How to choose a gold fund? 5 ways to invest in gold, which one is the most cost-effective?

Facing geopolitical risks and inflation pressures, more and more people are starting to allocate assets to gold. However, there are many ways to invest in gold, from physical gold bars to gold futures, from gold savings accounts to gold funds. How should you choose? This article provides an in-depth analysis of the characteristics, costs, and risks of various gold investment tools to help you find the most suitable plan based on your investment goals.

Why is now a good time to pay attention to gold investment?

As a traditional safe-haven asset, gold’s recent performance warrants investor attention:

• 2022-2023 Volatility Period: Gold prices fluctuated significantly between $1,700 and $2,000, mainly influenced by geopolitical conflicts and Federal Reserve rate hikes
• 2024 Rebound Period: Supported by expectations of US rate cuts, escalating geopolitical risks, and record-breaking central bank gold purchases worldwide, gold prices broke through historical highs. Global central banks net purchased 1,045 tons of gold in 2024 (over 1,000 tons for three consecutive years), directly pushing gold prices toward the $2,700 mark
• 2025 New Highs: Gold prices have surpassed $3,700, with Goldman Sachs projecting a mid-2026 target of $4,000 per ounce

These data indicate that the gold market is in a significant upward cycle. However, it is important to note that many factors influence gold prices, and short-term trends are difficult to predict accurately.

Long-term preservation VS short-term arbitrage—clarify your investment goals first

Before choosing a gold investment method, ask yourself: Am I aiming for long-term preservation or short-term profit through trading?

If aiming for long-term preservation, focus on finding suitable entry points rather than blindly chasing rallies. Suitable tools include:

• Physical gold (collectibles and preservation)
• Gold savings accounts (convenient and relatively low cost)
• Gold funds (high liquidity and transparent fees)

If engaging in short-term trading, basic technical analysis skills and risk tolerance are necessary. Suitable tools include:

• Gold futures (two-way trading, leverage, low costs)
• Gold CFDs (lower entry barriers, more flexible trading)

Comprehensive comparison of five gold investment methods

Method 1: Physical Gold—The most traditional preservation tool

Physical gold includes gold bars, ingots, and commemorative coins, available at banks or jewelry shops. It is recommended to buy gold bars rather than jewelry or collectible coins, as the latter include processing fees and incur handling and wear costs upon resale.

Advantages of physical gold: Low risk, tangible asset, enhances psychological security

Disadvantages:

• Non-interest-bearing asset, no income from interest
• Requires dedicated storage facilities, incurring storage fees
• Less liquid, with “hard to buy, easy to sell” phenomenon
• Larger investment amounts per transaction

Tax reminder: Transactions exceeding NT$50,000 must be declared as personal occasional trade income, calculated at a 6% profit rate.

Purchase advice: Large grams of gold can be directly purchased from Taiwan Bank for safety; smaller amounts can be bought at jewelry shops, but purity should be verified.

Method 2: Gold Savings Account—Low-cost electronic investment

Gold savings accounts (also called “paper gold”) are services where banks hold gold on behalf of investors, who do not need to hold physical gold, only an account. Banks like Taiwan Bank, CTBC, and First Bank offer this service.

There are three purchase methods: TWD-denominated, foreign currency-denominated, and dual-currency gold savings accounts. Choosing TWD involves exchange rate risk; foreign currency accounts incur currency conversion costs. Overall, costs are moderate, but frequent trading can accumulate fees.

Suitable for: Long-term low-cost investors with low trading frequency

Advantages: Lower risk, small transactions possible, can exchange for physical gold

Disadvantages: Limited trading hours, only buy low/sell high, currency exchange costs

Tax reminder: Profits are considered property transaction income and should be included in the next year’s individual comprehensive income tax declaration. Losses can be deducted; if not fully deducted, they can be carried forward for 3 years.

