Ways to Trade Gold

"Buying gold" covers half a dozen products that behave differently, cost differently and suit different purposes. Choosing the wrong one is not usually catastrophic — it is just expensive, in a way that is hard to see until you try to sell.

Gold bars

Physical bullion: a bar of a stated weight and purity, usually 99.5% or finer, from a recognised refiner.

• The round trip is the real cost. Premium on the way in plus discount on the way out can be several percent, which is many months of a trading edge.
• Smaller bars carry larger premiums per ounce, so the convenient size is the expensive one.
• Documentation matters. A bar with recognised refiner marks and an assay certificate sells more easily than one without.

Bullion is a holding, not a trade. If the intention is to own gold for years outside the financial system, the round-trip cost is amortised over that period and is reasonable. If the intention is to take a view on next month, it is the worst instrument on this list.

Gold ornaments (physical gold)

Jewellery is gold plus craftsmanship, and the craftsmanship is charged for and rarely recovered.

• You pay for making, on top of the metal content. That portion is largely lost on resale.
• Purity varies and is what determines the metal value — the same weight at a lower purity contains less gold.
• Resale is usually at metal value, minus the dealer's margin, which means the craftsmanship you paid for does not come back.
• Local markets have their own conventions for weight and pricing, which often differ from the troy ounce the international price uses.

Gold ETFs · GLD, IAU, SGOL on the US market

A gold exchange-traded fund holds bullion and issues shares against it. You buy the shares through a broker like any listed security, and they track the gold price less the fund's fee.

• The expense ratio is a slow drag, which matters for a multi-year holding and is negligible for a few months.
• Trading hours are the exchange's, so a move overnight is met with a gap at the open rather than a tradeable market.
• Some funds are physically backed and some are not. A synthetic or futures-based product tracks gold differently and carries different risks; the prospectus says which it is.
• Leveraged gold ETFs exist and are not gold. They reset daily, so over any extended period their return diverges from the metal's by an amount that has nothing to do with the gold price.

Gold futures · CME (GC)

A futures contract is an agreement to buy or sell a fixed quantity at a future date, traded on an exchange. The CME's headline gold contract covers 100 troy ounces.

That size is the important number. At a gold price of, say, $2,400, one contract represents $240,000 of gold — which makes it an institutional instrument that a retail account can reach only through smaller variants.

And the one most readers will actually use

A CFD on XAU/USD through a forex broker is the fifth format, and it is the one this track's lesson 4 is written about. It is a contract for difference: you do not own metal, you have an agreement with the broker that settles the price change.

• Sizes are small. 0.01 lots is reachable on a modest account, where a futures contract is not.
• Both directions are equally easy, which physical gold is not.
• Costs are spread plus swap, and swap on a held gold position is frequently larger than traders expect — Track 4's carry lesson applies.
• Your counterparty is the broker, which is why Track 2's lessons on execution and regulation matter more here than the product description suggests.

Match the format to the holding period, and the choice is usually obvious. Most of the mistakes come from using a long-horizon product for a short-horizon view, or the reverse — paying overnight swap for months on a position that should have been an ETF.