Gold CFD, Futures, ETF or Gold Bars: How They Differ and What Holding Costs

If you want exposure to the gold price, there are several routes. You can trade XAUUSD in a trading account, buy futures on an exchange, buy units of an ETF that holds gold, or buy a bar from a gold shop. All four move with gold, but they differ a lot in leverage, in who your counterparty is, and in costs that depend on how long you hold. This article explains how each one works, then calculates the cost of holding each for 1 week and for 1 year.

This article doesn’t recommend any of them and doesn’t forecast the gold price. Every number in the examples is an assumption, with gold at a hypothetical 4,000 dollars an ounce.

Spot and CFDs at a broker

XAUUSD on a platform like MT5 is often called spot gold, but what you actually trade is a CFD (Contract for Difference): a contract where the broker pays you the price difference or you pay it. No gold is delivered, there is no expiry, and you can hold it as long as your margin lasts.

• Leverage is high: you put up only part of the contract value as margin. The cap depends on the broker and each country’s rules. In the European Union, for example, retail accounts are limited to 1:20 for gold. Work through the numbers in Leverage, margin and stop out
• Costs are the spread on every trade plus swap on every night you hold past the daily rollover. The Buy side of gold is usually negative. How to read and convert it is in What is swap
• The counterparty is the broker. How safe your money is depends on that broker and the regulator that licensed it. Always check the licence with that country’s financial regulator, and watch for the signs in Forex scam red flags

Contract size, lots, margin and spread for gold in a trading account are covered in Trading gold (XAUUSD): what to know

Gold futures on an exchange

A futures contract is an agreement to buy or sell gold at a price fixed today, with delivery or settlement in a set month. It trades on an exchange under common rules. The best known is COMEX in the US, where the standard gold contract is 100 troy ounces and a Micro contract is 10 troy ounces. Thailand has gold futures on TFEX too, priced in baht or in dollars, in several contract sizes, traded through securities brokers. For contract size, expiry months and margin, check the exchange’s own documents.

Three things clearly differ from a CFD:

1. The counterparty is a clearing house, not a single broker. Gains and losses are settled into your account every day (mark-to-market). If losses leave your margin short, you have to add money
2. Contracts expire. To hold for long you have to roll: close the near contract and open the next one. Each roll costs spread and commission again
3. The financing cost is in the price. There is no swap line to see, but contracts that expire later usually trade above spot

Why do later contracts trade higher? A seller who holds physical gold to deliver has cash tied up in that gold until delivery, so the price includes what that cash could have earned, minus what the gold could earn by being lent out (the lease rate). Roughly, futures price = spot × (1 + carry rate × time in years). When later prices sit above nearer ones like this, it’s called contango, and it is the normal state for gold.

Example: rolling from the 2-month contract (4,023.3) to the 4-month contract (4,046.7) spans 4,000 × 3.5% × 2 ÷ 12 = 23.3 dollars. You don’t pay this as cash at the roll. But if spot stays at 4,000, the new contract bought at 4,046.7 drifts down to 4,023.3 over the next 2 months, so you give up 23.3 dollars an ounce compared with holding real gold. It plays the same role as swap on a CFD, just paid through the price.

Futures show no swap, but the financing cost sits in the gap between the contract price and spot. Hold for long and you pay it all the same.

Gold ETFs

A physically backed gold ETF is a fund that uses its holders’ money to buy gold bars, stores them in a custodian’s vault, and lists its units on a stock exchange. The unit price moves with the gold the fund holds.

• No leverage. Buying 4,000 dollars’ worth costs 4,000 dollars (unless you borrow through a margin account, which is a separate matter)
• Costs are the commission when you buy and sell, the bid-ask spread, and an annual management fee taken from the fund’s assets every day. It never appears as a line in your account, but it makes the unit value slowly lag the gold price. Check the real figure in the fund’s factsheet
• The counterparty is the fund structure and the gold custodian, not a broker setting its own prices
• Thai investors can buy foreign ETFs through an overseas stock broker (with currency and tax issues on top), or Thai gold mutual funds that invest in a foreign ETF, which add their own fee layer. Some of those hedge the currency and some don’t

Don’t confuse these with leveraged or inverse gold ETFs. Those use derivatives and reset daily, so over longer holds their result can differ a lot from the gold price times the multiplier. They are a different product from an ETF that holds gold.

Bars from a Thai gold shop

Gold bars in Thailand are 96.5% gold, weighed in baht. A 1-baht bar weighs 15.244 grams (1 baht of jewelry weighs 15.16 grams). Shops post two prices: the buy-back price (the shop buys from you) and the selling price (the shop sells to you). That gap is the main cost of holding real gold. Jewelry also carries a making charge when you buy, and its buy-back price is lower than for bars, so the gap is much wider.

Converting the world price to an approximate Thai gold price, with gold at a hypothetical 4,000 dollars an ounce and a hypothetical 33 baht per dollar (1 troy ounce = 31.1035 grams):

1. Pure gold in a 1-baht bar = 15.244 × 0.965 = 14.710 grams
2. In ounces = 14.710 ÷ 31.1035 = 0.47295 ounces
3. Value = 0.47295 × 4,000 × 33 ≈ 62,430 baht per baht of gold

Real posted prices won’t match this formula exactly, because of premiums and the exchange rate the price-setter uses. But it shows that the Thai gold price follows two things: the world gold price and the baht. If the baht strengthens, the Thai gold price can fall even when the world price doesn’t move.

Physical gold has no leverage, no yearly fee and no counterparty once you’ve paid. But it can be lost or stolen, you need somewhere safe to keep it, and you can only sell when shops are open.

The four compared

Cost by holding period: 1 week vs 1 year

Let’s compare them on the same basis: holding 1 ounce of gold worth 4,000 dollars, using the assumptions below. Real values differ a lot between brokers, exchanges, funds and shops.

