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How to invest in gold
On this page, we explain everything you need to know about gold. We explain where you can invest in it, the different ways to invest, explore the dynamics behind the gold market and explain why gold may be the right investment for you.
Where can I invest in gold online?
If you want to invest in gold securities – which are tradable financial assets related to the gold market – you need to sign up to an online stockbroker. Below, we have listed some of our top picks, and you can click on one of them to sign up and get started. Otherwise, keep reading t learn more about gold investing.
Why invest in gold?
There are a wide variety of reasons why an individual may invest in gold. More broadly, commodity investing is frequented by individuals with an interest in natural resources, geopolitics, and industrial macro stories. Gold is perhaps the easiest to understand commodity with simple and robust demand drivers, and we have outlined some of the key reasons for its popularity below.
- Hedge against inflation. Inflation is when money loses its value over time as the cost of living increases, and administrative strategies like quantitative easing can exacerbate this. However, the price of gold tends to increase in proportion to the amount of inflation, so owning gold can help you avoid negative consequences.
- Store of value. Like decentralised cryptocurrencies, owning gold allows you to take total control of your investments by keeping them out of the banking system and away from government control. If you want to store your capital safely without having to trust a clearing house, owning physical gold or gold-backed ETFs can be a good way to accomplish this.
- A robust macro story. Gold finds its demand in a multifaceted range of industries, including jewellery, technology, banking and speculative investment. This means the gold market can peak at different times, making it more lucrative. Gold demand hovers around 400t per year, making it the second most valuable commodity market behind crude oil.
How to invest in gold
Below, we have broken down each step you need to take to successfully invest in gold. Read on to familarise yourself with this simple process.
- Decide on an investment strategy. Before you start investing, it is crucial to have established a clear strategy. Fundamnetally, you must decide how hands-on you are willing to be with your investments and how much time you have available to commit to this process. In addition, you need to define the level of risk you are willing to face. These factors will allow you to start your investing journey on solid foundations.
- Do your research. You can’t expect to make money from an investment unless you are well educated on it. Performing good due diligence is crucial, regardless of the type of gold-related asset you are considering. Make sure you take your time and be thorough, because the more work you put in at this stage, the more likely your returns will be strong.
- Set a budget. Having discipline is key to investing success, and if you allow emotion to dictate your use of capital, losses can quickly accumulate. Setting a definitive budget provides the boundaries necessary to keep your investments on the straight and narrow.
- Choose between the long term and short term. If you want to invest passively, putting your money to one side and waiting for returns to compile, investing for the long term is likely best. However, if you are looking to invest actively, returns can be accelerated via short-term strategies like trading.
- Find an investment platform. Not all brokers offer tradable gold assets, so choosing one that does so is mandatory. In addition, you should look for a platform with a favourable fee structure and a good reputation. Click the button below for our analysts’ recommendations.
Ways to invest in gold
There are numerous ways to gain exposure to the price performance of gold. You need to base the options you choose on your own personal circumstances, including how much experience you have, what your budget is, and what timeframe you would like your investment to occupy. Check out the different gold investing routes below.
Invest in gold stocks
Gold stocks represent a portion of ownership in a publicly traded company that is involved in the gold industry. This can include mining, royalty and jewellery companies. Typically, the share price of gold stocks will correlate with the spot price of gold.
Invest in gold ETFs
There are two different types of gold ETFs you can invest in. A gold stocks ETF features a diversified basket of public gold companies, whereas a gold commodity ETF is a tradable fund that is backed by the value of securely stored physical gold. ETFs can often provide the easiest route for beginners to get involved.
Invest in gold mutual funds
If you don’t feel you have sufficient expertise to make your own investing decisions, mutual funds can make things much simpler. When you invest in a gold mutual fund, your capital is pooled with that of other investors and an experienced fund manager then buys and sells shares and physical gold according to their own know-how.
Invest in gold futures
Gold futures are a good way of speculating on short-term price action; however, it is crucial you have a working knowledge of the factors that affect the gold market before going down this route. Without experience and expertise, it can be extremely difficult to predict the future price of gold accurately.
Invest in physical gold
The simplest form of gold ownership is physical. You can purchase your very own gold bars, bullion and coins from a variety of sources – your only real limitation is storage logistics.
How does the gold market work?
First off, gold supply and demand plays a key role in how the market functions. Supply is driven by the mining industry, while demand is divided into four main categories that we have outlined below.
- Investment. Given its status as one of the world’s most well known commodities, gold finds well over 40% of its demand from investors, both retail and institutional.
- Jewelry. This is the second most significant demand driver for gold, with well over 30% of the material going towards things like wedding rings, bracelets and other luxury items.
- Central banks. Gold is often purchased to diversify a government’s monetary reserves, and an increase in purchasing in any given time period typically corresponds with a gold price uptick.
- Technology. An increasing amount of gold is used in the tech sector. For example, it plays a substantial role in certain LEDs around the world.
Around these demand drivers are other factors, including geopolitics, the value of various fiat currencies and the overall level of gold production. Right at the core of the gold market is wealth protection, so in difficult economic times, it is regarded as a safe haven for individuals to park their capital in.
When should you invest in gold?
Gold typically moves in 8-year bull and bear cycles, which combine into larger and more dynamic 40-year cycles. It is best to invest as the price of gold is rising, unless you want to be a contrarian, which carries additional risks. It is also best to put money into gold when economic unrest is on the horizon.
Is gold a good investment in 2022?
It largely depends on the health of the gold market, global economic conditions, the strength of the main demand drivers and the performance of gold relative to other assets, such as cryptocurrencies. Broadly, gold is a material with a robust and permanent base of demand that is rarely a bad investment in the long run.
What should I do now?
To learn more about gold, check out our guide on trading gold or scroll down for more lessons on commodities.
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Fact-checking & references
Our editors fact-check all content to ensure compliance with our strict editorial policy. The information in this article is supported by the following reliable sources.
Invezz is a place where people can find reliable, unbiased information about finance, trading, and investing – but we do not offer financial advice and users should always carry out their own research. The assets covered on this website, including stocks, cryptocurrencies, and commodities can be highly volatile and new investors often lose money. Success in the financial markets is not guaranteed, and users should never invest more than they can afford to lose. You should consider your own personal circumstances and take the time to explore all your options before making any investment. Read our risk disclaimer >