How to Invest in Gold

Gold BarsI read in The Weekend Australian on Saturday that you can now walk into Harrods in London and walk out with some gold bullion. Of course you can also buy a matching designer vault to keep it in.

After many years (even decades) of languishing out of sight, gold is back on many people’s radar as an investment. Partly this has been driven by fear that paper currencies will collapse. Partly it is driven by fashion and the old band wagon.

Besides walking down to your local jeweller (or Harrods) how do you actually invest in the commodity of gold?

Here are three ways:

  • Buy physical metal
  • Via an exchange traded product
  • Through investing in a gold mining company

Please note I am not recommending an investment in gold. Talk to your financial planner to assess if it is appropriate for your goals and circumstances.

Buy physical gold

To buy physical gold head to the Wild West where The Perth Mint provides three methods of investing in gold.

You can buy bullion bars and coins and take them home with you. Awesome show and tell for your next party, but where do you keep it?

More conveniently you can buy legal title to a portion of the gold held by the mint, through their certificate program. If you fancy having your own “private vault” at the mint you can pay a bit extra and have your own bullion bars segregated from the others.

Investing in gold on the stock exchange

The third method offered by The Perth Mint is to buy a gold product listed on the Australian Stock Exchange (ASX) that is designed to track the actual gold price. It’s structured as a call warrant giving you the right to exchange your paper for physical gold. (ASX: ZAUWBA)

Also listed on the ASX is an exchange traded managed fund. The fund buys and stores physical gold. By purchasing a share in the fund you buy a portion of the gold in their stock, which is audited. (ASX: GOLD)

Investing in a gold mining company

This is a less direct method and your investment value will not necessarily track movement in the gold price. Further, many mining companies have investments in more than one commodity. Plus you have the management and operational risk associated with any company.

The best investment in gold…

For me, the shadow of my wife over my shoulder as I write this article reminds me that my best investment in gold may be the decorative kind. (Oh, and apparently gold’s an even better investment when combined with other precious gems.)

2 thoughts on “How to Invest in Gold

  1. Or you can invest in the Talga Gold Ltd IPO!
    But seriously Re your comments Matt, especially on investing in a gold mining/exploration company, each of your possibly negative points also have positive ones.
    “The investment value will not necessarily track movement in the gold price”
    Yes, it may exceed it!

    “Many mining companies have investments in more than one commodity”
    Yep, and you want them to have some Nickel when the gold price drops and nickel takes off, etc. Their diversity provides an inbuilt hedge.

    “…you have the management and operational risk associated with any company.”
    Yes, and the management benefits. Kerry Harmanis, the MD of Jubillee took shareholders from 20c to $23 per share. The company value far outperformed the commodity value in that time – good management can add value to your gold aspirations.

    Mark Thompson
    Managing Director
    Talga Gold Ltd

    1. Nice points Mark about the potential upsides. They are obviously what attracts people to the “speculative” end of the market where a potential very large gain comes with higher volatility and a higher chance of loss.

      Perhaps I should come around and have coffee with you and your management team to learn more. 🙂

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