The five major channels of gold investment fully explained: How to choose the most suitable trading method?

Current Investment Opportunities in the Gold Market

In recent years, geopolitical conflicts and inflation expectations have become the main drivers pushing gold prices upward. In 2024, gold prices hit a record high, surpassing the $3,700 mark, with expectations to reach $4,000 by mid-2026. The underlying factors include record-breaking central bank gold purchases (net purchase of 1,045 tons in 2024, exceeding 1,000 tons for three consecutive years), rising expectations of Fed rate cuts, and escalating geopolitical risks.

The core logic of gold investment is simple: long-term preservation requires good entry points, while short-term trading depends on analytical skills. However, the market offers various gold investment tools, and beginners often don’t know where to start. This article compares five mainstream gold trading methods in detail to help you choose based on your risk tolerance and investment goals.

Physical Gold vs Paper Gold vs Derivatives: A Three-Dimensional Comparison

Different gold investment methods vary significantly in entry barriers, trading hours, costs, and risks.

Investment Thresholds and Trading Flexibility: Physical gold and gold certificates require moderate capital; gold ETFs have relatively low thresholds; gold futures and CFDs can leverage small capital to control large positions. Regarding trading hours, physical gold is limited by bank or jewelry store hours; gold certificates and ETFs also have specific trading periods; only futures and CFDs support 24-hour trading.

Hidden Costs and Pitfalls: Buying and selling physical gold bars incurs handling fees of 1% to 5%, plus storage costs; gold certificates have about 1% handling fee but involve currency exchange costs; gold ETF management fees range from 0.25% to 1.15% annually; futures costs are about 0.1% per trade; CFDs are calculated based on spreads and overnight fees, approximately 0.04%. Frequent trading can significantly eat into returns, so investors need to be clear about their trading frequency.

Leverage and Risk Bearing: Physical gold, certificates, and ETFs are one-to-one holdings without leverage; futures and CFDs offer leverage tools, allowing large trades with margin. Leverage can amplify gains but also losses, requiring higher capital management discipline.

Detailed Explanation of Five Gold Trading Methods

Method 1: Buying Physical Gold

Suitable for: Investors seeking tangible ownership and long-term preservation

Physical gold includes bars, ingots, and coins, mainly purchased through banks or jewelry stores. Its advantages are low risk and simple purchase process, but drawbacks are obvious: high unit price, need for proper storage, limited liquidity, and a “hard to sell” situation.

When buying bars, Taiwan banks are reliable channels; bank gold bars come from Swiss bank UBS, with guaranteed purity, starting from 100 grams. For smaller amounts, consider jewelry stores or pawnshops, but focus on confirming gold purity. Avoid purchasing counterfeit bars, as bargaining space is large.

Tax-wise, transactions exceeding NTD 50,000 must be declared as personal one-time trade income, calculated at a 6% profit rate.

Method 2: Gold Certificate Trading

Suitable for: Those who want to avoid holding physical gold and conduct low-frequency buying and selling

Gold certificates (paper gold) are held in trust by banks, allowing investors to buy and sell via account without physically holding gold bars. Many financial institutions in Taiwan, such as Bank of Taiwan, CTBC Bank, First Commercial Bank, and Hua Nan Bank, offer this service, with options to buy in TWD or foreign currencies; recently, dual-currency gold certificates have been introduced.

Handling fee is about 1%, representing moderate friction costs, but attention should be paid to exchange rate risks and transaction fees each time. Frequent trading accumulates costs; low-frequency operation is recommended. If buying in TWD, you bear USD/NTD exchange rate fluctuations; if using foreign currency, there are initial currency exchange costs.

Profits from gold certificates are considered property transaction income and must be reported in the following year’s comprehensive income tax. Losses can be deducted within the year, and excess losses can be carried forward for three years.

Method 3: Gold ETF Investment

Suitable for: Retail investors seeking low-cost, hassle-free holdings

Gold ETFs are index funds tracking gold prices, including Taiwan’s Gold ETF (00635U) and US gold ETFs (GLD, IAU). Their advantages are easy trading, low investment thresholds, and good liquidity.

Transaction costs include management fees, handling fees, and currency exchange costs. Taiwan gold ETF management fee is about 1.15% annually; US ETFs like GLD are around 0.4%, IAU about 0.25%. US ETFs generally have lower costs but require opening a US brokerage account and bear exchange risks.

