How to choose gold ETFs? A comprehensive guide to Taiwan and US gold ETF recommendations and investment strategies

As a traditional safe-haven asset, gold can not only hedge against inflation risks but also play a balancing role in an investment portfolio. Compared to directly holding physical gold or participating in futures trading, Gold ETFs, with their flexible trading and low costs, have become the preferred choice for more and more investors. What are the ways to play with Gold ETFs, and how can beginners quickly get started? This article will outline the core knowledge and practical strategies for Gold ETFs.

The Three Main Types of Gold ETFs, Each with Its Own Advantages

Gold ETFs are essentially exchange-traded funds that track the price movements of gold. Based on the underlying assets they track, the available Gold ETFs can be roughly divided into three categories:

Physical Gold ETFs directly hold physical gold stored by professional institutions, with investors indirectly owning corresponding gold shares. Representative products include GLD (SPDR Gold Shares). The price movements of these ETFs are highly correlated with the spot gold price, with relatively low volatility.

Derivative Gold ETFs invest in gold futures contracts or other derivative instruments like CFDs, adjusting their positions dynamically according to market conditions. For example, ProShares Ultra Gold (UGL) offers leverage, providing amplified returns but also higher risks.

Gold Mining Stock ETFs invest in a basket of stocks of listed gold mining companies, such as VanEck Gold Miners ETF (GDX). These products are influenced not only by gold prices but also by overall stock market trends and individual company performance, making their volatility generally the highest.

Why Invest in Gold ETFs? Five Major Advantages at a Glance

High Trading Convenience: Gold ETFs are traded directly on stock exchanges, just like stocks. Open your trading app, a few steps are enough to buy or sell—no complicated procedures involved.

Much Lower Costs: Buying physical gold usually involves paying 5%-10% in fees plus storage costs. Gold ETFs, on the other hand, have management fees of only 0.2%-0.5%, significantly reducing overall investment costs.

A Tool for Risk Diversification: Gold has a low correlation with stocks and bonds. Allocating 5%-10% of your portfolio to gold assets can effectively diversify risk. Studies show that adding gold appropriately can improve the risk-adjusted return of your investment portfolio.

Transparent Information Disclosure: Spot gold ETFs regularly disclose their gold reserves, allowing investors to see exactly how much physical assets support their funds.

Accessible Investment Threshold: With just a few hundred dollars or even less, you can participate—much lower than the cost of buying gold bars—making it accessible for ordinary investors to share in gold investment gains.

Gold ETF vs. Gold CFDs, How to Choose?

These two tools have different focuses. Gold ETFs are suitable for investors optimistic about long-term appreciation and seeking steady returns; while gold CFDs, supporting leverage and more flexible strategies, are more suitable for short-term traders aiming to capture quick price movements.

In terms of cost structure, gold ETFs require paying management and custody fees but have no leverage costs; gold CFDs use margin trading, offering up to 200x leverage, but overnight fees apply to open positions. For medium- to long-term investors, gold ETFs are more cost-controlled; for day traders or short-term swing traders, gold CFDs offer greater flexibility.

How Volatile Are Gold ETFs? Is Liquidity Sufficient?

Spot gold ETFs tend to have relatively moderate volatility, closely linked to the spot gold price. Although gold is considered a safe-haven asset, during geopolitical events, monetary policy shifts, or increased economic uncertainty, gold prices can experience significant fluctuations.

It’s worth noting that gold’s historical volatility has shown a long-term downward trend, remaining relatively stable even during major black swan events like the COVID-19 pandemic. Compared to oil, copper, or the S&P 500 index, gold’s volatility is significantly lower, which is why it is widely used for risk management.

In contrast, gold ETFs based on mining company stocks tend to be more volatile because they are affected not only by gold prices but also by stock market trends, corporate earnings, and industry-specific risks (such as mining costs and management risks).

Regarding liquidity, mainstream gold ETFs like GLD and IAU have assets worth billions of dollars, with highly active trading, small bid-ask spreads, and very convenient entry and exit.

Recommended Gold ETFs: Comparing Taiwan Stocks vs. US Stocks

The most representative gold ETFs in the US market are GLD and IAU.

GLD (SPDR Gold Shares) has an asset size of $56.1 billion, making it the largest gold ETF globally. It has a five-year cumulative return of 62.5%, with a management fee of only 0.4%, and excellent liquidity.

IAU (iShares Gold Trust) has assets of $26.7 billion, with a cumulative return of 63.69%, and a management fee of 0.25%, one of the lowest in the industry, especially suitable for cost-sensitive beginners.

SGOL (Invesco DB Gold Fund) has assets of $2.8 billion, with a cumulative return of 64.36%, and a management fee of 0.39%. Its unique feature is supporting physical gold redemption, making risk control more straightforward.

In Taiwan stocks, Yuan Da S&P Gold ETF is the largest and most liquid gold ETF, with assets of $25.5 billion, a five-year cumulative return of 34.17%, and a management fee of 1.15%, very friendly for beginners.

From the data comparison, US gold ETFs outperform Taiwanese products in terms of asset size, management fees, and historical performance, making them generally more stable and efficient.

Practical Investment Rules for Gold ETFs

Step 1: Build a Layered Investment Portfolio

Design your allocation based on your risk tolerance. Aggressive investors might allocate 50% to stock ETFs, 25% to gold ETFs, 20% to bond funds, and 5% to gold CFDs; moderate investors could adjust to 30% stocks, 25% gold ETFs, 42% bonds, and 3% gold CFDs; conservative investors should base their portfolio on 30% bonds and 40% bank deposits, supplemented with 15% gold ETFs and 15% stocks.

Step 2: Use a Regular Fixed Investment Strategy

Choose a fixed date each month (e.g., payday) to buy a fixed amount of gold ETFs. This approach effectively averages costs, reduces the impact of market volatility, and is especially suitable for working professionals and novice investors. The key is to stick with this plan for 3-5 years, avoiding frequent buying and selling.

Step 3: Flexibly Use Buy-the-Dip Strategy

Compared to passive fixed investments, a more advanced approach is to increase purchases when gold prices fall and reduce positions when prices rise. This requires some ability to analyze gold price fluctuations and is suitable for investors with some experience.

Step 4: Set Clear Profit Goals

Most investors aim for a 30%-50% return. Once the target is reached, sell decisively to lock in profits or gradually reduce positions to realize gains. Don’t let greed take over—timely profit-taking is the right approach.

How to Choose the Right Gold ETF for Yourself?

Look at Issuer and Size: Prioritize reputable issuers with large assets, as these products tend to have higher liquidity and easier trading.

Compare Historical Performance: Review the 3- or 5-year cumulative return and maximum drawdown to assess risk. Avoid products with poor past performance unless they are severely undervalued and you believe in their future potential.

Evaluate Trading Costs: Enter when gold prices are relatively low to reduce unit costs, and pay attention to management fees—choose products within an acceptable range.

Summary

Gold ETFs, with their trading convenience, low costs, and risk diversification benefits, have become a staple in modern investment portfolios. Among US gold ETFs, GLD, IAU, and SGOL are relatively more stable and efficient. Ultimately, the choice depends on your risk appetite and investment horizon. For beginners, it’s crucial to thoroughly assess your risk tolerance before investing in gold ETFs, adopt strategies like fixed monthly investments or buy-the-dip, and hold long-term to let gold serve as a “hard currency” to safeguard and grow your assets.