Classification in the Gold Investment Market

Physical Gold
Physical gold includes gold bars, gold bullions, gold coins, gold jewelry, etc. Gold bars and gold bullions are the most common investment vehicles in gold investment. Since the opening up of sole proprietorship in the domestic gold market, investors are able to buy and sell over the counter or through banks. The main emphasis in the trading of physical gold is in maintaining its value; physical gold accounts for a large amount of funds, and is relatively resistant to change as the procedures are complicated. It is suitable for long-term investment, as well as for collection and gifts to others. It will be difficult to secure a lucrative yield for short-term investments.

Gold Certificates
Gold is credited into a personal account through gold certificates. The pricing, which fluctuates with the international gold market prices, is similar to that in the foreign exchange business. Customers may ride on market trends to buy at a low price and sell at a high price in order to earn the difference. A lower capital is required for investing in gold certificates, the transaction is simpler and the transaction cost is much lower than that for physical gold. It is suitable for general investors as a mid- or short-term investment vehicle.

Gold Futures
A gold futures contract, also known as gold futures trading, is a type of standardized contract agreed upon between a buyer and seller in which the buyer will make payment of an agreed sum on an agreed date in the future, and the seller will deliver the agreed quantity of gold. In comparison with the spot trading of gold, gold futures contracts are more attractive: (i) Controllable transactions: Both the buyer and seller may reverse the transaction and close their position anytime before the final delivery date; (ii) Liquidity: Gold futures traders are seldom interested in the delivery of physical gold, and will usually reverse the transaction and close the position prior to the maturity of the contract; (iii) Controllable risks and returns: Through hedging, traders may make prompt settlement during the emergence of risks or after gaining returns.

Gold Margin Trading
Gold margin trading is a type of spot gold trading on margin with an extended delivery. It is also a professional gold investment product that combines the characteristics of stocks and futures. In gold margin trading, the buyer is not required to pay the entire amount for the traded gold. Instead, he or she will only need to pay a certain percentage of the entire traded amount as a margin for the delivery of physical gold. In the current global gold trading market, there is both gold futures margin trading as well as spot gold margin trading.

Gold Funds
Gold mutual funds, or “gold funds” in short, are mutual funds in which gold or gold derivatives are used as the investment instrument. They are established by the founders of the fund, acquired and purchased by the investors, and the detailed investments are handled by the fund management company. The funds are managed by an investment committee comprising of investment experts. Gold funds are similar to the commonly-known securities investment funds with lower risks and relatively stable returns.

Exchange-traded gold
Gold is traded in the form of securities on stock exchanges in Australia, France, Hong Kong, Japan, Mexico, Singapore, South Africa, Switzerland, Turkey, the United Kingdom and the United States. By design, these forms of securitized gold investment, all regulated financial products, are generally referred to as Exchange Traded Commodities or Exchange Traded Funds (ETFs), and are expected to track the gold price almost perfectly. Unlike derivative products, the securities are 100% backed by physical gold held mainly in allocated form.