Gold ETF Investment Guide: Taiwan and US Choices and Practical Strategies

Why Consider Gold ETFs Now?

Gold, as a traditional “hard currency,” combines inflation resistance with risk diversification. Compared to directly purchasing gold bars (requiring tens of thousands of dollars to start) or engaging in futures trading (complex and high risk), Gold ETFs redefine gold investment with lower entry barriers and more flexible trading methods.

You can participate with just a few hundred dollars, and trading is as simple as buying and selling stocks—this is the core reason why Gold ETFs are attracting more and more investors.

The Three Faces of Gold ETFs

Depending on the underlying assets tracked, gold ETFs are mainly divided into three categories:

Physical Gold ETFs — Directly hold physical gold, stored by professional institutions, with investors indirectly owning corresponding gold assets through shares. Typical representatives include GLD and IAU.

Derivative Gold ETFs — Trade through gold futures contracts, contracts for difference, and other instruments, with investors adjusting buy/sell positions based on market fluctuations. These ETFs offer leverage mechanisms and carry higher risks.

Gold Mining Stock ETFs — Track indices of gold mining companies, holding stocks of gold mining enterprises. Examples include VanEck Gold Miners ETF (GDX). These tend to be more volatile than physical gold ETFs.

The Five Major Investment Advantages of Gold ETFs

Very Low Trading Threshold: Unlike traditional gold bar investments requiring tens of thousands of dollars to start, gold ETFs can be participated in with hundreds of dollars, greatly lowering the barrier for ordinary investors.

Transparent and Favorable Costs: Physical gold may involve handling fees of 5%-10% and storage costs. Gold ETFs typically have management fees of only 0.2%-0.5%, with clear trading cost advantages.

Sufficient and Stable Liquidity: Can be bought and sold on stock exchanges without special channels, allowing for anytime entry and exit—an unmatched convenience compared to traditional gold investments.

A Stabilizer for Investment Portfolios: Gold has low correlation with stocks and bonds. Allocating 5%-10% of assets in gold can effectively diversify risk. When stock markets decline, gold’s hedging properties often lead to inverse growth.

Complete Transparency of Information: Spot gold ETFs regularly publish reserve data, allowing investors to clearly understand asset backgrounds; other types also disclose investment portfolios and trading strategies.

How Does the Volatility of Gold ETFs Perform?

Although gold is viewed as a safe-haven asset, its volatility is not constant. During periods of increased economic uncertainty, geopolitical events, or central bank policy changes, gold prices may experience significant fluctuations.

Historical Data Shows: Over the past five years (2017-2022), gold’s volatility has been significantly lower than assets like oil, copper, or the S&P 500 index, only rising sharply during extreme market conditions such as the COVID-19 pandemic.

It’s Important to Note: Gold ETFs based on mining company stocks tend to be more volatile because they are influenced by gold prices, stock market trends, and individual company performance. In terms of liquidity, US gold ETFs are the most liquid due to their large scale; Taiwanese gold ETFs have relatively lower liquidity.

Gold ETF vs. Gold CFD: How Should Investors Choose?

Investment Decision Logic: If you aim to participate steadily in the gold market over 3-5 years and pursue market performance, gold ETFs are more suitable; if you want to leverage gold price fluctuations for flexible trading, gold CFDs are more attractive.

Three Practical Strategies for Gold ETF Investment

1. Portfolio Investment, Scientific Risk Allocation

Based on risk appetite, adopt different allocation schemes:

• Aggressive Investors: 50% stock index ETFs, 25% gold ETF, 20% bond funds, 5% gold CFD
• Balanced Investors: 42% bond funds, 30% stock index ETFs, 25% gold ETF, 3% gold CFD
• Conservative Investors: 40% bank deposits, 30% bond funds, 15% stock index ETFs, 15% gold ETF

2. Fixed Regular Investment, Smoothing Cost Curve

Invest a fixed amount on a fixed date each month (e.g., payday), without timing judgment. This method allows investors to buy less at high prices and more at low prices, naturally forming an average cost over time. A commitment of 3-5 years is essential; avoid frequent trading.

3. Buy on Dips, Reduce on Rises

Compared to passive fixed investment, this is an active approach. Increase investment when gold ETF prices fall, and reduce when prices rise. This strategy requires some price analysis skills and is suitable for advanced investors. Setting reasonable profit targets (usually 30%-50%) is also crucial; take profits promptly once targets are reached.

Comparing Taiwan and US Gold ETFs

Taiwan Gold ETF Representatives

Yuanta S&P Gold ETF — Taiwan’s largest and most liquid choice, with assets of $2.5534 billion, 5-year cumulative return of 34.17%, management fee 1.15%. Very friendly for beginners.

Yuanta S&P Gold Bull 2 ETF — Leverage of 2x, 5-year return of 70.40%, but higher risk, not recommended for beginners.

Yuanta S&P Gold Inverse 1 ETF — Designed for shorting gold, not suitable for beginners.

US Gold ETF Representatives

GLD (SPDR Gold Shares) — The largest US gold ETF, with assets of $56.075 billion, 5-year return of 62.50%, management fee only 0.40%, top liquidity.

IAU (iShares Gold Trust) — Assets of $26.683 billion, even lower management fee at 0.25%, 5-year return of 63.69%, slightly less known but with clear fee advantages, suitable for cost-sensitive investors.

SGOL (Sprott Physical Gold Trust) — Assets of $2.83 billion, offers physical redemption options, with relatively lower risk of loss, but average liquidity.

Key Finding: From multiple dimensions—asset size, liquidity, cumulative return, and maximum drawdown—US gold ETFs, especially GLD and IAU, perform more stably and are more prominent.

How to Precisely Choose the Right Gold ETF for Yourself

Issuer Credibility and Asset Size — Prioritize products issued by reputable financial institutions with larger assets, as these ETFs generally have better liquidity and easier trading.

Tracking Target and Historical Performance — Examine the specific underlying (international spot prices or industry indices), 3-year returns, maximum drawdowns, etc. Avoid products with poor historical performance unless they are severely undervalued, as liquidity is often lower.

Timing and Cost Calculation — Assess personal risk tolerance; entering at relatively low points can reduce cumulative management and trading costs.

Cost Structure Comparison — Management fees may seem small but have a significant long-term effect. The difference between 0.25% and 1.15% can lead to substantial yield gaps over ten years.

Summary

Gold ETFs have become the mainstream tool for modern investors to participate in the gold market. In the Taiwan and US markets, US gold ETFs (especially GLD and IAU) are more advantageous due to their large scale, low fees, and high liquidity.

For novice investors, the primary task is to honestly assess their risk tolerance and choose a suitable portfolio. Whether through fixed regular investment or buying on dips, consistent long-term investing is the key to success. Gold ETFs are not quick wealth tools but an important part of stable asset allocation.