Most investors know gold has long been considered a safe-haven asset – particularly during economic times of uncertainty – and very few investment opportunities have stood the test of time the same way that gold has.
As of the time of this writing the gold price sits at US$2,012.90 per ounce, representing a 4.20 per cent increase over a one-year basis. Over the past five years, however, the price of the yellow metal has increased more than 56.60 per cent – which is undoubtedly an impressive feat but also indicative of volatile global and economic markets during that time period.
Although investing in physical gold might seem like the obvious choice, other ways to invest in gold include gold mining company stocks, exchange-traded funds (ETFs), gold mutual funds and, of course, physical gold.
How to invest in gold: stocks
Publicly traded gold companies in the mining sector that are actively exploring, developing and producing the metal is a popular option when it comes to investing in gold.
Owning gold stocks is essentially owning shares of a company involved in the process of recovering gold at different stages rather than investing in actual physical gold.
Of course, owning gold stocks has rewards and risks because companies in the space are also often impacted by the fluctuating price of the yellow metal. Case in point, pros of owning gold stocks include an increase in stock price and dividends, should a company issue them. Cons, however, include share price declines and potential exposure to other commodities and the impact those have on gold.
With that in mind, when it comes to investing in gold companies, investors should always do their due diligence and research, which can take some time and effort.
How to invest in gold: exchange-traded funds
An exchange-traded fund is a way for an investor to gain exposure into a market without directly investing in an actual company.
Rather, ETFs allow investors exposure to a range of securities – such as gold companies – with far fewer risks than investing in a single company.
When it comes to gold ETFs, investors have the opportunity to own a select amount of gold assets that further diversify their portfolios. In other words, gold ETFs offer a lot of liquidity and have plenty of upside potential, but runs the risk of underperforming gold.
In Canada, investors have the option of choosing from several gold ETFs, with the top three that provide exposure to gold mining companies including:
Because ETFs trade on a stock exchange, investors can invest in an ETF through their broker of choice, including through its website.
How to invest in gold: mutual funds
Similar to gold ETFs, gold mutual funds also hold gold-related assets, with the most common types of funds holding physical gold bullion, gold futures contracts and gold mining companies.
Gold funds are attractive because of their low risks as well as minimal investment and low costs associated. Gold mutual funds also differ from ETFs in that they are more flexible and open-ended in that they can invest directly or indirectly in gold assets.
Examples of gold mutual funds include:
- TD Precious Metals Fund F, which allows investors the opportunity to directly invest in gold, silver and platinum situated in Canada. The fund provides exposure to investments in deposit receipts and certificates evidencing such commodities, and the securities of Canadian and international issuers engaged in the exploration, mining and production of precious metals and stones.
- Mackenzie Gold Bullion Fund, which is a passively managed fund that offers investors liquid exposure to gold
- Sprott Gold Equity Fund, which invests roughly 80 per cent of its net assets in gold and other precious metals and securities of companies all around the world that are focused on mining or the processing of gold
Unlike ETFs, gold mutual funds are not traded on an exchange and are typically accessible through a commercial bank.
How to invest in gold: physical gold
Gold bullion is perhaps the most common way to invest in gold and is categorized as any pure or nearly pure form of gold that has been certified for its weight and purity. As such, gold bullion includes coins, bars and other physical forms of gold and will have a serial number attached for security purposes.
When it comes to other forms of physical gold, gold coins are also an option and can be purchased from private dealers.
In conclusion
There is no one-size-fits-all approach when it comes to investing in gold. With that in mind, whether you’re a new investor or a longtime, savvy investor, gold investment options exist at every level for every type of investor.
As always, however, investors should always practice their due diligence when making any investment decision and to practice extra caution during times of market volatility.
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