Gold is becoming increasingly more popular as an investment and prices continue to climb to new heights. With growing debt concerns across the globe, particularly in the United States, some investors are looking to invest in gold as a hedge against the next economic crisis.
As a value investor I will generally steer clear of any asset class that has reached a 52-week high, let alone one that is at an all-time high. However, with global currencies under severe pressure due to massive government deficits and interest rates remaining at record lows, investors may be wise to allocate a portion of their investment portfolio to gold.
If you are looking for information on how to invest in gold, there are a number of different options to choose from:
Invest in Gold Stocks
The Canadian landscape is rich in resources and gold mining companies make up a large portion of the TSX 60. By purchasing a Canadian equity index fund you are naturally exposing your investment portfolio to gold.
Investors can also purchase the shares of individual gold mining companies like Kinross (K), Barrick (ABX), and Goldcorp (G). All three of these gold mining stocks are rated strong buys from stock analysts. If the price of gold rises, it should be expected that the profits and stock price of these companies should rise along with it.
Invest in Gold Exchange-traded Funds
Exchange-traded Funds, or ETF’s, are bought and sold on the major stock markets just like common shares.
The Claymore Gold Bullion ETF (CGL) holds physical gold bullion and is designed to replicate the performance of the price of gold bullion.
Horizon BetaPro’s COMEX Gold ETF (HUG) looks for investment results with gold futures contracts, or paper gold. Any U.S. dollar gains or losses will be hedged back to Canadian dollars, which is important because it offers no protection for Canadian investors against a falling U.S. currency.
iShares CDN Gold Sector Index Fund (XGD) essentially tracks the S&P/TSX Global Gold Index. With management fees of 0.55%, XGD looks like a solid alternative to speculating on individual gold mining companies.
Invest in Gold Coins and Gold Bars
If you are wondering how to invest your money in physical gold bullion, investors can do so by purchasing gold coins or gold bars.
The Canadian Gold Maple Leaf produced by the Royal Mint is the official bullion gold coin of Canada. They produce a wide variety of 99.99% pure gold coins ranging from 1/20 to 1 ounce. In 2007, the Royal Mint produced the world’s first million dollar coin, which weighed 100 kilograms (3,215 troy ounces). Incredibly, the Mint has sold 5 of these coins to investors from around the world.
Gold bars are the most traditional way to invest in gold. They can be purchased in a variety of weights and sizes ranging from one gram to 400 troy ounces. In Canada investors can buy gold bars through ScotiaMocatta, the global bullion banking division of ScotiaBank.
Buying and selling gold is subject to an administration fee of 0.25% for any transaction under $5,000. Gold and other precious metals are exempt from GST and HST.
Is it the Right Time to Invest in Gold?
As you can see, there are a number of different ways for investors to buy gold. In a period of economic uncertainty, gold definitely has a place in any investors asset allocation mix. Your allocation of gold will vary depending on how optimistic or pessimistic you are on the global economy.
There are plenty of opinions on the future of investing in gold. The bears are sceptical and see a gold-bubble that’s about to burst while the bulls view gold as a safe haven and paint a doomsday scenario of collapsing economies and falling currencies.
Gold is an intriguing investment option to me, but I would only consider adding a small percentage to my investment portfolio. And given the record high gold prices that we are seeing, I’d prefer to sit on the sidelines and wait for a market correction.
Now that you know how to invest in gold, would you consider adding gold to your portfolio? Is this a good time to buy gold?