Gold Fund Investment Guide: How to Choose Between Taiwan and US Gold ETFs?

What Exactly Is a Gold ETF?

Gold ETFs are index funds that can be traded directly on exchanges, tracking the spot gold price movements. Compared to traditional gold investments, they combine the convenience of funds with the liquidity of stocks, allowing investors to participate in the gold market at lower costs and with greater flexibility. Since gold prices tend to be relatively stable, the volatility of gold ETFs is usually lower than that of equity funds.

Three Main Types of Gold Funds

Depending on the underlying assets they track, gold ETFs are mainly divided into three categories:

Physical Gold ETFs directly hold physical gold, stored by professional institutions. Investors indirectly own corresponding gold assets based on their shares, with typical benchmarks like GLD.

Derivative Gold ETFs operate through investments in gold futures contracts and derivatives like CFDs. Investors buy and sell contracts based on market changes, such as UGL which offers leverage mechanisms.

Gold Mining Stock ETFs are open-ended index funds that closely track indices related to the gold mining industry, holding stocks of gold miners, such as VanEck Gold Miners ETF (GDX).

Why Invest in Gold Funds?

Low and Convenient Trading Threshold

Purchasing physical gold usually requires tens of thousands of dollars, whereas gold funds can be bought with just a few hundred or even less. Investors can complete transactions by simply clicking the buy button on their brokerage app, without complex procedures.

Clear Cost Advantages

Handling fees for physical gold can be as high as 5%-10%, plus storage costs. Gold funds have annual management fees of only 0.2%-0.5%, significantly reducing transaction costs.

Effective Risk Diversification

Gold has low correlation with stocks and bonds. Adding 5%-10% gold assets to a portfolio can effectively reduce overall risk. Studies show that moderate gold allocation can improve the risk-return profile of an investment portfolio.

High Transparency of Information

Physical gold ETFs regularly disclose gold reserves, and other fund types also publish their holdings and trading strategies, giving investors clear insight into asset status.

Bright Market Outlook

Despite reaching new highs in 2023-2024, market institutions remain optimistic about the future. Central banks worldwide continue to increase gold reserves, and growing economic uncertainties support gold prices.

Volatility and Liquidity Analysis of Gold Funds

The volatility of gold funds mainly depends on their underlying assets. Physical gold ETFs’ prices are closely linked to spot gold, with smaller fluctuations. Although gold is considered a safe-haven asset, during economic uncertainties, monetary policy adjustments, or geopolitical conflicts, gold prices can experience significant swings.

Long-term data shows that gold’s historical volatility has been decreasing, remaining stable except during major crises like COVID-19. Compared to oil, copper, or the S&P 500 index, gold’s volatility over the past five years has been notably lower.

Mining company stock ETFs tend to be more volatile, influenced by gold prices, overall stock market trends, individual company performance, and mining costs.

Comparing Taiwan Stock vs. US Stock Gold Funds

Data shows that US gold funds are relatively stable in terms of asset size, liquidity, and performance, with more competitive management fees.

Practical Strategies for Investing in Gold Funds

Build a Diversified Portfolio

Based on risk tolerance, consider the following allocations:

Aggressive Investors: 50% stock index funds, 25% gold funds, 20% bond funds, 5% others

Balanced Investors: 42% bond funds, 30% stock index funds, 25% gold funds, 3% others

Conservative Investors: 40% bank deposits, 30% bond funds, 15% stock index funds, 15% gold funds

Regular Fixed Investment Method

Invest a fixed amount in gold funds on a set date each month (e.g., payday). This automates the dollar-cost averaging approach—buying less at high prices and more at low prices. Suitable for office workers and small investors, requiring persistence over 3-5 years to see significant results.

Active Timing Investment Method

Observe gold fund price trends, increasing investment during dips and reducing or pausing during rises. This requires some technical analysis skills and is suitable for advanced investors. Set profit targets of 30%-50%, and consider partial exits once targets are reached.

How to Choose the Right Gold Fund?

Issuing Institution and Scale

Prioritize funds issued by reputable large institutions. Larger asset sizes generally mean better liquidity and easier trading.

Tracking Index and Historical Performance

Focus on funds tracking international spot gold prices, and review 3- or 5-year returns and maximum drawdowns. Avoid funds with poor long-term performance and low liquidity.

Fee Structure

Within your risk capacity, select products with lower management and trading fees to minimize long-term costs.

Investment Conclusion

Gold funds provide ordinary investors with a convenient way to access the gold market. US gold funds (like GLD, IAU, SGOL) are particularly advantageous due to their large scale, low costs, and high liquidity. Beginners should first assess their risk tolerance, choose suitable portfolios, and adopt a long-term investment mindset to steadily build wealth.