Five Major Paths to Gold Allocation: Long-term Preservation or Short-term Profit, Choosing the Right Method is the Key

Global central banks are making record gold purchases, expectations for Fed rate cuts are heating up, and geopolitical conflicts are frequent—all driving gold prices higher. In 2024, gold prices broke through $2,700, surging to $3,700 this year, with Goldman Sachs estimating it could reach $4,000 by mid-2026. However, in this gold bull market, investors face a core question: Which method should I use to enter the market?

Physical gold, paper gold accounts, index funds, futures contracts, CFDs—each tool has different risk-return profiles, transaction costs, and operational complexities. Choosing the wrong approach can not only prevent gains but also be “chipped away” by fees and holding costs. This article breaks down five major gold investment paths to help you find the most suitable entry method.

Your Investment Goals Determine Your Choice

Before comparing various gold investment tools, ask yourself: Are you aiming for long-term preservation against inflation, or short-term trading for price differences?

Long-term preservation suits investors expecting continued central bank gold buying and persistent geopolitical risks. These investors are not in a hurry to sell and care more about buying at good entry points. Physical gold, gold savings accounts, and gold ETFs are suitable, with the key being to find a reasonable entry price.

Short-term trading targets investors with market analysis skills and the ability to withstand volatility. Gold futures and CFDs support leverage, two-way trading, and 24-hour markets, making them especially suitable for these needs. The potential returns are higher, but so are the risks—leverage amplifies both gains and losses.

Five Gold Investment Methods Fully Compared

Path 1: Physical Gold—A Classic Choice for Preservation and Collection

Suitable Scenario: I want to physically hold gold as the ultimate hedge asset.

Physical gold includes bars, ingots, commemorative coins, etc. If you plan to hold for more than 5 years, bars are the best choice—unlike jewelry with processing and wear costs, priced purely by weight.

Entry Cost: Higher unit prices (Taiwan banks start at 100 grams), plus storage and insurance fees. If the transaction exceeds NT$50,000, profits are taxed at a 6% income tax rate.

Why choose physical gold? Physical gold does not face platform risks or technical failures, making it a trust-based asset. But it has weaknesses: poor liquidity, high holding costs, and difficulty in buying and selling.

Purchase Tips: Buy large quantities directly from Taiwan Bank (safe, quality-assured, transparent fees). Smaller quantities can be bought at jewelry stores (more flexible pricing), but verify purity. Note that imported gold bars must meet national regulations; Taiwan Bank sells Swiss bank (UBS AG) bars ranging from 100 grams to 1 kilogram, with quality assured.

Path 2: Gold Savings Account—A Convenient Alternative to Paper Gold

Suitable Scenario: I want to buy gold but don’t want the hassle of physical storage.

Gold savings accounts are “paper gold”—you own the gold’s ownership, not the physical metal. Banks handle storage, and you can track holdings via passbook or app. Banks like Taiwan Bank, CTBC, First Bank, and Hua Nan Bank offer this service.

Transaction Methods:

• Buy with TWD (exposed to exchange rate fluctuations)
• Buy with foreign currency (initial exchange costs)
• Dual-currency gold passbook (tracking both TWD and foreign currency exchange rates)

Cost Analysis: Handling fees are moderate (~1%), but frequent trading incurs exchange costs. Monthly or quarterly buying and selling are recommended, rather than daily trading. Profits are taxed as income in the following year; losses can be deducted within 3 years.

Advantages and Disadvantages: Small transactions possible, can exchange for physical gold, relatively low risk, but only suitable for “buy low, sell high”—no short selling.

Path 3: Gold ETF—A Simple Index Investment

Suitable Scenario: I want to participate in gold appreciation without frequent trading.

Gold ETFs track spot gold prices via index funds. Taiwan has 00635U, US markets have GLD and IAU. Entry is very accessible (a few thousand TWD), liquidity is good, ideal for lazy investors.

