek short-term gains and can bear risks, mastering technical analysis and risk management is essential.

Comparing Five Major Gold Investment Methods: Costs, Entry Barriers, Liquidity

Plan 1: Physical Gold—A Classic Preservation Asset

Suitable for: Long-term collectors, those seeking tangible assets, risk-averse investors

Investment features: Physical gold includes bars, ingots, coins, etc., available at banks or silver shops. Buying and selling are straightforward, with relatively low risk, satisfying the psychological comfort of “holding it in hand.”

Cost analysis:

• Purchase cost: 1%-5% transaction fee
• Holding costs: storage, insurance, etc.
• Liquidity: relatively poor—“easy to buy, hard to sell,” with longer realization cycles

Notable drawbacks: Physical gold is a non-yielding asset, earning no income—profits rely solely on price differences. Plus, storage, insurance, and security costs are significant. If your goal is investment appreciation rather than collection, physical gold may not be the most efficient.

Recommended purchase channels: Large banks for bulk purchases (safe and reliable), reputable silver shops for small amounts (pay attention to purity).

Plan 2: Gold Deposit Note—The Convenience of “Paper Gold”

Suitable for: Investors wanting exposure to gold without holding physical assets, low-frequency traders

Investment features: Gold deposit notes, known as “paper gold,” are stored by banks on behalf of investors, who only hold a certificate. Transactions are completed entirely through banks, avoiding physical handling, making operations more convenient. Many banks offer gold deposit note services, supporting three purchase methods: local currency (e.g., MYR), foreign currency, or dual-currency schemes.

Cost analysis:

• Per-transaction cost: about 1%
• Cost components: transaction fee + currency exchange costs
• No holding costs: bank manages storage

Risk warning: Frequent buying and selling can accumulate currency exchange costs, and exchange rate fluctuations add to cost uncertainty. Buying in local currency (e.g., MYR) involves exchange rate risk; foreign currency purchases incur initial exchange costs. Overall, this incurs “moderate friction costs,” so frequent trading is not recommended.

Plan 3: Gold ETF—A Low-Cost Tool for Long-Term Allocation

Suitable for: Investors seeking low costs, good liquidity, medium to long-term holding

Investment features: Gold ETFs track gold price indices. There are multiple options—domestic ETFs (e.g., 0828EA) and overseas ETFs (e.g., GLD, IAU). Trading is as simple as buying stocks, with very low entry barriers.

Cost comparison: Using US gold ETFs (e.g., IAU, with the lowest cost):

• Annual management fee: 0.25%
• Trading commissions: 0%-0.1%
• Currency exchange costs: 0.32%
• Total costs are much lower than physical gold and deposit notes

Advantages and disadvantages:

• Pros: Easy to buy/sell, high liquidity, transparent costs, suitable for beginners
• Cons: Only long positions—no short selling; trading hours limited to exchange hours

Best for long-term cost-effective investment.

Plan 4: Gold Futures—A Tool for Professional Traders

Suitable for: Experienced derivatives traders, seeking short-term gains, with substantial capital

Investment features: Gold futures are contracts based on future gold prices, allowing both long and short positions. Traders only need to pay a margin, leveraging their capital. Trading hours are extended (4-6 hours or 24 hours depending on the exchange).

Costs and leverage:

• Transaction cost: about 0.10%
• Leverage options: adjustable
• Hidden costs: rollover fees, futures transaction taxes (capital gains tax, GST, etc.)

Risk warning:

• Leverage amplifies both gains and losses
• Contracts have expiration dates; require manual rollover or closing, incurring additional costs
• Tax obligations: capital gains tax, stamp duty, etc.
• Requires high trading skills; unsuitable for beginners

Plan 5: Gold CFD—Low Barrier Derivative Trading

Suitable for: Traders wanting quick market access, small capital, flexible operations

Investment features: CFD (Contract for Difference) tracks spot gold prices, allowing two-way trading without expiration dates. More flexible than futures, with the lowest entry barrier. Trading logic is simple—predict price direction, no need for complex stock selection.

Costs and leverage:

• Transaction cost: about 0.04%
• Initial margin: very low, enabling small capital trading
• Leverage: flexible, adjustable
• Main costs: spreads, overnight holding fees

Differences between futures and CFD:

Risk warning:

• Leverage increases risk; strict risk management required
• Requires technical analysis skills and risk awareness
• Overnight positions incur fees; long-term holding costs accumulate

How to Choose Among the Five? A Decision Tree for You

What is your investment goal?

If aiming for long-term preservation/hedging:

• Preferred: Gold ETF (low cost, liquidity, hassle-free)
• Alternative: Gold deposit note (small amounts, flexible)
• Not recommended: Physical gold (high costs, non-yielding)

If seeking short-term arbitrage/band trading:

• Preferred: Gold CFD (low barrier, lowest cost, flexible)
• Alternative: Gold futures (if capital allows)
• Not recommended: Gold deposit note (limited to long/short, less flexible)

If wanting both preservation and trading opportunities:

• Combined approach: 70% long-term holding of Gold ETF + 30% flexible trading via Gold CFD
• This way, you get basic hedging plus short-term opportunities

How to Buy Gold: Regional Specific Guides

In Malaysia:

• Physical gold: major banks (Maybank, CIMB, Public Bank, etc.)
• Gold deposit note: via mainstream banks
• Gold ETF: open a brokerage account
• Gold futures: via Malaysia Futures Exchange or overseas brokers
• Gold CFD: choose internationally regulated brokers

In the US:

• Physical gold: JPMorgan Chase, Bank of America, Wells Fargo
• Gold ETFs: most options (GLD, IAU, etc.)
• Futures trading: CME COMEX
• CFD: limited due to strict US regulation

In Hong Kong:

• Physical gold: HSBC, Hang Seng Bank
• Gold ETFs: multiple products on HKEX
• Futures: HKEX offers gold futures
• CFD: relatively accepted

Important Tax and Risk Tips

Tax considerations:

• Physical gold transactions over certain amounts must be declared
• Frequent trading of deposit notes may be considered commercial activity, liable for business tax
• Futures trading profits are subject to capital gains tax, GST
• CFD trading profits are included in personal income tax calculations

Risk management rules:

1. Understand leverage risks before trading; beginners should avoid leverage initially
2. Gold prices are influenced by many factors; short-term trends are unpredictable—avoid chasing highs
3. Different investment methods carry different risk levels; choose according to your risk tolerance
4. Verify the regulatory status of your broker; beware of unregulated platforms

One Sentence Summary

How to buy gold most cost-effectively? The answer depends on your investment nature and risk appetite—use gold ETFs for preservation, gold CFDs for trading, and physical gold for collection. There is no absolute best method—only the most suitable for you. Start small, accumulate experience gradually—that’s the rational investment approach.