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How To In Invest Gold

30.03.22

Gold has a long history as a hedge against inflation and a hedge against uncertainty. Currently, we have an excess of both, so it is not surprising prudent investors are opting to protect their wealth by purchasing gold.  

How do you ensure that you invest in gold in a way that affords you the protection you seek?

When investing in gold as a hedge against inflation and uncertainty it is important to consider each option under the following headings.  

  1. Premium – The cost over the gold content 
  1. Liquidity – Ease of buying and selling? 
  1. Proximity/Access – Taking possession of your gold? 

Gold Jewellery 

Premium 4/10 

Gold jewellery is a very popular investment in some parts of the world. However, in the UK most of the cost of a piece of jewellery is the craftsmanship involved in its production. Therefore, you are paying a very high price for the pure gold content.  

Liquidity 4/10 

While it is very easy to buy, reselling gold jewellery may see you accepting large discounts to what you originally paid.  

Proximity 10/10
Gold jewellery naturally scores very highly here - once you buy it you have it! 

Total Score 18/30 

Gold Mining Stocks  

Premium 1/10 

When purchasing gold mining stocks, you get exposure to a company that should benefit from the rise in the gold price, if effectively managed. However, you are not actually investing directly in gold. High inflation and uncertainty are not necessarily positive for gold mining stocks. 

Liquidity 10/10 

Major gold mining stocks that are traded on stock exchanges benefit from high levels of liquidity. They can be easily bought and sold. 

Proximity 0/10
As you are investing in a company that mines gold you have no claim on or access to that gold. Proximity to gold when buying gold mining stocks is basically non-existent.
Total 11/30 

Gold Futures  

Premium 9/10 

A gold future is a contract which entitles you to purchase gold at a certain price at a specific date in the future. These contracts trade very close to the price for an ounce of pure gold. 

Liquidity 9/10
Gold futures are highly liquid. 

Proximity 2/10 

While you own a contract for taking delivery of a quantity of gold, you don’t have possession of any gold until that contract is executed. Many contracts can also be cash settled so you may never be able to take delivery of any gold.
Total 20/30 

Gold ETFs  

Premium 8/10 

Gold ETFs (Exchange Traded Funds) trade close to the Net Asset Value of the fund, therefore the premium you pay above the gold price is very low. 

Liquidity 9/10 

Gold ETFs are traded on the major stock exchanges and are highly liquid.  

Proximity 1/10 

When you purchase an ETF, you own shares of a company that has a claim on gold holdings, you don’t have any direct claim on or ability to take delivery of that gold. 

Total 18/30 

Investment Grade Gold Bars or Coins 

Premiums 8/10 

When you buy gold coins or bars that are investment grade, you are purchasing gold with a minimum purity of 99.5%. These coins and bars normally trade at a small premium over their pure gold content. 

Liquidity 8/10 

The market for the most popular gold coins and bars is extremely liquid. They can be bought and sold through a global network of precious metals dealers with ease.
Proximity10/10 

You can easily take possession of your gold coins or bars or chose to have them stored on your behalf in high-security specialised precious metals vaults.  

Total 26/30 

https://www.goldcore.co.uk

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