Gold Investment Channels Showdown: A Complete Analysis of the Risks and Returns of the Five Major Buying and Selling Methods

Is there still a chance for gold investment? A glimpse into gold price trends

Gold prices experienced significant fluctuations between 2022 and 2023, dropping from a high of $2000 to below $1700, mainly due to geopolitical conflicts and Federal Reserve rate hikes. Entering 2024, gold prices continuously hit new highs, with global central banks net purchasing 1,045 tons of gold (over a thousand tons for three consecutive years), directly pushing gold prices above $2700. By 2025, international gold prices have surpassed $3700, with Goldman Sachs estimating it will reach $4000 per ounce by mid-2026.

Although long-term bullish, gold prices are influenced by multiple factors, making short-term trends difficult to predict. For investors seeking long-term appreciation, the focus is not on waiting for prices to rise but on finding the right entry point. For traders aiming for higher profits and willing to take risks, short-term and swing trading can profit from price differences.

How to buy gold most cost-effectively? Investment style determines everything

Choosing the method of buying and selling gold entirely depends on your investment goals. Are you aiming for value preservation against inflation, or do you want to profit from price fluctuations? Different investment intents correspond to different tools.

Long-term value preservation investors should consider physical gold, gold savings accounts, or gold ETFs, which have relatively transparent costs and lower risks but limited returns.

Short-term traders can focus on gold futures and gold CFDs, which feature leverage and two-way trading mechanisms, allowing quick profit from price volatility.

Comparison table of the five major gold trading methods

Physical gold investment: a traditional tangible hedge

Buying physical gold includes bars, ingots, and commemorative coins, usually obtained from banks or jewelry stores. It is recommended to buy gold bars directly, avoiding jewelry and commemorative coins—these include processing fees and incur selling fees and wear-and-tear costs, making them less cost-effective.

Physical gold’s core characteristic is that it does not generate interest, and it also involves storage and insurance costs. Liquidity is relatively poor, with the risk of “easy to buy, hard to sell.” However, as a hedge asset, physical gold remains attractive for many investors due to its tangible nature and preservation value, especially suitable for long-term collection and asset allocation.

For large quantities, buying directly from banks is recommended for safety, though storage fees apply; for smaller amounts, jewelry stores are an option, just pay attention to purity. Tax-wise, transactions exceeding NTD 50,000 must be declared as personal one-time trade income.

Suitable for: Collecting, hedging, preserving value
Advantages: Low risk, simple trading
Disadvantages: High unit price, storage needed, additional costs

Gold savings account: paper trading without physical possession

Gold savings accounts (paper gold) allow investors to avoid the hassle of physical custody. Banks hold the gold on behalf of investors, who only record transactions via the account. Major banks like Bank of Taiwan, CTBC Bank, and First Commercial Bank offer this service. Gold savings accounts can be exchanged for physical gold, making them one of the most flexible value-preservation tools.

Currently, banks offer three types: TWD-denominated, foreign currency-denominated, and dual-currency gold savings accounts. TWD accounts involve exchange rate risk; foreign currency accounts have currency conversion costs. Regardless of the type, fees are moderate friction costs, and frequent trading can accumulate significant expenses.

Profits are considered property transaction income and must be included in the next year’s individual comprehensive income tax declaration. Losses can be deducted, and any remaining loss can be carried forward for three years.

Suitable for: Low-cost long-term investment, low-frequency trading
Advantages: Lower risk, small transactions possible, exchange for physical gold
Disadvantages: Trading hours limited, only buy low and sell high, currency exchange costs hard to control

Gold ETFs: easy holding via fund approach

Gold ETFs (gold index funds) enable retail investors to participate easily in the gold market. Examples include Taiwan Gold ETF(00635U), US gold ETFs(GLD) or(IAU).

Cost structure: Taiwan gold ETF has an annual management fee of 1.15% plus transaction fees and taxes; US ETFs(GLD) have an annual management fee of 0.4% plus currency conversion costs;(IAU) has an annual fee of 0.25% plus conversion costs.

