When you think of gold, you might picture glimmering jewellery, hidden treasure or Olympic medals. But for many, gold represents a valuable investment, particularly during times of uncertainty.
As a “safe haven” asset, gold has often retained value over time, many investors choose to hold some gold in their portfolios as a diversification tool. But with so many ways to buy or trade gold in the UK, how do beginners start and is it even worth it?
Gone are the days when you’d have to head out west to the gold mines of San Fransisco to get your hands on this precious metal. With today’s technology, you can start your own gold rush from your living room if you like.
Here are some of the most popular ways to trade gold or invest in gold if you’re in the UK:
This is the old school way to invest your money in gold. Owning physical gold has been popular with savers, investors, central banks, governments – and everything in between.
You can still use trusted online platforms to invest in things like gold coins, gold bars or gold bullion – and get it delivered right to your door. If you like, you can even invest in physical gold by buying yourself some bling, by which we mean gold jewellery.
Buying physical gold means that you’ve got complete and total control and ownership over the asset. However, that physical ownership also comes with some questions like how will you store your gold? How would you move it around? And, how would you eventually sell it?
Other fees may apply. Your capital is at risk.
In the modern age, with global markets at your fingertips, gold ETFs have become an increasingly popular choice for investors looking for a fast, cheap and convenient way to invest in gold.
Using a gold ETF or gold ETC is an alternative way to own physical gold without having to manage, store or insure it yourself. With some investment apps you can buy or sell gold ETFs and ETCs paying no (or low) commissions. However, there will usually be a small ongoing percentage fee to hold an ETF investment.
It’s also important to check whether it’s an investment that purchases physical gold or one that invests in a basket of gold-related stocks. If you want to make sure you’re just investing in the underlying gold, it might be better to use a gold ETC.
A gold ETC trades exactly the same way as an ETF does on a stock exchange. A useful long-term benefit of gold ETFs and gold ETCs is that you can hold them in tax-efficient accounts like a stocks and shares ISA or self-invested personal pension (SIPP) and pay no tax if your gold investment rises.
| Gold ETC/ETF | Ticker | YTD performance (to 18 November 2024) | Link to invest |
|---|---|---|---|
| Invesco Physical Gold A | SGLD | 24.80% | InvestInvestCapital at risk |
| iShares Physical Gold ETC | SGLN | 24.65% | InvestInvestCapital at risk |
| Xtrackers IE Physical Gold ETC Securities | XGDU | 24.66% | InvestInvestCapital at risk |
| Amundi Physical Gold ETC GBP | GLDA | 24.67% | InvestInvestCapital at risk |
| WisdomTree Physical Gold | PHGP | 24.50% | InvestInvestCapital at risk |
| WisdomTree Physical Swiss Gold | SGBX | 24.77% | InvestInvestCapital at risk |
| Gold Bullion Securities | GBSS | 24.50% | InvestInvestCapital at risk |
| WisdomTree Core Physical Gold | WGLD | 25.11% | InvestInvestCapital at risk |
| HANetf The Royal Mint Responsibly Sourced Physical Gold ETC | RMAU | 23.70% | InvestInvestCapital at risk |
| Xtracker Physical Gold ETC | XGLD | 24.66% | InvestInvestCapital at risk |
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.
One of the most popular alternative ways to invest in gold is with gold mining stocks. This type of investment has some unique advantages because the share price of gold mining stocks isn’t based on the price of gold alone. So it is possible that investments can outpace the spot price of gold, and these companies can generate dividend income.
Like with gold ETFs, you’re also able to hold some of these stocks in accounts like ISAs and SIPPs. If you want to go prospecting for real high-risk, high-reward gold mining stocks, there’s even sub-sectors like junior gold mining stocks where you can invest in miners that may not have struck gold just yet and your investment performance will rely on the miner’s success or failure.
