As the gold price hits all-time highs, investors are piling in for fear of missing out while others are selling their holdings to bank profits.
The price has surpassed $4,000 an ounce, having risen 46 per cent this year alone, and investment bank Goldman Sachs has forecast it could hit $4,900 by December next year.
However, buying at the top of the market is risky as there is no guarantee that the price will continue to rise – and if it falls it could do so precipitously.
If you do choose to hold gold, here are several options.
Buy physical gold
Bullion from The Royal Mint starts at about £125 for the smallest 1g bar. But many UK investors prefer to invest in coins because they are exempt from capital gains tax (CGT) due to their status as legal British currency.
In fact, all gold, silver and platinum bullion coins produced by The Royal Mint are classed as CGT-free investments.
Bright idea: Investing in physical gold can bring large returns, but is not regulated by the Financial Conduct Authority
There are plenty of other gold dealers too, and most will store and insure it for you at a cost.
But physical gold is not regulated by the Financial Conduct Authority. That means the protections offered by the Financial Ombudsman Service and Financial Services Compensation Scheme are not applicable, so tread carefully before buying and check reviews on websites such as Trustpilot. If you’re keeping gold at home, make sure you tell your home contents insurer. And buy a safe.
Buy on the stock exchange
Gold exchange-traded commodities (ETCs) can be bought and sold on the stock exchange, just like shares, but are backed by physical bullion held in secure vaults.
The Royal Mint Responsibly Sourced Physical Gold ETC (RMAU) is a popular option.
Investors looking at gold should also consider that it is priced in US dollars. While gold has rallied by about 45 per cent this year, the actual return in pounds is closer to 35 per cent, reflecting the relative decline in the value of the dollar.
Tom Bailey at investment provider HANetf recommends currency-hedged ETCs. He says: ‘A sterling-hedged gold ETC should deliver returns that more closely track the gold price, without being affected by currency swings.’
One to consider is the iShares Physical Gold GBP Hedged ETC.
Buy the miners
For much of the three-year rally in the gold price, gold miners have underperformed. But Bailey says: ‘There’s been a dramatic reversal. While gold itself has appreciated by over 40 per cent this year, some gold mining ETFs [exchange-traded funds] have produced returns of more than 100 per cent.’
You’d get gold exposure via a major multinational miner such as Glencore or Rio Tinto. But there are also specialised precious metals producers such as Fresnillo and Endeavour Mining listed on the London Stock Exchange.
A gold mining ETF will spread your risk among a few companies. Responsible investors might like the HANetf ICAV AuAg ESG Gold Mining UCITS ETF, which has a fee of 0.6 per cent.
Pick a fund
Really cautious investors could use a multi-asset fund that holds gold as part of the mix. For example, Ruffer Diversified Return has exposure to gold and miners as part of its defensive portfolio.
But if you hold a broad equity fund you may already have exposure to gold miners, so make sure you’re not duplicating by checking your fund’s factsheet.
- Are you buying or selling gold? money@mailonsunday.co.uk
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