What’s the best way to turn the yellow metal into green? Four prominent investors share their strategies.

They’re gold diggers of the new millennium, sifting for fortune amid soaring prices for the yellow metal.

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But today’s gutsy investors are panning for gold in very different ways.

Just as California’s Gold Rush in the 19th century drew miners to the West with different strategies on how to profit, some of today’s most notable investors are pursuing distinct tactics to wager on a rise in gold. Some are scooping up exchange-traded funds and mining companies. Others are betting on futures and derivatives markets. Still others are storing vast amounts of gold in secret warehouses in the U.S. or in foreign countries.

Some of the investors making the biggest bets on bullion are well worth watching. John Paulson and David Einhorn were early predictors of the subprime-mortgage and financial meltdown of 2007 and 2008. Thomas Kaplan and John Burbank were wagering on mining shares several years ago, when their rivals snickered.

Gold prices have been climbing amid worries about leading currencies and future inflation. Other factors include a growing number of ETFs and other investment vehicles that offer plays on the commodity. It’s also getting harder to tap new ore veins, limiting supply.

The four investors featured here don’t always agree, nor do they always get it right. But here are some of the strategies they’re pursuing:

ENLARGE

Ross MacDonald

John Paulson: Big Miners

Mr. Paulson made his reputation by scoring $20 billion in 2007-08, anticipating the financial meltdown and buying inexpensive protection.

Today it’s potential inflation he’s worried about.

Mr. Paulson, who operates one of the largest hedge funds in the world, is buying shares of some of the biggest mining and exploration companies, part of an investment of more than $10 billion in gold. His firm, Paulson & Co. owns nearly 11% of AngloGold Ashanti Ltd. and almost 3% of Kinross Gold Corp. He also owns select smaller miners.

Shares of mining companies can act as a leveraged bet on gold, Mr. Paulson has argued. If gold prices do well, the miners will do even better. They could rise two or three times as much as the price of gold, he has told investors. That’s because the higher gold prices go, the more miners can profit from existing and potential projects. Digging for gold can be expensive, but as prices rise big miners can score profits as they tap projects that were difficult or costly to mine.

So far Mr. Paulson’s strategy is working. His gold fund was up 33% in 2010 through November, topping the rise in gold futures.

Thomas Kaplan: Junior Miners

Mr. Kaplan is a low-profile billionaire making a bigger wager on gold than almost any investor. Through a firm that invests his family’s money, Tigris Financial Group, and affiliates, Mr. Kaplan has acquired stakes in mining properties on five continents; his gold holdings are valued at more than $2 billion.

Mr. Kaplan also controls as much as 30% of a group of smaller mining companies, called junior miners, including many that have yet to produce an ounce of gold. These companies are sitting on valuable assets, Mr. Kaplan argues, providing the greatest leverage to a bull market.

We are entering an era defined by the scarcity value of great precious-metals assets, he says.

His firm, for example, owns nearly 18% of Gabriel Resources Ltd. which owns 80% of a gold mine in Romania that is Europe’s biggest but has yet to produce any gold. That’s partly due to questions raised about the environmental impact that may result from tapping the mine. His firm also owns more than 23% of NovaGold Resources Inc. a $3.3 billion mining company whose shares have roughly tripled in the past 12 months.

George Soros and Mr. Paulson also own slugs of some of these smaller companies. But Mr. Kaplan owns larger stakes, underscoring his conviction that junior miners have bigger upside potential, even if they are riskier because they’re unproven. It’s not the kind of thing I would suggest for widows and orphans, he says.

John Burbank: Gold Bars

Some investors are wary of miners because various companies have failed to generate huge profits due to lackluster management. Others worry that ETFs depend on others to store gold bullion in vaults, meaning added cost, risk of theft or damage, and no way for investors to get their hands on the bullion in the event of a crisis.

Holding gold oneself is a better move, these investors say. Among the most vocal: Mr. Burbank, who runs hedge fund Passport Capital in San Francisco. He stores his gold in a Zurich vault operated by UBS.

Mr. Burbank argues that storage costs are lower than the expenses of ETFs. He also says a squeeze may develop that could benefit holders of physical gold at the expense of gold contracts and shares. If investors become concerned that shares and futures contracts aren’t fully backed by physical gold, or if inflation surges, they may begin to demand delivery of the metal, sending the price of physical gold soaring, he argues.

There’s no sign of such a sudden spike, but Mr. Burbank and his fellow gold bugs are trying to find the best way to profit if it does.

David Einhorn: Gold ETFs, Futures and Bars

Mr. Einhorn, who runs hedge fund Greenlight Capital, also argues that owning gold bars is the best strategy; he stores his firm’s in an undisclosed warehouse in the New York borough of Queens.

Beyond that, Mr. Einhorn is a fan of exchange-traded funds that own gold miners. His firm owns about 2% of Market Vectors Gold Miners ETF, which tracks gold-mining shares.

Mr. Einhorn, who has made gold his firm’s largest position, also has purchased some call options on gold, or futures contracts that allow his firm to buy gold at a set price in the future.

Gold futures are the best way to invest in gold, some say, because they track gold with fewer transaction costs than gold shares or ETFs. And investors don’t have to commit much money to control a big gold position. The risk, of course, is that a tumble in gold price can wipe out the collateral behind a gold-futures position.

Mr. Zuckerman is a special writer for The Wall Street Journal in New York. He can be reached at gregory.zuckerman@wsj.com .