If you’d rather opt for the big dogs of the gold mining industry, here in the UK a number of top miners are listed on the London Stock Exchange (LSE) and are even members of the esteemed FTSE 100 index. This includes the likes of Glencore (GLEN), Rio Tinto (RIO) and Fresnillo (FRES).
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.
If you’d like to trade gold based on the spot price (rather than invest and hold gold for the long-term), one of the best strategies is to use derivatives like contracts for difference (CFDs).
The major benefits of trading gold CFDs are that you have the ability to go long or short on gold. So, you can make money if gold goes up or down in value. You can even make money from the volatility of gold if it happens to trade sideways for long periods (something that’s happened a lot in the past). The other key upside is that trading gold CFDs can be a tax-efficient way to make a profit (if you’re successful).
Using leverage for trading gold CFDs is something that can be both a benefit or a drawback. Trading with leverage basically involves borrowing money from your broker to open bigger gold trades. This means you could maximise your profit with a successful trade, but it also means you can maximise and multiply your losses if your trade doesn’t pan out (excuse the pun).
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.
If you’re a beginner investor, you should try and keep things simple if you want to invest in gold. Ideally, keep your costs low and invest in a way that you understand. How much you want to invest can also be a factor. If you’re a beginner looking at how to invest in gold with a little amount of money, this will narrow down your options.
First, think about how much money you want to invest in gold. Next, decide what method best suits your situation and profile. Understanding your own goals and long-term portfolio ambitions will help you find the right method of investing in gold. Some investors will prefer a stock-based or ETF approach, while others might prefer to look at physical gold.
Typically, gold stocks and ETFs can be cheaper, easier to store (digital), and simple to buy or sell – you can do it online using your trading platform. Buying something like physical gold sometimes requires a larger minimum investment and you also need to think about how you’ll store it and how you’d plan on selling it. Selling shares is much easier than selling physical gold.
If you want to know about the benefits, this depends slightly on what you’re buying. For example, are you investing in gold coins or bars, or are you investing in a gold stock or ETF?
Whatever way you decide to invest in gold, here are some broad advantages linked to gold investments:
Depending on the type of gold investment you’re using, some of the key disadvantages of investing in gold include:
If you’re considering investing in gold and silver, they share a lot of similarities in terms of advantages and disadvantages. It’s usually gold that takes priority, but silver can be useful too. However, whether you choose to invest in gold or silver will depend on your goals and appetite for risk.
The gold market is more mature than the silver market. This means that the price of silver can be even more volatile, but it also means there can be the possibility of larger profits with silver due to growth potential. That being said, silver is less liquid than gold, so it can be harder to sell.
If you’re thinking of buying physical silver, bear in mind that silver is cheaper and bulkier. So, you’d need more storage space for a silver investment compared to a gold investment which could mean increased costs for you.
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.
There are plenty of reasons why investors view gold as a safe haven, for example:
However, these reasons do not guarantee that gold will continue to be perceived 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 – not just supply and demand.
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.
"The price of gold has been on a decent run so far in 2024, managing to hit new all-time highs and making plenty of ‘gold bugs’ gleam with pleasure. However, stock markets in the US and the UK have also been breaking records.
There have been long periods where the gold price has been in the doldrums for years (or even decades). The price is high right now – but in the infamous words of Bruce Forsyth – it’s hard to say if the price is right. We could see the gold price continue to rise as the world still digests all the inflation from recent years, but then again, this could be the top for gold."
If you’re wondering whether investing in gold is a good idea, well, it depends. Gold has proven to be a solid investment over long periods, holding value or increasing in value. However, the price of gold has also barely moved for long periods of time, so you need to think about the opportunity cost if you invest in gold during a flat period – which is impossible to predict.
It also makes a difference which method you choose for investing in gold as each has some pretty unique advantages and disadvantages. For example, using a gold ETF can be useful to provide some diversity and tax benefits if you hold it in a stocks and shares ISA (or other tax-efficient account), but these investments have ongoing costs you pay regardless of whether the price of gold goes up.
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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