How to invest in gold profitably? Understand the costs and risks of 5 different methods to find the trading approach that suits you best.

Gold prices have reached new highs in recent years, once surging past the $3,700 mark. Against the backdrop of escalating geopolitical conflicts and rising inflation expectations, more and more people are considering joining the gold investment ranks. However, there are many ways to invest in gold, including traditional physical gold, savings accounts, ETFs, futures, and contracts for difference (CFDs). Which method is the most cost-effective and suitable for you? This article will analyze the costs, risks, and return characteristics of various gold trading channels in depth.

Why is gold worth investing in?

Gold’s investment value has a long history, mainly due to its “hedging properties.” Whenever economic uncertainty increases and market volatility intensifies, institutional investors tend to increase their gold holdings as a risk hedge. According to market conventions, the recommended gold allocation in a portfolio is usually no less than 10%.

Historically, gold prices are highly correlated with major systemic events. For example, after the outbreak of the Russia-Ukraine war, gold prices skyrocketed to $2,069. In 2024, due to the warming of US rate cut expectations and record-breaking global central bank gold purchases (net purchase of 1,045 tons), gold prices broke through historical highs. By 2025, gold prices had surpassed $3,700, with Goldman Sachs even predicting it could reach $4,000 by mid-2026.

However, it is important to note that short-term gold price movements are subject to multiple uncertainties and are difficult to predict precisely. The key to long-term gold investment is to grasp the right entry timing rather than blindly chasing high prices.

Comparison of all gold trading methods: costs and returns at a glance

In-depth analysis of five gold trading methods

1. Physical Gold: The most traditional hedging choice

Physical gold includes gold bars, ingots, jewelry, and commemorative coins. Purchase channels are usually banks or jewelry shops, but it is recommended to buy gold bars directly because jewelry and coins contain significant processing fees, and selling them involves handling fees and wear-and-tear costs, resulting in lower actual returns.

Cost analysis:

• Purchase cost: 1%-5%
• Storage cost: insurance or safe deposit box fees
• Tax costs: profits exceeding TWD 50,000 must be declared as occasional trade income, taxed at a 6% net profit rate

Risks and advantages: The biggest advantage of physical gold is low risk and strong physical ownership security. However, it is not an interest-bearing asset, has lower liquidity, and can be difficult to buy and sell quickly. It remains attractive for long-term preservation and collection purposes but is inefficient as a short-term trading tool.

Gold bar purchase advice: Taiwanese banks are reliable channels for purchasing physical gold, offering guaranteed quality and relatively low costs. Focus on gold purity rather than brand appearance, and consider buying larger grams to reduce unit costs.

2. Gold Savings Account: An accessible paper gold option

Gold savings accounts (also called paper gold) allow investors to avoid holding physical gold, with banks acting as custodians and providing trading services. Many banks in Taiwan, including Bank of Taiwan, CTBC Bank, and First Commercial Bank, offer this service.

Trading methods and costs: Gold savings accounts support TWD, foreign currency, and dual-currency trading, each with associated costs. Buying with TWD involves exchange rate risk; buying with foreign currency involves initial currency exchange costs. Overall, the frictional costs are moderate. Frequent trading can accumulate exchange costs, so it is not recommended for short-term operations.

Tax considerations: Profits from gold savings accounts are considered property transaction income and must be reported in the following year’s comprehensive income tax. Losses can be deducted from property transaction income, and any unused losses can be carried forward for up to three years.

Suitable scenarios: Ideal for investors seeking low-cost, low-frequency, long-term investment. It can be exchanged for physical gold for added flexibility but only supports buy low, sell high strategies; no short selling.

3. Gold ETF: Easy participation through fund investment

Gold ETFs are exchange-traded funds tracking gold indices, allowing investors to buy and sell directly through brokers without physical delivery. Market options include Taiwan-listed gold ETFs (e.g., 00635U) and US-listed gold ETFs (e.g., GLD, IAU).

Cost structure:

• Taiwan gold ETF: management fee (1.15%/year) + transaction fee (0.15%) + trading tax (0.1%)
• US gold ETF (GLD): management fee (0.4%/year) + transaction fee (0%-0.1%) + currency exchange (0.32%)
• US gold ETF (IAU): management fee (0.25%/year) + transaction fee (0%-0.1%) + currency exchange (0.32%)

Main features: Low investment threshold, high liquidity, convenient trading, but only long positions are possible—no short selling. Trading hours are limited to broker operating hours. Suitable for beginners and long-term investors, especially those building passive portfolios.

