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A complete guide to buying, selling and investing in gold
Learn more about gold, why it is seen as 'safe', and how you can invest today.
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What's in this guide?
You might have noticed that global stocks have taken a hit in 2020 and prove to be pretty volatile. This is mainly due to coronavirus while everyone panics all over the world about where to put their money.
For centuries, gold has been a popular store of wealth. In turbulent times, you might notice people talking about gold as an investment. During times like this, you often see the price of gold rising, while other stocks are falling.
Ways to invest in gold
There are a number of ways you can invest in or buy gold, from physically buying gold bullion or gold coins, to investing in gold-related stocks (such as mining companies), exchange-traded funds (ETFs) or gold derivatives like futures.
The main ways to invest or buy gold are:
- Gold-mining stocks
- Gold ETFs
- Physical gold (gold bullion/jewellery)
- Gold futures/contracts for difference (CFDs)
Buy gold mining stocks
One option is to invest in gold mining firms. You can find many large firms listed on the FTSE 100. Equally the Alternative Investment Market (AIM) can offer access to smaller, newer enterprises. Through investing in mining stocks, you’re directly linking your capital to the success of these companies, and the changing value and price of gold.
While heavily correlated, the performance of gold mining stocks will not perfectly match the price of gold. Unlike the resource itself, companies are subject to a number of external factors such as employees taking strike action, geo-political implications for the area, natural disasters, and business decisions.
Pros
- You can pick and choose a range of stocks through a Stocks and Shares ISA, and cash out when you want.
Cons
- Like any investment, mining stocks are not immune to risk.
Gold exchange traded funds (ETFs)
ETFs are another option worth considering. ETFs give access to a whole load of assets, without having to put all of your money into one or two firms. If you need to brush up on ETFs, check out our guide.
Simply, ETFs allow investors to minimise risk, while taking advantage of the performance and general popularity of a particular sector – in this case gold.
There are loads of gold-based ETFs to select from, covering off a whole host of different companies within the industry. There are mining companies, exploration companies, as well as the actual asset itself. Gold ETFs are a pretty good choice for those who are new to investing, as well as those looking to secure their portfolio.
Pros
- ETFs allow for instant diversification across the whole gold industry, at a low price.
Cons
- By placing your money in an ETF, you are trusting your gold portfolio to a robo—adviser, and so you naturally relinquish some control over the split of assets.
Gold ETFs in the UK
| ETF | Ticker | Annual cost | Numeric |
|---|---|---|---|
| iShares Physical Gold ETC | SGLN | 0.25% | |
| Invesco Physical Gold ETC | SGLD | 0.29% | |
| WisdomTree Physical Gold | PHAU | 0.39% | |
| Gold Bullion Securities Ltd | GBS | 0.40% | |
| WisdomTree Physical Swiss Gold | SGBS | 0.19% | |
| WisdomTree Physical Gold GBP Daily Hedged | GBSP | 0.39% | |
| WisdomTree Physical Gold GBP | PHGP | 0.39% | |
| WisdomTree Physical Precious Metals | PHPM | 0.44% |
If the trading platform you use has access to the US stock market and other international markets, you should also be able to invest in a range of foreign gold ETFs.
Buy solid gold
For some people, part of the appeal of gold is being able to hold it. If you’re one of those people then good news, buying solid gold has never been easier. Traditionally, you can buy gold Bullion via the Royal Mint.
The Royal Mint is the government owned mint that produced the UK’s coins. Head to The Royal Mint site and you’ll be able to choose from a range of Gold Bars. From 1g up to 1kg, you can buy it online today.
Alternatively, there are plenty of UK based dealerships that will buy and sell gold for competitive prices.
Before you buy physical gold, you should make sure of the following:
- You have a way to store it securely. If you plan on holding the gold yourself, you should have a safe or other secure way to store the gold.
- The gold is real and certified. Make sure the seller is legitimate and that the gold has been tested before buying.
- The price is fair. It’s important that you are paying a market rate, or at least a price that you believe represents good value.
If you want to own gold but not store it yourself, many dealers will sell it and then store it on your behalf. Instead of receiving the physical gold, you will receive a gold certificate for the amount you bought.
However, these certificates are only as good as the company that issues them, and it may be hard to sell off your gold, e
Pros
- You have a tangible asset which is yours to hold, store, or pass on to someone else.
Cons
- You will need to factor in the cost of secure storage and insurance if you plan to build up a stockpile of gold. These costs will stack up over time, even if the value of your gold decreases.
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All investing should be regarded as longer term. The value of your investments can go up and down, and you may get back less than you invest. Capital is at risk.
Why is gold a ‘safe haven’?
There are many reasons people view gold a safe haven for investors. For example:
- Gold is a physical asset
- It is not easily created or destroyed
- It does not change (it is resistant to oxidation, gold looks the same hundreds of years from now)
- Cultural and historical value – gold predates modern currency, and has always been seen as beautiful and special
- This is partly why governments turn to gold in times of financial crisis, which in itself adds to gold’s stability
How much is gold worth now?
What is a safe haven?
A safe haven investment is typically stable in times of market volatility. A safe haven is also useful for investors looking to diversify their portfolio, decreasing exposure to riskier assets or investments.
All investing should be regarded as longer term. The value of your investments can go up and down, and you may get back less than you invest. Capital is at risk.
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