Home / Course / Module 4 / Ways to Get Gold Exposure
Module 4 · Lesson 6 of 7There is more than one way to have your money linked to the gold price, and each comes with different costs and risks. This lesson compares the main routes so you understand what you are actually holding.
Risk warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. Educational content only. Nothing here is a recommendation, and no result is guaranteed.
Gold exposure simply means that the value of what you hold rises and falls with gold. There are several ways to get it, and they differ in what you own, how much it costs and what can go wrong.
| Route | What you hold | Main costs | Main risks |
|---|---|---|---|
| Physical coins and bars | The metal itself | Dealer premium, storage, insurance, selling spread | Theft, storage, difficult to sell at the exact price you see |
| Gold-backed funds (ETFs and similar) | Shares in a fund that holds metal | Annual fund fee, broker costs | Fund structure, tracking differences, market hours |
| Mining company shares | A share of a business | Dealing costs | Company-specific problems, costs, management, not just gold |
| Futures | A contract for later delivery | Margin, roll costs | Leverage, contract expiry |
| CFDs on gold | A contract with a broker tracking the price | Spread, financing, possible fees | Leverage, you do not own any gold, broker risk |
None of these is automatically best. The right route depends on your purpose, time horizon and risk tolerance, and none should be chosen without understanding its costs. Check with a qualified professional on tax and legal questions as these vary by person and country.
Physical gold means coins or bars. The standard unit is the troy ounce, which is about 31.1 grams (slightly heavier than a normal ounce). Large professional bars used between banks weigh roughly 400 troy ounces, while retail bars and coins come in far smaller sizes.
The advantage is direct ownership with no counterparty. The costs are that dealers sell at a premium above the spot price and buy back below it, and you must store and insure the metal. The gap between buying and selling prices means the gold price has to move a meaningful distance before you break even.
Gold-backed funds pool investors' money to hold gold in a vault and issue shares that track the price. They are convenient, because they trade like shares. The fund charges an ongoing fee and you hold a financial product rather than the metal itself, so it is worth reading how the fund is structured and where its metal is held.
Suppose (hypothetically) spot gold is $2,000 per troy ounce. A dealer sells a small bar to you at 5% above spot, so you pay $2,100, and would buy it back at 2% below spot, so $1,960. Even if the spot price does not move at all, selling straight away would lose $140 per ounce. Gold would need to rise by roughly 7% before you break even. The numbers here are purely illustrative, and actual premiums vary by product, size and dealer, but the principle is real: the round trip cost matters for physical gold.
Mining shares are shares in companies that dig up gold. They often move in the same direction as gold but they are not the same thing. A mining company has labour costs, energy bills, debt, taxes and operational risks, so its shares can fall even when gold rises, and they may rise or fall faster than the metal itself. This is sometimes described as operating leverage: a rise in price can have an outsized effect on profits because many costs are fixed.
Futures are standardised contracts to buy or sell gold on a future date, traded on exchanges. They require only a fraction of the contract value as margin (a deposit), which means they are leveraged. Futures expire, so a position held long term must be rolled into the next contract. These are mostly used by professionals, but understanding them explains how the benchmark price is formed. The mechanics are explained in forwards and futures.
A contract for difference (CFD) is an agreement between you and a broker to exchange the difference in the price of an asset between the time you open and close a trade. With a gold CFD (usually shown as XAUUSD), you do not own gold. You hold a contract that tracks its price. Our gold trading for beginners lesson covers the practical side of trading XAUUSD, and the CFDs explained lesson covers the product itself.
CFDs let you profit from a falling price as well as a rising one and need only a deposit, but that same leverage multiplies losses. Costs include the spread and possible overnight financing charges. You also depend on your broker, so choose one that is properly regulated, and remember that rules for retail CFDs differ between regulators and change over time. Check the regulator's website for current limits on leverage and the risk warnings brokers must show.
A large share of retail CFD accounts lose money, and regulators require brokers to publish that figure. Leverage can make losses arrive far faster than most beginners expect. Never trade money you cannot afford to lose.
Gold exposure is a spectrum. At one end, you own the metal and carry storage costs. At the other, you hold a leveraged contract and carry market and counterparty risk. The right choice is the one you can explain in plain English, including how it can lose money.
Notice that the gold price itself drives all of them. That is why understanding central bank demand and the wider drivers remains useful whichever route you pick.
There is no single best answer. Simpler products with lower leverage are generally easier to understand, and it is wise to practise on a demo account before using real money with any leveraged product.
Usually you own shares in a fund that holds the metal, not specific bars yourself. The fund documents explain how the structure works.
The Gold Desk shares XAUUSD signals on Telegram, with entry, stop loss and targets on every call. Signals are educational ideas, not advice, and no result is guaranteed. Not directed at residents of the USA. Join the free Telegram channel.