gold prices have surged 40% in nine months to new all-time highs. we analyze why interest rate cuts and Trump policies have boosted gold prices, and how to invest in gold bars, gold passbooks, gold spot accounts, and even gold ETFs.
the price of gold has been crazy lately
while the stock market has been hitting record highs lately, there's one asset that's been quietly soaring. that asset is gold. from around $2,600 an ounce at the start of the year, the international price of gold has surged more than 40 percent, topping $3,775 in September.
the same is true domestically. with the price of a single ounce of gold approaching 700,000 won, up from around 500,000 won at the start of the year, sales of gold bars at major commercial banks have more than doubled from last year. Gold and silver shops across the country have been flooded with people looking to sell their old earrings and necklaces.
why is the price of gold rising at such a frightening rate, and is it too late to start investing in gold now?
3 reasons why gold prices are soaring
as the quintessential safe haven asset, gold tends to rise in price when the economy is unstable. there are three main factors behind the recent rise in gold prices.
uS interest rates start to drop
gold prices typically move inversely to U.S. interest rates. that's because when the Federal Reserve lowers interest rates, bond yields fall, and some of the safe haven demand that was heading to Treasuries shifts to gold. In fact, when the Fed lowered its benchmark interest rate this year, gold prices hit another record high.
the unpredictability of the Trump administration
some analysts say President Trump's policies are also contributing to market uncertainty. he started a trade war in April of this year by threatening reciprocal tariffs, and his firing of Fed board members and pressure on Chairman Powell has shaken the Fed's independence. with confidence in the dollar shaken, investors are turning to gold.
central banks are buying gold on a massive scale
having seen their assets frozen after Russia's invasion of Ukraine in 2022, central banks around the world have been buying gold, especially in emerging markets such as China and India, where gold holdings have surged, with global central bank gold holdings surpassing U.S. Treasury holdings this year for the first time in nearly 30 years.
add to that fears of a fiscal crisis in Europe, led by France, and some have suggested that the price of gold could break through $5,000 an ounce within the year.
finding the right way to invest in gold
with all the interest in investing in gold, there are a number of different ways to invest, and it's important to choose the one that fits your investment personality and goals.
pros and cons of investing in physical gold
the most straightforward way to invest in gold is to buy physical gold, such as gold bars or gold rings, which are readily available at banks, gold and silver shops, and even some convenience stores. most importantly, there's the psychological security of having something tangible to hold.
there are also tax benefits. gold bars weighing one kilogram or less are exempt from capital gains tax if held for more than one year. however, purchases are subject to 10 percent VAT plus fees, and gold rings and necklaces add another 1 to 2 percent for jewelry. you'll also need to factor in additional costs for safe storage.
ease your tax worries with a gold spot account
if you want to minimize your tax burden, one option is to use the gold market on the Korea Exchange. open a gold investment account with a brokerage firm and you can buy and sell gold in one-gram increments, just like a stock.
the biggest advantage is taxes: aside from a trading fee of about 0.3 percent, there are no capital gains taxes or dividend income taxes, so you can expect the highest returns. you can also withdraw more than 100 grams as physical gold bars, but you'll have to pay 10 percent VAT and a withdrawal fee.
save small with a gold passbook
a dedicated gold passbook at your bank allows you to accumulate gold on a steady basis, just like a savings account. when you put money into a gold passbook, your bank buys gold at the international gold price and credits it to you.
0.you can invest as small as .01 grams, making it easy for beginners to get started. however, it's not cheap, with a 1 percent transaction fee and a 15.4 percent dividend income tax on gains. it's also important to remember that there's no deposit protection and no interest. Currently, you can open a gold passbook at Kookmin Bank, Shinhan Bank, and Woori Bank.
investing with gold ETFs is easy
there's another way to invest directly from your stock account. this is by investing in gold-related ETFs, which range from those that track the price of gold to those that invest in gold mining companies.
these come with management fees and are subject to a 15.4% dividend income tax on the gains, but you can use an ISA, personal pension, or pension savings account to take advantage of tax deferral and tax relief. however, it's important to note that ISAs are classified as risky and can only hold up to 70 percent in gold, and you can only trade gold spot ETFs.
related article: the Complete Guide to Safe-Haven Investing Strategies Related Article: ETF Investing Basics for Beginners Related Article: How to Use Your IRA and Save Money
what you need to know before investing in gold
the price of gold is sensitive to international events and the dollar exchange rate. you should be aware that prices can fluctuate significantly in the short term.
historically, gold prices tend to take a seasonal dip in the fourth quarter. it's best to wait and see what the market does rather than rushing into an investment. You should also consider that stock markets around the world have been strong recently, which may make gold investing less attractive in comparison.
investing is all about diversification. allocating a small portion of your assets to gold and balancing it with other assets such as stocks and bonds is a safe investment strategy.
frequently asked questions
Q. what is the best way to start investing in gold?
A. If you're a beginner, we recommend a gold passbook or a gold spot account, which allows you to start small. gold passbooks are less risky as you can contribute in 0.01 gram increments, while gold spot accounts have significant tax advantages, making them a good long-term investment.
Q. which is better, physical gold or a gold ETF?
A. It depends on your objectives. physical gold has the security of direct ownership and is free of transfer taxes when held for more than a year. gold ETFs offer the diversification and ease of buying and selling in small amounts, and can be tax-advantaged if you utilize a retirement account.
Q. will the price of gold continue to rise?
A. The price of gold is affected by many factors, including interest rates, the strength of the dollar, and geopolitical risks. While experts believe there is upside potential in the short term, the long-term outlook is uncertain. we recommend a diversified investment strategy rather than over-investing.
Q. what are the tax implications of investing in gold?
A. It depends on how you invest. gold bars weighing one kilogram or less are exempt from capital gains tax if you hold them for more than a year, while gold spot accounts are subject only to transaction fees. gold passbooks and gold ETFs are subject to a 15.4 percent dividend income tax on gains.
Q. isn't the price of gold too high right now?
A. In the short term, we may be near the highs. historically, gold prices often correct in the fourth quarter, so it's a good idea to watch the market. In a surging market, it's wise to spread your risk by buying in installments rather than investing a large amount at once.
closing thoughts
there are many factors behind the surge in gold prices, including interest rate cuts, geopolitical uncertainty, and central bank buying. there are many ways to invest in gold, from physical gold to gold spot accounts, gold passbooks, and gold ETFs, so it's important to choose the right one for your investment needs and goals.
what's your favorite way to invest in gold? share your gold investing experience or questions in the comments. for more great investing tips, please subscribe and like us.