Purchase channels: Buying Taiwan ETFs is most convenient via domestic brokers; for US ETFs, opening an US account allows direct purchase, with lower costs but currency risk.

4. Gold Futures: A tool for professional traders

Gold futures are based on international gold prices, with profits depending on the price difference at buy and sell. Futures support two-way trading and leverage to amplify gains. Trading hours are long (almost 24 hours via overseas brokers), with prices linked to real-time international prices.

Core risks:

• Expiration delivery: Futures contracts have fixed expiration dates; holding until expiry requires delivery, and rolling over involves additional costs.
• Leverage risk: While leverage can magnify gains, it also amplifies losses, requiring high capital management.
• Forced liquidation: If positions are not zero at delivery month, brokers will forcibly close positions.

Tax advantages: Futures trading on gold is exempt from income tax, with only a 0.025% (25 per ten-thousand) futures transaction tax, much lower than other methods.

Suitable for: Professional investors and those experienced in derivatives trading. Best for short-term swing trading, requiring technical analysis skills and risk management.

5. Gold CFD: The most flexible derivative option

Gold CFDs are contracts tracking spot gold prices, allowing investors to profit from price differences without physical delivery. Compared to futures, CFDs have no expiration date, more flexible leverage options, and lower entry barriers.

Costs and features:

• Lower margin requirements than futures
• No fixed contract size, suitable for small-scale operations
• 24-hour trading, enabling long and short positions at any time
• Main costs are spreads and overnight financing fees

Tax reminder: Income from international gold trading is considered overseas income; amounts exceeding TWD 1 million annually must be included in the basic income calculation, subject to minimum tax.

Futures vs. CFD summary:

• Futures have minimum contract sizes; CFDs do not
• Futures have expiration dates requiring rollover; CFDs can be held indefinitely
• Futures incur trading fees and taxes; CFDs mainly involve spreads
• CFDs generally require less capital and are easier to operate

Suitable for: Investors seeking short-term trading with small capital and no experience restrictions. Due to high leverage risk, thorough technical analysis and risk management are essential before trading.

How to choose the most suitable gold trading method?

( Long-term wealth preservation investors Aim to hedge against inflation and asset depreciation, should consider:

• Physical gold: lowest risk, strongest security
• Gold savings account: low cost, no physical custody worries
• Gold ETF: most convenient, transparent fees

) Swing traders Aim to profit from gold price fluctuations, requiring:

• Ability to trade frequently → choose futures or CFD
• Sufficient technical analysis skills → to correctly judge market trends
• Sound risk management → use leverage cautiously

Core principle: Futures are more suitable for larger, professional investors; CFDs are better for beginner and small-scale traders.

Layered investment strategy suggestion

Consider a diversified approach:

1. Allocate 10%-15% to physical gold or gold savings as core hedging assets
2. Allocate 10%-20% to gold ETFs for liquidity
3. Use remaining risk-tolerant funds for futures or CFD swing trading

Warning: The risk boundaries of gold investment

Although gold has great long-term growth potential, investors must recognize several realities:

Reasonable return expectations: Gold is not interest-bearing; long-term annual returns are typically 5%-8%. Overly optimistic expectations are unwarranted. Short-term trading can be profitable but carries significant risks.

Use leverage cautiously: Leverage in futures and CFDs is a double-edged sword. Beginners should start with low or even 1x leverage, gradually gaining experience before increasing leverage.

Platform selection is crucial: The gold trading market is complex; ensure the broker is regulated by reputable international financial authorities. Be cautious of unlicensed platforms to protect your funds.

Conclusion: Find your own gold investment rhythm

The choice of gold trading methods ultimately depends on your investment goals, risk tolerance, and experience. Long-term preservation investors should prioritize physical gold, savings accounts, or ETFs for stability and low costs. Investors with technical analysis skills and risk appetite can explore futures and derivatives like CFDs.

Regardless of the method chosen, follow these principles: identify good entry points rather than blindly chasing high prices, set clear stop-loss and take-profit plans, continuously learn market knowledge, and regularly review your portfolio. Success in gold investing depends more on discipline and risk awareness than on the tools themselves.