Futures or bars? How to avoid ending up the fool
Battered investors will receive a fresh option when the Hong Kong stock exchange relaunches gold futures tomorrow.
But are gold futures a good way to invest in gold? Is the entry fee low and are the returns attractive? What are the risks? How does it compare with direct purchases of gold bars or jewellery, stocks of gold producers, or gold exchange-traded funds (ETFs)?
According to brokers and financial planners, it all depends on what type of investor you are and your investment goals.
For general and retail investors, directly buying gold bars, jewellery or gold ETFs is better if you are bullish on gold but have low risk-bearing ability, says Denise Cheung Pui-yee, president of financial planning company Money Concepts.
'As the financial crisis rages, gold prices have increased drastically in the past few months. I don't think gold futures are suitable for retail investors, as the risks are very high given their high leverage. I think they are more suitable for professional or sophisticated investors, or those with hefty investment capital.'
Ms Cheung said gold bars or jewellery and gold ETFs were a simpler, more convenient investment, allowing one to diversify investment risks while benefiting from any rise in gold prices in the long run.