Gold ETFs are highly liquid, with low investment thresholds, but only long positions are possible, no shorting, suitable for beginners and retail investors for long-term investment. Buying through domestic brokers or overseas brokers each has advantages.

Suitable for: Low-cost long-term investment, low-frequency trading
Advantages: Easy to buy/sell, low investment threshold
Disadvantages: Watch out for management fees, limited trading hours

Gold futures: advanced two-way trading tool

Gold futures are based on international gold prices, with profits or losses depending on the price difference between entry and exit. Compared to spot trading, futures offer two-way trading, longer trading hours, and lower holding costs, suitable for short-term trading and professional investors.

After paying margin, leverage allows trading gold with increased capital efficiency. Gold futures prices are linked 24/7 to international markets and are less susceptible to manipulation. The downside is that all futures contracts have expiration dates, requiring rollover or closing; holding positions past expiration results in forced liquidation. Leverage amplifies both gains and losses, so proper capital management is essential.

Tax-wise, futures trading income tax has been suspended, with only a 0.0000025% futures transaction tax applied.

Trading in Taiwan is through the Taiwan Futures Exchange with shorter hours; overseas brokers offer nearly 24-hour trading, with better liquidity and volume.

Suitable for: Short-term trading, swing investing, larger capital
Advantages: T+0 trading all day, long and short positions, leverage for capital efficiency
Disadvantages: High leverage risk, requires settlement and rollover

Gold CFDs: the lowest threshold derivative

Gold CFDs track spot gold prices without actual physical possession, and have no expiration date, making them more flexible than futures. Allowing two-way long and short trading, with very low entry barriers, flexible leverage, and fees mainly from spreads and overnight financing.

Analyzing gold price trends is simpler than stock picking, providing a quick way into the gold market. Income from international gold trading is considered overseas income, and amounts exceeding NTD 1 million annually must be included in personal income tax.

Core differences between futures and CFDs:

• CFD margin requirements are lower than futures, with no fixed contract size
• CFDs have no expiration date; futures do
• CFDs have no trading fees or transaction taxes; futures do
• CFD capital requirements are lower, suitable for small traders

Suitable for: Short-term trading, swing investing, smaller capital
Advantages: Low entry threshold, two-way trading, T+0 all day, easy account opening
Disadvantages: High leverage risk, requires trading skills

Framework for gold investment decisions

Choosing the right gold trading method depends on clear investment goals and risk tolerance.

If the goal is value preservation and inflation hedging, physical gold, gold savings accounts, and gold ETFs are prudent choices, with modest annual returns but less volatility.

If the goal is profit from price differences, short-term traders can leverage futures’ fixed specifications and trading hours, or choose CFDs for their flexibility and low entry barriers.

Regardless of the method, pay attention to:

• Tax implications: Different methods have different tax treatments
• Cost structure: Accumulated fees, management costs, currency exchange fees
• Risk management: Especially leverage risks of margin tools
• Liquidity: Ensure quick entry and exit when needed

Why is gold a must-have asset?

As a more volatile asset, gold does not offer fixed returns like fixed deposits nor unlimited potential like stocks or futures. Its unique position lies in providing a sense of security and market confidence, helping investors cope with uncertainty and financial crises.

Almost all investment institutions recommend allocating gold in portfolios, generally at least 10%. Whenever inflation or market turbulence intensifies, enthusiasm for investing in gold surges.

Historically, any major event involving systemic risk—macro-economic shocks, geopolitical conflicts, wars—tends to cause significant gold price swings. After the Russia-Ukraine war erupted in 2022, gold surged to $2069, and recently breaking through $3700 again proves this.

Due to the large scale and long history of the international gold market, it quickly reflects systemic events, leading to rapid price surges and drops. Therefore, investors often use gold for “short-term trading profits” or as a hedge in their portfolios.

There is no absolute answer to how to buy gold most cost-effectively; only the method that best fits your investment style. Understanding each tool’s costs, returns, and risks is key to wise investing.