Gold has performed very well in recent years; people feel safe with it, and you can buy it in different forms such as gold bars, jewellery, sovereigns or coins. Be warned, however, that initial dealing costs are high – sometimes 5% or even higher every time you buy or sell. There’s no annual charge to hold the gold after that, but you will have to keep it somewhere safe, which could cost you.

Actually, you don’t have to buy actual physical gold. There are various ways that you can invest in gold – some of them where you never even see it!

1. Bullion

Small bars and bullion coins can be bought from dealers, such as Spink, at about 5 per cent above metal value and sold back at the same rate below value. Dealers tighten margins (i.e. make it cheaper) for customers who buy or sell in bulk.

2. Collectable coins (antique ones, as opposed to standard ones)

Gold coins with a value above their bullion content are an interesting option, but not one recommended by Spink. It says that the market is notoriously difficult for non-collectors to second guess. If you do decide to buy, rare coins in excellent condition are the safest.

3. Jewellery

Jewellery has the advantage of being both decorative and wearable. Also, it’s easy to get – you just walk into a shop. However, bog-standard new items come with a mark-up of as much as 300 per cent on the gold price. Collectible items, either vintage examples or new pieces from top designers, have greater investment potential and a value well above bullion, but they are a speculative punt, dependent on volatile market trends. Like most investments, in order to get a good price, you need to research this market, find out where the best deals are and go there.

4. Exchange-traded funds (ETFs)

Gold ETFs track the gold price and offer the easiest way to gain exposure to pure gold as a commodity. ETFs are listed on the stock market, like shares, and can be bought through a stockbroker, held tax free in an Isa and incur much smaller fees than managed funds. (See this article for more information on ETFs).

5. Mining shares

Shares in gold-mining companies provide geared gains over the metal price. This is where a rise or fall in the gold price translates into a greater rise or fall in the share price. Several funds invest heavily in the sector, notably the Black Rock Merrill Lynch Gold and General Fund. This has delivered a return of 2,026 per cent since its launch in 1988.

6. Gold futures

These are high-risk investments available from stockbrokers. A futures contract is a tradable promise to buy or sell at a set price on a future date. Investors put down a deposit of only 10 per cent, so they can buy 100oz of gold – the size of a futures contract – for the price of 10oz. Huge profits, and losses, can be made. I wouldn’t bother with this unless you’re a really, really, really experienced investor!

7. An online option

BullionVault.com offers the chance to buy and sell shares of gold bars held in secure vaults in Zurich, London and New York. The metal is held in your name. Transaction costs are nice and low, as are the charges for storage and insurance costs. New users can sign up for a free gram of gold to get a feel for the site.

So…there’s a few ideas. Let me know if you’ve tried any!

One Response to “Invest in gold?”

1. Rob Farrington says:

   April 8, 2009 at 3:29 am

   I’ve been buying silver for a while now (including a ten ounce silver medallion that could potentially be used frisbee-style as a lethal weapon).

   I’ve been considering investing in gold for some time, but I’ve been overwhelmed by the sheer number of options and suffering from a bit of information overload (the specialist financial jargon doesn’t help), so thanks for this clearly written article!

   Reply