[Derivative ABC] What Are the Investment Methods for 'Geum'?

[Image source=Yonhap News]

[Asia Economy Reporter Park Jihwan] Interest among individual investors in gold investment methods is increasing.

There are three main ways to invest in gold.

First is buying gold in physical form directly. The common method is purchasing gold bars. However, when buying gold bars physically, a 10% value-added tax must be paid, and a commission of around 4% is charged when buying and selling. This means starting with a negative return of over 10% from the moment of purchase, so if the investment is for short-term price gains, a cautious approach is necessary.

If investing in physical gold is burdensome, indirect investment is also possible. Usually, the Korea Exchange (KRX) gold market or gold-related exchange-traded funds (ETFs) are considered the most accessible methods. Especially, advantages stand out in terms of taxes and trading convenience.

If the investment scale is small and a mid- to long-term investment is planned, the KRX gold market is advantageous. If physical withdrawal is not made, the 10% value-added tax does not apply, and capital gains tax or dividend income tax is not imposed on trading profits. Only a brokerage trading fee of about 0.3% per transaction is charged.

Another method is investing in gold-related ETFs listed on the domestic stock market in the same way as stock investment. Domestic listed ETFs are not subject to securities transaction tax (0.25%), which is an advantage. For investors who trade frequently, this can be a more attractive investment method compared to others. However, a 15.4% dividend income tax is imposed on profits generated during the holding period. Representative products include KODEX Gold Futures (H) and TIGER Gold Futures (H).