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How to invest in gold in the UK
Find out why investors attempt to use gold as a safe haven, how you can invest in gold and what to be aware of when investing.
When you think of gold, you might picture glimmering jewellery, hidden treasures or Olympic triumphs. But for many, gold represents a valuable investment, particularly during economic uncertainty. As a “safe haven” asset, gold has often demonstrated its ability to retain value better than other investments.
We delve into the best ways to invest in gold in the UK, examining its role as a safe haven asset and assessing the potential drawbacks. We’ll also explore the recent record-setting surge in gold purchases by central banks to give you some broader insights.
Key takeaways
- There are several ways to invest in gold directly or indirectly in the UK.
- You can buy physical gold, invest in gold exchange-traded funds (ETFs)/exchange-traded commodities (ETCs) or buy gold mining stocks and ETFs.
- Some view gold as a safe haven asset and a potential hedge against inflation.
What is the best way to invest in gold?
This depends on your personal style of investing, goals and risk appetite. The best way for you to invest might be different than it is for someone else.
However, using a gold ETF or a physical gold exchange-traded commodity (ETC) can be a low-cost, accessible way to invest. By investing in a gold ETF, you’re able to avoid the cost and hassle of buying and storing physical gold while still getting full exposure to any potential increases in the price of gold.
Like with any investment, there are still elements of risk. When buying a gold ETF, you’re still exposed to the price volatility of this commodity. If the price of gold falls, so too will the value of your investment.
Ways to invest in gold in the UK
There are plenty of ways you can invest in gold. This includes everything from physically buying gold to investing in gold-related stocks, exchange-traded funds (ETFs) or derivatives (like gold futures or CFDs).
The 3 most popular ways to invest in gold include:
- Gold mining stocks and ETFs.
- Gold ETFs or exchange-traded commodities (ETCs).
- Physical gold (gold bullion, gold coins, jewellery).
Strategy 1:
Buy gold mining stocks
One option is to invest in gold mining firms. You can find many large firms listed on the FTSE 100. The Alternative Investment Market (AIM) also offers access to smaller, riskier and newer enterprises – sometimes called “junior mining stocks”.
By investing in gold mining stocks, you’re not just reliant on the price of gold. The potential success of your investment comes down to the company’s performance. This has upsides and downsides.
The main benefits are that the price can be less volatile, and you might receive dividend income. The drawbacks are that you’re dependant on the firm being efficient (even if the price of gold is high), and there can be natural disasters or geopolitical risks like mine licensing rules.
Here are some gold mining stocks you could consider:
Barrick Gold
Barrick Gold is a Canadian-based gold mining company. Until 2019, it was the world’s largest gold mining company when Newmont Corporation acquired Goldcorp. In 2019, Barrick Gold had 71 million ounces of gold reserves (that’s about 20 blue whales).
It has 16 different operating sites in 13 countries, including:
- Argentina
- Canada
- Chile
- Côte d’Ivoire
- Democratic Republic of the Congo
- Dominican Republic
- Mali
- Papua New Guinea
- Saudi Arabia
- Tanzania
- USA
- Zambia
Compare brokers to buy Barrick Gold shares
Hochschild Mining
Hochschild Mining is a British gold and silver mining company. It operates in North, Central and South America but is listed on the London Stock Exchange and is part of the FTSE250.
Hochschild Mining has mines in Peru and Argentina.
Compare brokers to buy Hochschild Mining shares
Centamin
Centamin is a gold mining company that operates the Sukari Gold Mine in Egypt. It is listed on both the London Stock Exchange and the Toronto Stock Exchange and is part of the FTSE 250.
The Sukari mine is Egypt’s first modern gold mine, with estimated reserves of 15.4 million ounces of gold.
Compare brokers to buy Centamin shares
Pros and cons of investing in gold mining stocks
Pros
- You can pick from a range of stocks that can be easy to trade
- It’s possible to pay low or no commissions with some platforms
- An opportunity to earn passive income with dividends
- You can hold most gold mining stocks in a stocks and shares ISA to protect gains from tax
Cons
- Your investment can be impacted by things outside the spot price of gold
- It’s expensive to set up and maintain gold mines, eating into profits
- Gold mining stocks face unique risks like natural disasters and geopolitical issues
Compare brokers to buy gold shares
Strategy 2:
Invest in gold ETFs
Investing in ETFs is another option worth considering. ETFs give you exposure to a bunch of assets without having to put all of your gold in one basket (you know what I mean).
