U.S. Stock Gold ETF Selection Guide: Taiwan-U.S. Comparative Analysis and Investment Strategies

Gold, as a traditional safe-haven asset, possesses characteristics such as inflation resistance and risk diversification. Compared to directly holding physical gold or engaging in futures trading, Gold ETFs offer a more convenient and low-cost entry method. So, what are the types of gold ETFs? How do US gold ETFs perform? How should investors choose? This article will provide answers one by one.

The Three Main Types of Gold ETFs

Gold ETFs are classified into three main types based on their tracking targets:

Physical Gold ETFs directly hold physical gold, managed and stored by professional custodians. Investors indirectly own corresponding gold assets through shares. Typical representatives include GLD and IAU in the US stock market.

Derivative Gold ETFs operate through investing in gold futures contracts, CFDs, and other derivatives, with investors buying and selling based on market conditions and making adjustments. These ETFs usually have leverage features.

Gold Mining Stock ETFs are open-ended index funds that closely track the gold mining industry index, holding stocks of gold miners rather than physical gold. VanEck Gold Miners ETF (GDX) is a typical example.

Why Choose Gold ETFs for Investment

Compared to other gold investment methods, gold ETFs have several advantages:

High Liquidity: Gold ETFs are traded on stock exchanges, with operations as simple and intuitive as buying and selling stocks. Investors can place orders via trading software for quick execution.

Low Costs: Physical gold may incur handling fees of 5%-10%, plus storage costs. Gold ETFs typically have management fees around 0.2%-0.5%, significantly reducing investment costs.

High Asset Allocation Efficiency: Gold has low correlation with stocks and bonds. Allocating 5%-10% of a portfolio to gold can effectively diversify risk and improve overall risk-adjusted returns.

Full Transparency: Physical gold ETFs regularly disclose gold reserves, and other types also reveal their portfolios and trading strategies, allowing investors to understand asset backgrounds clearly.

Low Investment Threshold: Buying physical gold bars requires tens of thousands of yuan, while gold ETFs can be participated in with just a few hundred yuan or less.

Currently, the market generally remains optimistic about gold prices, driven by factors such as continuous central bank gold reserve increases and rising economic uncertainties. This explains why more investors are choosing gold ETFs as an asset allocation tool.

Volatility Characteristics of Gold ETFs

The price fluctuations of physical gold ETFs are closely related to spot gold prices. Although gold is regarded as a safe-haven asset, it can still experience significant volatility during periods of economic uncertainty, monetary policy adjustments, or geopolitical events.

Long-term data shows that gold’s volatility trend is decreasing, with notable increases only during extreme market conditions like the COVID-19 pandemic. Between 2017 and 2022, the historical volatility of gold was significantly lower than that of assets like oil, copper, 10-year government bonds, and the S&P 500.

Gold mining stock ETFs, based on mining company stocks, tend to be more volatile because they are influenced not only by gold prices but also by overall stock market trends, individual company performance, and industry risks such as extraction costs and management issues.

Gold ETFs vs. Gold CFDs

When investing in gold, besides ETFs, CFDs (Contracts for Difference) are also an option, suitable for different investors:

Gold ETFs require no margin, with trading costs mainly consisting of handling fees and management/storage fees, and can be held indefinitely. They are suitable for investors seeking long-term, steady returns.

Gold CFDs require margin from 0.5% to 100%, offering leverage trading mechanisms, with no commission but overnight fees. They are mainly suitable for short-term trading and volatility trading.

If you aim for long-term market positioning and performance, gold ETFs are a better choice; if you want to leverage gold price fluctuations for quick and flexible trading, gold CFDs are more attractive.

Comparison of US Gold ETFs and Taiwan Gold ETFs

Data as of March 7, 2024. The table shows that US gold ETFs generally outperform Taiwan ETFs in asset size, liquidity, and cumulative returns, with more stability.

US Gold ETF Investment Plans

Risk-Preference Matching Portfolio

Based on risk tolerance, the following allocations can be designed:

Aggressive Investors: 50% Stock Index ETF, 25% US Gold ETF, 20% Bond Funds, 5% Gold CFD

Balanced Investors: 42% Bond Funds, 30% Stock Index ETF, 25% US Gold ETF, 3% Gold CFD

Conservative Investors: 40% Bank Deposits, 30% Bond Funds, 15% Stock Index ETF, 15% US Gold ETF

Systematic Investment Strategies

Fixed Monthly Investment: Suitable for investors lacking research time. Invest a fixed amount on a regular date (e.g., payday) for 3-5 years. This method averages costs and smooths market volatility.

Buy on Dips: Requires some analysis of gold prices. Reduce buying when prices rise, increase when prices fall, actively adjusting based on volatility patterns. Suitable for advanced investors.

Regardless of the strategy, setting clear profit targets is crucial. Investors often set targets of 30%-50%, and when reached, they reduce or sell positions. Profits can be taken in stages or adjusted accordingly.

US Gold ETF Selection Guide

When choosing US gold ETFs, consider the following factors:

Issuer and Size: Prioritize reputable issuers with high credibility. Larger asset sizes generally mean higher liquidity and reliability.

Tracking Index and Historical Performance: Check if the ETF tracks the international spot gold price, and review three-year returns and maximum drawdowns to assess risk. Avoid products with long-term poor performance unless they are undervalued and have good prospects.

Cost: Compare management fees, and buy during low-price periods to reduce transaction costs.

Summary

US Gold ETFs are ideal due to their large scale, high liquidity, and lower fees. GLD and IAU are the most popular products, with GLD leading globally and IAU offering the lowest fees.

As a beginner, before investing in US gold ETFs, thoroughly assess your risk tolerance and choose an appropriate portfolio. Gold ETF investing is long-term, requiring 3-5 years to realize wealth growth. Avoid frequent trading due to short-term volatility. Maintaining discipline and persistence is key to risk diversification and asset appreciation.