Cost Breakdown:

• Taiwan ETF(00635U): Management fee 1.15%/year + brokerage fee 0.15% + transaction tax 0.1%
• US ETF(GLD): Management fee 0.4%/year + brokerage 0–0.1% + currency exchange 0.32%
• US ETF(IAU): Management fee 0.25%/year + brokerage 0–0.1% + currency exchange 0.32%

Long-term, US ETFs tend to have lower costs, but require opening US brokerage accounts and currency exchange.

Limitations: Only long positions, no short selling. Suitable for long-term holders optimistic about gold’s future.

Path 4: Gold Futures—A Professional Two-Way Trading Tool

Suitable Scenario: I want quick gains from price differences and can handle leverage risk.

Gold futures are based on international spot gold. Entry requires margin deposits (about 10% of contract value), leveraging capital utilization. 24/7 trading (overseas brokers), supporting both long and short positions.

Trading Advantages:

• Lowest transaction costs (~0.10%)
• Very low trading tax (0.0000025, 25 per million)
• T+0 trading all day
• Price linked to international markets, hard to manipulate

Hidden Costs: Futures have expiry dates; positions need rollover (additional costs). Unclosed positions at expiry are forcibly closed. Leverage is a double-edged sword—multiplying gains and losses.

Risk Warning: Requires basic technical analysis and risk management skills; otherwise, you risk being trapped.

Path 5: Gold CFD—Lowest Cost Quick Entry

Suitable Scenario: I want to enter the gold market with minimal capital and flexible leverage.

CFDs track spot gold prices; contracts have no fixed size or expiry, more flexible than futures. The main advantage is very low entry barrier—some platforms allow trading 0.01 lots for as little as $18.

Cost Benefits:

• Lowest fees (~0.04%)
• No futures trading tax
• No fixed contract size
• Flexible leverage (from 1X to 100X)

Flexibility: Supports leverage adjustment, overnight positions without restrictions, two-way trading, T+0 all day. Beginners can start with 1X no leverage, then gradually add leverage as experience grows.

Tax Considerations: If overseas income exceeds NT$1 million in a year, it must be included in minimum tax calculation.

Futures vs CFD Comparison:

• Initial Capital: CFD has lower threshold
• Expiry: Futures have, CFDs do not
• Trading Tax: Futures have specific tax, CFDs do not
• Leverage Flexibility: CFD wins
• Suitable For: Both fit short-term and swing trading, but CFDs are more friendly for small traders

How to Choose the Right Method for You?

I am a conservative investor → Choose physical gold or gold savings accounts, with small monthly allocations, no need to watch the market constantly.

I am a busy professional with limited time → Gold ETFs are best, set up automatic investments, check returns at year-end.

I want to hedge stock market risks with gold → Gold savings or ETFs are suitable; consider allocating 10–15% of your portfolio to gold.

I have trading experience and want quick profits → Gold futures or CFDs, but ensure you understand technical analysis and set stop-loss and take-profit levels.

I have limited funds but want to try trading → Start with gold CFD, use the no-leverage 1X mode to practice, then consider adding leverage.

Why Do Institutional Investors Allocate Gold?

Gold does not provide fixed income or high-multiplier returns like stocks. But it does something more important—protects your wealth during market crises.

Historically, whenever inflation heats up, war erupts, or financial crises occur, gold shines. In 2022, the Russia-Ukraine war pushed gold to $2,069; recently, it broke through $3,700. Almost all investment institutions recommend allocating at least 10% of their portfolios to gold.

The true value of gold is not in short-term gains but in hedging against market uncertainties. That’s why it’s called a “smart money” tool—not gambling, but risk management.

Final advice: If you haven’t tried gold investing yet, start with a gold savings account or ETF to experience the market rhythm. Once you accumulate enough experience and capital, consider futures or CFDs for leverage opportunities. Whatever method you choose, remember one thing: Timing is more important than the method. Waiting for gold prices to rise before jumping in is often the most costly mistake.