Gold prices have surged recently—should I go with a gold ETF or physical gold?
With gold prices hitting new all-time highs almost daily, I've been thinking about investing.
Which is more efficient: gold ETFs (like KODEX Gold Futures, ACE Gold Futures) or physical gold (gold bars, gold coins)?
ETFs are easy to trade and allow fractional purchases with small amounts, while physical gold comes with storage costs and transaction fees. However, some say physical gold is safer for long-term holding.
If you have experience investing in gold, I'd appreciate it if you could share the pros and cons or your own strategy.
3 answers
I mainly invest in physical gold. ETFs are convenient, but I've heard that leverage and rollover costs can be quite significant. With physical gold, I bought a storage box and keep it in a bank vault, so the storage fee is only about 5,000 won per month. Transaction fees vary by jewelry shop, but if you're holding for the long term, it's not something to worry about too much. However, the downside is that selling it when you need quick cash can be a hassle.
I recommend ETFs in this case. Physical gold comes with a premium when buying and a discount (appraisal fee) when selling, which eats into your returns more than you'd expect. KODEX Gold Futures has high trading volume and is great for averaging in through dollar-cost averaging, making it easier to handle volatility. There are also overseas cases where ETFs have outperformed physical gold even for long-term holdings, so keep that in mind.
I had a similar dilemma, and in the end, I went half and half. I use ETFs for short-term trading to keep things liquid, while for physical gold, I'm slowly accumulating 10g gold bars with the intention of holding them for over 10 years. ETFs don't pay dividends, but physical gold gives me a strong sense of psychological stability from just holding it. Both have clear pros and cons, so I recommend adjusting the ratio based on your own investment style.