Gold Investing: Where You Buy Determines Your Return — A Complete Comparison of Physical Gold, KRX, and Gold ETFs
You have probably heard the saying, "Gold prices rise whenever there is a crisis." In fact, gold has been used for hundreds of years as an asset that hedges against inflation and declines in currency value. But once you decide, "I should invest in gold," there are too many paths to choose from. Should you buy a gold bar from a jewelry shop in Jongno, open the KRX gold market through a brokerage app, or buy a gold ETF? This article compares the costs, taxes, and convenience of these three methods with numbers, helping you find the right entry point for your situation. (This is for reference only and is not a recommendation to buy or sell any specific product.)
| Section | Key summary |
|---|---|
| Introduction | But once you decide, "I should invest in gold," there are too many paths to choose from |
| Why hold a small amount of gold in a portfolio? | Gold does not generate interest or dividends on its own |
| Method 1 — Physical gold (gold bars and coins) | The fact that you can see it and hold it in your hand is both its biggest strength and weakness |
| Method 2 — KRX gold market (gram-based trading through a brokerage account) | Its biggest appeal is tax treatment |
| Method 3 — Gold ETFs and gold funds (products tracking an index or gold prices) | Practical method in brief |
| At a glance — Cost, tax, and convenience | Cost items at a glance |
| Checking the tax difference with numbers | Suppose you invest the same 10 million won and make a profit of 2 million won (20%) after 1 year |
| So which option suits whom? | If you value physical holding as a hedge against the currency system itself |
Why hold a small amount of gold in a portfolio?
Gold does not generate interest or dividends on its own. In other words, it is closer to an asset that preserves value than one that earns income. The key point is that gold tends to move differently from stocks and bonds, meaning it has a low correlation, so it is used as a diversification tool to reduce overall portfolio volatility. For example, if you have 10 million won in assets and divide it into 7 million won in stocks, 2 million won in bonds, and 1 million won in gold, gold may act as a buffer when stocks fluctuate sharply. However, gold is also an asset with high short-term volatility, so it is a misconception to think that because it is a safe-haven asset, it generally does not fall.
Method 1 — Physical gold (gold bars and coins)
The fact that you can see it and hold it in your hand is both its biggest strength and weakness. When buying physical gold, a 10% value-added tax applies. In other words, if the market value of the gold is 1 million won, you need to pay about 1.1 million won when buying it. On top of that, jewelry shops and banks add fabrication costs and sales margins, usually around 5%, and when you sell it back, another spread occurs because they buy it at a price lower than the selling price. You effectively start with a loss of around 15% versus the market price the moment you buy, so it is better suited to long-term physical holding than short-term gains. Storage and theft risks come with it as well.
Method 2 — KRX gold market (gram-based trading through a brokerage account)
This is the spot gold market operated by the Korea Exchange (KRX), where you can buy and sell gold in 1g units through a brokerage app, much like stocks. Its biggest appeal is tax treatment. Capital gains from trading on the KRX gold market are exempt from capital gains tax and dividend income tax, and they are not included in comprehensive financial income taxation. Trading fees vary by brokerage, but they are roughly 0.2~0.3%, far cheaper than physical gold. For example, if you buy 100g, about 10 million won, at 100,000 won per 1g and the price rises to 120,000 won per 1g, almost no tax applies to the 2 million won gain. However, if you withdraw the gold you bought as a physical gold bar, a 10% VAT is charged at that point.
Method 3 — Gold ETFs and gold funds (products tracking an index or gold prices)
This method involves trading funds designed to track the gold price, or a gold futures index, like stocks. The advantages are that it is easy to invest in small amounts, diversify, and convert back to cash. However, management fees, around 0.3~0.7% per year, are deducted annually, and trading gains on domestically listed gold ETFs are subject to 15.4% dividend income tax and may be included in comprehensive financial income taxation. For example, if you make a profit of 1 million won, about 154,000 won would be paid as tax. You should also check whether the product is currency-hedged or unhedged, because the impact of the won-dollar exchange rate will differ.
At a glance — Cost, tax, and convenience
- Physical gold: 10% VAT plus margin when buying, a heavy storage burden, capital gains are tax-free but entry and exit costs are the highest → suited to long-term physical holding
- KRX gold market: fees of about 0.2~0.3%, capital gains tax-exempt and excluded from comprehensive taxation, small investments possible in 1g units → the most tax-efficient option (VAT applies only when withdrawing physical gold)
- Gold ETFs/funds: excellent for small amounts, diversification, and liquidity; annual management fees of 0.3~0.7%; trading gains taxed at 15.4% dividend income tax → convenient, but taxes and fees apply
- Common point: all three have no interest or dividends, carry price fluctuation risk, and are investment products not covered by depositor protection of 100 million won
Checking the tax difference with numbers
Suppose you invest the same 10 million won and make a profit of 2 million won (20%) after 1 year. In the KRX gold market, capital gains are tax-free, so the tax is effectively close to 0 won. By contrast, for a domestic gold ETF, dividend income tax of 15.4% applies to the 2 million won profit, reducing it by about 308,000 won and leaving an after-tax profit of about 1.69 million won. With physical gold, you have already paid around 15% in VAT and margins at the time of purchase, so even under the same market price movement, the break-even point itself is higher. Even with the same "gold," the result can differ quite a lot depending on the vehicle you use.
So which option suits whom?
- If your top priority is accumulating gold efficiently with low taxes and costs → KRX gold market (open a brokerage account and buy in 1g installments)
- If you want a simple way to invest small amounts alongside other ETFs → gold ETF (consider management fees and 15.4% dividend income tax)
- If you value physical holding as a hedge against the currency system itself → gold bar (offset entry and exit costs through long-term holding)
In short, even within gold investing, the cost structure and taxes differ completely, so your choice of entry point becomes part of your return. In general, the KRX gold market offers the best tax efficiency, ETFs offer convenience, and gold bars provide the reassurance of physical ownership. Whichever you choose, it is safer to keep gold in a supporting role within your portfolio and start with a small allocation. This article is reference material intended to aid understanding and is not an investment recommendation or a guarantee of returns. Tax rates, fees, and product terms may change, so be sure to check exchange and brokerage disclosures as well as the latest tax laws before investing.