ETFs allow investors to spread risk through diversification while taking advantage of the performance of a particular sector – in this case, gold.
There are loads of gold-based ETFs to choose from. They can cover a host of different companies within the industry. This can include mining companies, exploration companies, as well as the actual asset itself (sometimes sold as an ETC). Gold ETFs and ETCs are pretty good for beginners looking to invest in gold or those who want plenty of diversification.
Read our guide on gold ETFs to learn more
Compare brokers to buy gold ETFs
Gold ETFs in the UK
| ETF | Ticker | Annual cost |
|---|---|---|
| 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% |
Pros
- ETFs can provide instant diversification across the whole gold industry.
- Can be a cheaper and more efficient way to invest.
- A liquid asset that you can buy or sell easily on most platforms and stock exchanges.
- The ability to earn dividends or hold them inside a stocks and shares ISA.
Cons
- By investing in gold ETFs, you have no control over the stocks or assets in the fund.
- Too much diversity can reduce your overall performance, spreading yourself too thin.
- You still have to consider sector risk.
- Investment performance sometimes isn’t just tied to the price of gold.
Strategy 3:
Buy solid gold
For some, part of the appeal of investing in gold is being able to hold it. Good news: If you’re one of those people, buying solid gold has never been easier.
Where to buy gold in the UK
Based in Wales, the Royal Mint is the government-owned mint that produces the UK’s coins and is the best place to buy gold in the UK in terms of accessibility and trustworthiness. Head to The Royal Mint site, and you can choose from a range of gold bars sized 1g up to 1kg.
Alternatively, plenty of UK-based dealerships buy and sell gold for competitive prices. Before you buy and invest in 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 another 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 you pay 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 store it for you. Instead of receiving the physical gold, you’ll get 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 harder to sell your gold.
Pros
- You have a tangible asset that is yours to hold, store or pass on to someone else.
- You’re able to have direct control over the investment.
- It’s more likely you’ll hang on long-term and not panic sell.
Cons
- You’ll 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.
- It can be difficult to transport.
- Buying and selling isn’t as liquid compared to other investments.
- You can’t earn dividends or hold it in a tax-efficient account like a stocks and shares ISA.
- Lack of income means no chance of compounding returns.
Compare brokers to buy gold shares
How much is gold worth now?
Here’s a live graph showing the current price of gold.
Is gold a safe haven?
There are many reasons investors view gold as a safe haven for investors, for example:
- Gold is a physical asset.
- It’s not easily created or destroyed.
- It doesn’t change (it’s resistant to oxidation – gold will look the same hundreds of years from now).
- Cultural and historical value – without sounding too sentimental, it’s always been seen as beautiful and special.
- Governments turn to gold in times of financial crisis, which adds to gold’s ability to hold value.
- The use of gold predates all modern fiat currency, and most currencies used to be backed by gold.
However, these reasons do not guarantee that gold will continue to be perceived by some as a safe haven asset. Investing in commodities (including gold) can be a complex business, impacted by a wide range of social and economic factors.
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.
Compare providers for access to gold ETFs and more
Table: sorted by promoted deals first
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. Past performance is no guarantee of future results. If you’re not sure which investments are right for you, please seek out a financial adviser. Capital at risk.
Why are central banks loading up on gold?
Money expert Mark Tovey answers
Central banks around the world made a record-breaking start to 2023 as they raced to buy up gold. With demand reaching 228 tonnes in the first 3 months, this marked a 34% increase compared to the previous record set in 2013 for the same 3-month period.
The motivation behind this gold accumulation stems from economic uncertainty and global realignment. Gold serves as a safe-haven asset of choice for central banks, offering stability during uncertain times.
Factors such as the conflict in Ukraine, soaring inflation and concerns about a global financial crisis have driven central banks to diversify their reserves and mitigate risks.
Looking ahead, central banks are expected to continue increasing their gold holdings. Approximately 61% of central banks surveyed plan to boost their gold holdings in the coming year.
Bottom line
Investing in gold comes with unique benefits and risks, so it’s important to understand your options and the drawbacks of buying gold in the UK. Whether you choose to invest directly in gold or indirectly through gold mining stocks, thorough research is essential.
Consider the costs involved and the potential for liquidity based on the form of gold ownership. While gold is often considered a safe haven asset, its performance during recessions can vary. There have been instances where gold prices declined following market crashes.
Frequently asked questions
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. Past performance is no guarantee of future results. If you’re not sure which investments are right for you, please seek out a financial adviser. Capital at risk.
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