Product	Assumptions	One-off cost	Cost over time
CFD	Spread 0.30, swap −45 points per lot	0.30	0.45 per night
Futures (Micro, 10 oz)	Spread 0.10, commission 2 per contract per side, carry 3.5% a year, roll every 60 days	0.50 per round trip	3.5% a year
ETF	Commission 0.10% per side, bid-ask 0.02%	0.22%	0.40% a year
Gold bar	Buy-back/selling gap 100 baht at a price of 62,430 baht	0.16%	None

Where each number comes from:

• CFD: swap −45 points × 0.01 (point size) × 100 ounces × 0.01 lot = 0.45 dollars per night. The −45 points match the example in the swap article. A week charges 4 normal nights plus one triple night, 7 nights in total, so a year counts about 365 nights
• Futures: a 10-ounce Micro contract with commission of 2 dollars per side, 4 dollars round trip = 0.40 an ounce, plus a one-tick spread of 0.10, for 0.50 an ounce per round trip. Even this Micro contract is worth about 40,000 dollars at our assumed price, so the example works per ounce to keep things comparable
• Gold bar: 100 ÷ 62,430 = 0.160%

Holding 1 week (7 days)

1. CFD: 0.30 + 0.45 × 7 = 0.30 + 3.15 = 3.45 dollars (0.086%)
2. Futures: 0.50 + 4,000 × 3.5% × 7 ÷ 365 = 0.50 + 2.68 = 3.18 dollars (0.080%)
3. ETF: 4,000 × 0.22% + 4,000 × 0.40% × 7 ÷ 365 = 8.80 + 0.31 = 9.11 dollars (0.228%)
4. Gold bar: 4,000 × 0.160% = 6.41 dollars

Holding 1 year (365 days)

1. CFD: 0.30 + 0.45 × 365 = 164.55 dollars (4.11%)
2. Futures: 6 rolls (days 60, 120, … 360), so 7 round trips including the first, × 0.50 = 3.50, plus carry of 4,000 × 3.5% = 140, total 143.50 dollars (3.59%)
3. ETF: 8.80 + 4,000 × 0.40% = 8.80 + 16 = 24.80 dollars (0.62%)
4. Gold bar: unchanged at 6.41 dollars

For short holds, the products with a low one-off cost win. For long holds, the ones without a daily cost win. In this example the crossover comes sooner than many people expect: the CFD costs more than the bar from day 14 and more than the ETF from day 21, while futures pass the bar on day 16 and the ETF on day 25.

Financing cost doesn’t disappear, it moves

The 1-year figures above make ETFs and bars look several times cheaper than a CFD, but they leave out half the picture. Buying an ETF or a bar takes the full 4,000 dollars, while a CFD or futures position only takes margin, and the rest of the cash can sit on deposit earning interest. CFD swap and futures carry are, in effect, the price of borrowing money to hold gold.

Let’s add a hypothetical 3.5% a year deposit rate on the cash each route ties up (CFD assumed at 1:20 leverage, 5% down; futures assumed at 6% down; ETF and bar 100% down):

Product	Cost paid, 1 year	Interest given up	Total
CFD	4.11%	5% × 3.5% = 0.18%	4.29%
Futures	3.59%	6% × 3.5% = 0.21%	3.80%
ETF	0.62%	3.50%	4.12%
Gold bar	0.16%	3.50%	3.66%

All four land close together, around 3.7–4.3%. What’s left is what each route adds on top. In this example the CFD swap (4.11%) is about 0.6% a year above the carry built into the futures price (3.5%), which is the broker’s add-on under these assumptions. This only holds if the cash you didn’t put up actually earns interest. If it sits idle in a trading account, the CFD holder’s real cost is the full 4.11%. Read more on rates and gold in How interest rates move gold and currencies

The useful question isn’t “which is cheapest” but “how long will I hold, and do I use leverage”. The cost of each route changes with those two answers.

Questions to ask yourself first

No route is best for everyone, and we don’t recommend any of them. These questions help you see which structure matches your own plan:

1. How many days do you intend to hold? If you’re not sure, look at your own history of trades held overnight, see how long they lasted on average, and work out the cost from that
2. Do you really need leverage? Leverage means putting up less money, but the same amount of money loses faster, and you can be stopped out before price comes back. If you don’t need it, routes where you pay the full value remove this risk entirely
3. Which counterparty risk can you accept? A broker, a clearing house, a fund, or keeping it yourself. Each carries a different risk
4. Check the real numbers first. Swap in the Contract specification, contract specs on the exchange’s website, the management fee in the factsheet, and the shop’s buy-back and selling prices. Then put them in place of the assumptions in this article

If you’re curious how gold moves against other metals, read The gold/silver ratio, and for the dollar that gold is priced in, see The dollar index (DXY)

Common mistakes

• Thinking XAUUSD means owning gold. A CFD is a contract with the broker, and there’s no gold to collect. If the broker has problems, what you have is a claim on the broker, not gold
• Holding a CFD for months without counting swap. A few tens of cents per ounce a day became 4.11% of the value over a year in this example, more than 25 times the gap on a gold bar
• Buying bars or jewelry to speculate for a few days. You pay the full buy-back/selling gap on day one, and jewelry adds a making charge on top. Price has to move quite a way in your favour just to break even
• Reading futures above spot as a bullish signal. Most of the gap is carry cost, not a forecast
• Forgetting futures expiry. Holding past the last trading day or into the delivery period can trigger special conditions. Check the contract calendar on the exchange’s website and roll in time
• Forgetting the baht. Thai gold, foreign ETFs and dollar accounts all move with the exchange rate too. A profit in dollars can shrink when converted back to baht