How to invest in gold funds? A comparison and analysis of five major channels to find the most suitable method for you

Why Consider Gold Investment Now?

International geopolitical risks continue to rise, inflation pressures have become a global focus, and gold, as a traditional safe-haven asset, is once again attracting investors’ attention. However, many people’s understanding of gold investment remains at the physical gold bar purchase stage, unaware that gold funds and other derivative instruments offer more efficient investment options.

In recent years, gold prices have experienced significant volatility:

• Fluctuated between $1700 and $2000 from 2022 to 2023
• In 2024, driven by expectations of Fed rate cuts and global central bank gold purchases, gold prices broke through $2700, with global central banks net buying 1,045 tons of gold annually (over three consecutive years exceeding 1,000 tons)
• By September 2025, gold prices had surged past $3700, with market expectations continuing upward

The key issue is: the timing of entry is more important than the method of entry. Long-term bullish investors should seek good buying opportunities rather than waiting to buy after prices rise; short-term traders need to master technical analysis to profit from price differences.

Comprehensive Analysis of the Five Major Gold Investment Channels

1. Physical Gold: Traditional but Inefficient Choice

Includes gold bars, gold ingots, commemorative coins, etc., available at banks or jewelry stores. It is recommended to buy gold bars directly, avoiding jewelry and commemorative coins (which include processing fees and suffer higher loss upon resale).

Core disadvantages:

• Non-interest-bearing asset, no income from holding
• Requires storage costs (safety deposit boxes, insurance)
• Poor liquidity, with “hard to buy, hard to sell” phenomenon
• High transaction costs per trade (1%-5%)
• Tax burden: amounts exceeding NTD 50,000 must be declared as personal occasional trade income, calculated at a 6% net profit rate

Suitable for: Asset preservation-focused and physical collection enthusiasts

Gold bar purchase suggestion: Taiwan Bank is the only bank nationwide offering physical gold trading, with a minimum purchase of 100 grams, guaranteed quality, and low fees; for small amounts, jewelry stores are an option, but purity must be confirmed.

2. Gold Passbook: Paper Gold Managed by Banks

Hold gold exposure through bank passbook accounts, no need to store physical gold, making transactions more convenient. Many institutions such as Taiwan Bank, CTBC Bank, and First Commercial Bank offer this service, supporting TWD, foreign currencies, and dual-currency purchases.

Cost structure:

• Handling fee: about 1.00%
• Exchange rate risk: TWD-denominated purchases bear USD fluctuation risk; foreign currency purchases face currency conversion costs
• Taxation: profits are considered property transaction income, included in the following year’s comprehensive income tax; losses can be deducted over three years

Features: Moderate friction costs, high cumulative costs with frequent trading, suitable for low-frequency trading strategies.

Suitable for: Conservative investors seeking low-cost long-term holding and periodic portfolio adjustments

3. Gold ETFs and Gold Funds: The New Mainstream of Passive Investment

Gold funds track gold indices via fund management companies, allowing investment in Taiwan gold funds (e.g., 00635U) or US gold ETFs (GLD, IAU, etc.).

Cost comparison:

• Taiwan gold ETF: management fee 1.15%/year + handling fee 0.15% + transaction tax 0.1%
• US gold ETF (GLD): management fee 0.4%/year + handling fee 0-0.1% + currency conversion 0.32%
• US gold ETF (IAU): management fee 0.25%/year + handling fee 0-0.1% + currency conversion 0.32%

Gold funds have low investment thresholds, high liquidity, and convenient trading, but are limited to long-only strategies, unable to short. Suitable for beginners and retail investors with limited capital, especially those aiming for long-term allocation.

Suitable for: Seeking low-cost, highly liquid passive investment options

4. Gold Futures: Professional Trading Tools

Futures contracts based on international gold prices, with profits and losses determined by entry and exit price differences. Support two-way trading, 24-hour global operation, no manipulation space.

Advantages:

• Long trading hours (overseas futures brokers operate nearly 24/7)
• Leverage amplifies capital efficiency
• Relatively low holding costs
• Tax benefits: futures trading gains are not taxed, only a 0.0000025% transaction tax

Risks:

• Must handle delivery at expiration and rollover costs
• Leverage magnifies losses
• Positions in delivery months may be forcibly closed
• Requires professional risk control and capital management skills

Suitable for: Professional investors or traders experienced in derivatives

5. Gold CFDs: Flexible and Efficient New Choice

Derivative contracts tracking spot gold prices, supporting two-way long and short trading, with no physical holding or delivery deadlines. More flexible and accessible than futures, with costs mainly from bid-ask spreads and overnight fees.

Core advantages:

• Extremely low entry barrier (margin requirements much lower than futures)
• Flexible leverage (1X to 100X)
• T+0 trading, anytime long/short switching
• No minimum contract size, small amounts can participate
• Simple account opening process

Risk considerations:

• High leverage risk, easy to get margin called
• Basic technical analysis skills required
• Overseas income exceeding NTD 1 million must be included in minimum tax calculation

Comparison of Futures and CFDs: Futures have fixed contract sizes and delivery deadlines; CFDs are more flexible without such restrictions. Futures are taxed at a lower rate but are more complex to manage; CFDs have transparent costs but require trading experience. For small capital and short-term trading, CFDs are more advantageous.

Suitable for: Short-term traders seeking quick entry/exit with trading skills

Overview Comparison of Gold Investment Methods

How to Choose? Make Decisions Based on Investment Goals

For preservation and appreciation: Prioritize physical gold or gold passbooks, focusing on long-term anti-inflation; or select gold funds as part of a diversified portfolio. Recommended allocation: about 10% of total investment portfolio.

For arbitrage trading: Use gold futures and gold CFDs. Futures suit large-capital, professional traders willing to handle complex delivery processes; CFDs are suitable for limited capital, seeking flexible and quick short-term trading.

For beginners: Start with gold funds, which have low costs and manageable risks; gradually explore derivatives trading as experience grows.

Core Logic of Gold Investment

Institutional investors generally allocate gold not for high returns but for security and confidence. Gold is volatile but controlled, neither as monotonous as fixed deposits nor as limitless as stocks, yet it can serve as a hedge during systemic risks.

Historically, geopolitical crises, wars, and major economic policy shifts trigger sharp rises and falls in gold prices. For example, during the Russia-Ukraine war in 2022, gold surged to $2069; in 2024, record central bank gold purchases pushed prices beyond $3700. This rapid responsiveness makes gold a dual-purpose tool for long-term asset allocation and short-term arbitrage.

The essence of investing in gold is understanding market cycles and risks, not blindly chasing rallies. Regardless of the channel chosen, finding the right entry point, establishing a clear investment plan, and controlling risk exposure are key to success.