Method 3: Gold Funds—The most convenient investment option

Gold funds are low-cost ways to participate in the gold market. Investors can choose Taiwan stock gold funds (e.g., 00635U) or US stock gold funds (e.g., GLD, IAU).

Different gold funds have varying cost structures:

• Taiwan gold funds: 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 exchange (0.32%)
• US gold ETF IAU: Management fee (0.25%/year) + handling fee (0~0.1%) + currency exchange (0.32%)

Gold funds are easy to buy and sell, have low investment thresholds, and high liquidity, but only support long positions (no shorting), making them suitable for beginners and retail investors.

Suitable for: New investors seeking simple investment methods

Advantages: Easy trading, low entry barrier, good liquidity

Disadvantages: Need to watch management fees, trading time restrictions

Method 4: Gold Futures—A professional investor’s efficient tool

Gold futures are based on international gold prices, with profits from price differences between entry and exit. Futures feature two-way trading, long trading hours, and low holding costs, typically requiring only margin deposits to leverage.

Advantages:

• Supports both long and short positions
• Long trading hours (almost 24/7 for overseas futures)
• Prices linked to international markets 24/7, difficult to manipulate

Risks:

• Delivery deadlines require roll-over, incurring additional costs
• Positions in delivery months with non-zero holdings are forcibly closed
• Leverage amplifies both gains and losses; strict capital management is necessary

Tax advantage: Gold futures are exempt from income tax on trading gains, only a futures transaction tax (0.0000025‰) applies.

Suitable for: Experienced traders with risk tolerance and trading skills

Method 5: Gold CFDs—The most flexible derivative tool

Gold CFDs (Contracts for Difference) track spot gold prices. Traders do not need to hold physical gold, and there is no expiration date, making them more flexible than futures.

Advantages over futures:

• No fixed contract size, lower margin requirements
• No expiration date, no roll-over needed
• No futures transaction tax or handling fees, lower costs
• Flexible leverage, very low trading thresholds

Risks:

• High leverage means high risk; losses can exceed initial investment
• Requires trading skills and market analysis
• Overnight positions incur costs

Tax reminder: Income from international gold trading is considered overseas income; if exceeding NT$1 million annually, it must be included in the minimum tax calculation.

Suitable for: Traders with derivatives experience seeking small-scale short-term trading

Quick reference table of gold investment costs and returns

How to choose?—Decide based on your investment style

For conservative investors: Recommended: Physical gold, gold savings account, gold funds Features: Low risk, simple process, suitable for long-term holding

For balanced investors: Recommended: Mainly gold funds + small allocations in gold savings accounts Features: Balanced risk and return, good liquidity

For aggressive investors: Recommended: Gold futures, gold CFDs Features: High leverage, high risk, short-term trading, requires trading expertise

Key investment tips

1. Avoid chasing the peak Gold prices can surge or fall sharply in the short term. Do not blindly buy at new highs. The best approach is to establish positions at relatively low levels.

2. Minimize costs Different investment methods have vastly different costs. From 0.04% for CFDs to 5% for physical gold, choosing lower-cost tools benefits long-term returns.

3. Be cautious with frequent trading Regardless of the method, frequent buying and selling accumulate fees and costs. Long-term gold investment returns are not particularly high; short-term trading is mainly for arbitrage but requires skills.

4. Pay attention to tax implications Different methods have different tax treatments (some exempt income tax, others include it). Consider tax costs in your investment decisions.

5. Proper capital management is crucial Especially when using leverage, set stop-loss points, control individual losses, and prevent short-term losses from turning into long-term damage.

Summary

There is no absolute best gold investment solution—only the one that suits you best. Physical gold is suitable for conservative investors seeking peace of mind; gold funds are friendly for beginners; experienced traders can leverage futures and CFDs for more efficient trading.

Remember one core principle: Investing in gold is for diversification or short-term gains, not to replace stocks as the core asset. It is recommended to keep gold at about 5-15% of your total assets and adjust dynamically based on market conditions.