Gold ETF Investment Guide: How to Choose Between the Taiwan and US Markets for Stable Profits?

Gold has long been regarded as a traditional safe-haven asset favored by investors. However, many people still find it confusing to decide “how to invest in gold ETFs and which one to choose.” Instead of being stuck on the high barriers and complex procedures of traditional gold investments, consider directly investing in gold ETFs—combining gold’s anti-inflation characteristics with the flexibility of funds, low costs, and convenient trading, suitable for both beginners and advanced investors.

What is a Gold ETF? Why do so many people choose it?

Before discussing investment strategies, let’s clarify what a gold ETF actually is. Simply put, a gold ETF is a fund product that can be bought and sold directly on an exchange. It tracks the price of gold, allowing you to indirectly hold gold assets without actually buying gold bars or spot gold at a bank.

Compared to purchasing physical gold, which often costs tens of thousands of dollars and involves storage and handling fees, the appeal of gold ETFs lies in:

Trading as easily as stocks—open your trading app, click a few times, and you can buy or sell without restrictions on time or location.

Significantly lower costs—physical gold handling fees can be 5%–10%, while management fees for gold ETFs are only about 0.2%–0.5%, making the cost savings obvious.

Almost no investment threshold—you can participate with just a few hundred dollars, greatly lowering the entry barrier for ordinary investors.

Full transparency of information—regular disclosures of gold reserves held, portfolio composition, and trading strategies, providing peace of mind.

A good asset allocation tool—gold has low correlation with stocks and bonds. Allocating 5%–10% of your portfolio to gold ETFs can effectively diversify risk and improve overall stability.

Types of Gold ETFs and their differences

Based on the underlying assets tracked, gold ETFs mainly fall into three categories:

Physical Gold ETFs—Directly hold physical gold stored by professional custodians. This type is the most stable because it is backed by real gold, and investors have a clear understanding of its asset status. Typical examples include GLD and IAU.

Derivative Gold ETFs—Track gold prices through investing in gold futures contracts or CFDs, without holding physical gold. These ETFs often leverage, making them more volatile and suitable for advanced investors seeking amplified returns, such as ProShares Ultra Gold (UGL).

Gold Mining Stock ETFs—Track indices of gold mining and exploration companies, investing in a basket of stocks. Due to influences from company performance, industry risks, and other factors, their volatility is usually higher than the other two types. VanEck Gold Miners ETF (GDX) is an example.

For beginners, it is recommended to prioritize physical gold ETFs because their volatility is relatively controllable and risks are clearer.

How volatile are gold ETFs?

Many worry that gold prices fluctuate too wildly. In reality, as a safe-haven asset, gold has maintained relatively low volatility historically. Data from 2017 to 2022 shows that gold’s price swings are significantly smaller than those of oil, copper, stocks, and other asset classes.

Large fluctuations mainly occur during major events like the COVID-19 pandemic, economic uncertainties, or geopolitical conflicts. This precisely demonstrates gold’s “hedging property”—when market risks increase, capital tends to flow into gold.

Additionally, ETFs based on gold mining stocks tend to be more volatile because they are affected not only by gold prices but also by stock market trends and company-specific factors.

Gold ETFs vs. Gold CFDs, which should you choose?

If you’ve looked into investment products, you might notice that besides gold ETFs, there is also the option of gold CFDs. What’s the difference?

Gold ETFs are suitable for medium- to long-term investment—no leverage involved, with management and custody fees, but risks are relatively controlled. You can hold them indefinitely without worrying about forced liquidation.

Gold CFDs are suitable for short-term trading—offer leverage (up to 200x), allowing you to control large positions with a small margin, potentially earning higher profits but also increasing risks. CFDs have no expiration date but incur overnight fees if held overnight.

Here’s a simple comparison:

Core advice: If you want to participate steadily in gold markets over the next few years, choose gold ETFs. If you want to capitalize on short-term price movements, gold CFDs offer more flexibility.

How to invest in gold ETFs for stable profits?

Knowing what a gold ETF is isn’t enough; you also need strategies for investing. Here are some recommended approaches:

1. Reasonable diversification

Don’t put all your funds into gold ETFs. Based on your risk tolerance, consider this allocation:

• Risk-tolerant investors—50% stock index ETFs, 25% gold ETFs, 20% bond funds, 5% gold CFDs.

