The most direct option for gold investment is physical ownership of gold through bullion bars, coins or jewellery. This provides the tangibility of possession but comes with its associated of costs of storage and insurance, security concerns and liquidity limitations at the time of sale. Physical gold is also sold at premium over spot prices and markups from dealers, which can reduce returns over time.

Gold ETFs are investment funds which hold gold assets, through physical ownership of bullion, or via derivatives such as futures contracts. These investment funds are traded on a stock exchange. The price of gold ETFs are linked to the price of gold and provide investors economic exposure to gold prices, without the hassle of physical ownership. However gold ETFs are subject to counterparty risk of the fund vehicle holding the gold assets or derivatives. Gold ETFs may also not precisely track gold price movements due to fund management fees and trading costs but are a good proxy.

A less direct approach is to invest into the shares of gold mining companies. The performance and growth of these gold mining companies are linked to the price of gold, as their profitability is driven largely by the value of gold. Gold mining stocks provide investors access to the growth potential of the gold industry, but investors also bear the risks inherent in these companies, including operational challenges, exploration success, regulatory hurdles, and management risk.

Some banks offer certificates representing the depository ownership of physical gold in their vaults. In Singapore, banks such as UOB and OCBC offer gold certificates. These gold certificates provide the convenience of exposure to gold without the logistical burden of physical storage. However, banks charge fees and a premium for issuing these certificates which erode returns over time. Investors are also exposed to the banks’ counterparty risk as they are reliant on the banks’ custody of the underlying gold in their vaults.

For sophisticated investors who have experience trading derivatives, futures and options provide an opportunity to take a position on the future price movements of gold for speculation or hedging. These derivatives allow investors to take a leveraged position without owning the underlying asset, potentially amplifying returns, but also magnifying risk. Futures and options come with the risk of potentially unlimited losses, margin requirements, and should only be traded by investors with a deep understanding of derivatives market dynamics.

With the advent of blockchain and the nascent Web 3.0 digital asset economy, various gold-backed cryptocurrencies have emerged as a novel means to invest in gold. These gold-backed cryptocurrency tokens harness the advantages of digitisation on blockchain, offer fractional ownership and have potentially lower fees than physical storage or ETFs. However, these cryptocurrency tokens are subject to heavy regulatory uncertainty, cybersecurity threats and investors will need to understand how to navigate the various crypto exchanges and platforms to access these tokens.