ETFs can only go long, not short, making them suitable for long-term holding but not for short-term arbitrage. Investors should be aware that management fees can erode long-term returns.

Method 4: Gold Futures Trading

Suitable for: Investors with some trading experience aiming for short-term swings

Gold futures are based on international gold prices, with profits or losses depending on entry and exit prices. Futures allow two-way trading (long and short), have long trading hours, and low holding costs. Investors only need to pay margin to leverage large positions, making capital utilization efficient.

Taiwan Futures Exchange trading hours are limited, but many overseas futures brokers offer 24-hour trading, providing better liquidity. Futures have expiry dates, requiring delivery or rollover, which incurs additional costs. Rolling over at expiry can lead to forced liquidation, and leverage amplifies both gains and losses. Tax-wise, futures trading income is currently not taxed, only a transaction tax of 0.025%.

Method 5: Gold CFDs

Suitable for: Investors wanting quick market access and flexible trading

CFD (Contract for Difference) tracks spot gold, allowing two-way trading without physical ownership or expiry dates. Compared to futures, CFDs are more flexible.

CFD entry barriers are very low, with more leverage options, and main costs come from spreads and overnight fees. Trading gold CFDs involves analyzing price trends, not stock picking, making it relatively simple. Profits come from the difference between buy and sell prices.

The CFD market is dominated by overseas brokers; currently, there are no legitimate exchanges in Taiwan. When choosing a broker, ensure it is regulated by international financial authorities to avoid scams.

Key differences between futures and CFDs: Futures have fixed contract sizes and expiry dates; CFDs do not. Futures have trading fees and transaction taxes; CFDs do not. CFDs require lower margin, more friendly to small investors; futures require larger capital.

Tax-wise, CFD trading income is considered overseas income, and amounts exceeding NTD 1 million annually must be included in the basic income and taxed under the minimum tax regime.

Cost and Return Comparison Table

How to Choose the Most Suitable Gold Investment Method?

For long-term preservation: If the goal is inflation hedging and asset allocation, physical gold, gold certificates, or gold ETFs are good options. Generally, gold should constitute at least 10% of your portfolio. Among these, physical gold has the lowest risk but higher costs; gold certificates are in between; gold ETFs have the lowest threshold, lower costs, and good liquidity.

For short-term trading: If aiming to profit from price differences through technical analysis and active trading, futures and CFDs are primary tools. CFDs, with lower margin requirements and more flexible specifications, are more friendly to small investors. Futures are more suitable for those with sufficient capital and trading experience.

Key reminder: Long-term gold investment typically yields modest returns; short-term trading is the path to higher gains but involves higher risks. Mastering technical analysis and risk management is essential. Beginners are advised to start with demo trading to gain experience before moving to real trading.

Why Does Gold Investment Continue to Attract Attention?

The enduring popularity of gold investment is driven by four core reasons:

Preservation attribute: Gold does not depreciate due to inflation and often serves as the best hedge against inflation. Historical data shows that demand for gold surges whenever inflation heats up.

Global liquidity: The gold market is global, long-established, and massive, with ample buyers and sellers at all times, far surpassing other commodities in liquidity.

Risk hedging function: During market turbulence and geopolitical tensions, gold is seen as a “safe haven.” Institutional investors often include gold in portfolios to hedge systemic risks.

Price volatility opportunities: Because gold reacts sensitively to systemic risks, it can experience rapid surges and drops, providing opportunities for short-term traders. After the Russia-Ukraine conflict erupted, gold prices soared to $2,069 and continued to hit new highs.

Conclusion

Choosing the right gold investment method depends on three factors: investment goals (preservation or profit), risk tolerance, and available capital and time.

• Small capital, desire for short-term gains, some trading experience → Gold CFD is the most efficient entry point
• Moderate capital, seeking steady growth, limited time → Gold ETF or gold certificates are good options
• Idle funds, long-term preservation, physical possession matters → Consider buying physical gold bars
• Ample capital, experienced trader, frequent trading → Gold futures offer more flexibility

Regardless of the method chosen, the most important thing is to understand your investment style, control risks, and avoid blindly chasing highs. Currently, gold prices are at historic highs, requiring more cautious decision-making.