• Risk-neutral—42% bonds, 30% stocks, 25% gold ETFs, 3% gold CFDs.

• Risk-averse—40% bank deposits, 30% bonds, 15% stocks, 15% gold ETFs.

2. Stick to fixed dollar-cost averaging

Set a fixed date each month (e.g., payday) to buy a fixed amount of gold ETFs. This automates “buying less at high prices and more at low prices,” averaging costs over time. Gold ETF investing is about accumulating gradually; a holding period of at least 3–5 years is recommended to see significant wealth growth.

3. Actively seize buying and selling opportunities

If you have some judgment of gold price trends, consider increasing purchases during dips and reducing during rallies. This active approach requires market insight but can be more profitable than fixed investing.

4. Set clear profit targets

Generally, aim for a 30%–50% profit. Once your ETF holdings reach this target, consider selling in stages to realize gains. If you are very optimistic about a particular ETF, you can also sell in parts and hold some for long-term growth.

How to choose among Taiwan, US gold ETFs?

Now, let’s get into practical selection—specifically, which gold ETF to buy. Investors typically hold gold through financial markets, with the most well-known US ETFs being SPDR’s GLD and iShares’ IAU.

Main Taiwan gold ETFs:

Yuan Da S&P Gold ETF—Assets of $2.5534 billion, tracking the S&P Goldman Sachs Gold Excess Return Index, 5-year cumulative return of 34.17%, management fee 1.15%. Taiwan’s largest gold ETF with high liquidity, ideal for beginners.

Yuan Da S&P Gold Bull 2 ETF—Assets of $2.7694 billion, 5-year return of 70.40%, management fee 1.15%. This is a 2x leveraged ETF with more aggressive returns and higher volatility; not recommended for beginners.

Yuan Da S&P Gold Inverse 1 ETF—Assets of $1.378 billion, tracking the inverse index, 5-year return of -41.03%, management fee 1.15%. Used for hedging against gold declines, not suitable for beginners.

Main US gold ETFs:

GLD—Assets of $56.075 billion, 5-year return of 62.50%, management fee 0.40%. The largest US gold ETF with high liquidity and low trading costs.

IAU—Assets of $26.683 billion, 5-year return of 63.69%, management fee 0.25%. Less well-known than GLD but with lower fees, suitable for cost-conscious investors.

SGOL—Assets of $2.83 billion, 5-year return of 64.36%, management fee 0.39%. Moderate liquidity, offers physical delivery options, relatively low risk.

Key insight: Overall, US gold ETFs perform more steadily in terms of assets, liquidity, returns, and risk management, making them more suitable for long-term investors than Taiwan ETFs.

How to pick the right gold ETF for yourself?

With so many options, how should you evaluate?

Look at issuer reputation and asset size—prefer products from reputable, well-established issuers. Larger assets usually mean better liquidity and easier trading, especially important for long-term holding.

Research tracking index and historical performance—most track international spot gold prices, but some track derivatives or mining indices. Review 3- or 5-year returns and maximum drawdowns to assess your risk tolerance.

Calculate purchase costs—management fees may seem small but accumulate over time. Choose ETFs with lower fees to maximize returns. Also, avoid frequent trading to minimize transaction costs.

Consider liquidity—poor liquidity can make selling difficult during market volatility. Opt for ETFs with stable daily trading volume and narrow bid-ask spreads.

Why invest in gold ETFs now?

From 2023 to 2024, gold prices have broken historical highs, but market expectations suggest further upside. Major central banks continue to increase gold reserves, and global economic uncertainties persist—key factors supporting gold prices.

Participating via gold ETFs allows diversification and potential gains from upward trends, making it an increasingly popular choice among investors.

Summary

Gold ETFs combine stability, liquidity, and cost-effectiveness, making them the best way for ordinary investors to participate in the gold market. Based on the comparison, US gold ETFs (especially GLD and SGOL) perform better across various metrics and are more suitable for long-term investment.

The key to investing in gold ETFs is choosing products aligned with your risk tolerance, employing diversification and dollar-cost averaging strategies, and holding for the medium to long term. Avoid frequent trading, and before entering, carefully assess your investment goals and risk capacity to build a matching portfolio, ensuring steady wealth growth.