Four ways to invest in gold

As gold (GC=F) spent the past week flirting with – and then hitting – new all-time highs, and there was a global uptick in online searches for "gold price", market commentators are speculating there could be more price rises to come.

As a disappointing US jobs report came in, the yellow metal's price surged once again on Friday, with futures contracts heading more than 1% higher to trade at the $3,650 mark.

With the excitement around commodities, mining stocks also got a boost, with the likes of Anglo American (AAL.L), Glencore (GLEN.L) and Fresnillo (FRES.L) lifting the FTSE 100.

As an investment, gold would have been a solid bet over the last year. Futures prices are more than 40% higher for the year-to-date outpacing gains for major indexes. Over the same period the S&P 500 (ES=F) is up less than 10%.

“This is looking like the third major bull run in gold since President Richard M. Nixon withdrew America from the gold standard on 15 August 1971 and, in the process, pulled the rug from under the Bretton Woods monetary system that had prevailed since the end of the Second World War," said Russ Mould, investment director at AJ Bell.

“Gold bugs will therefore argue that there could still be more to come, given how the advance in this third bull phase still pales compared to the previous two."

Experts have previously predicted that gold prices could climb even further. Analysts at Goldman Sachs expects the commodity to hit $4,000 next year.

"The outlook for the precious metal remains bullish, supported by expectations of Fed rate cuts, which are weighing on the dollar, and by heightened safe-haven demand fuelled by tariff uncertainty, concerns over political interference in the Federal Reserve, and lingering geopolitical turbulence," said Ricardo Evangelista, senior analyst at Activtrades.

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Investing in gold: Should you buy gold coins or bars?

Gold falls under the category of alternative investments, named after their nature as alternatives to traditional investment assets such as bonds and equities. These can be anything from art to property, hedge fund investments, gold, and gold funds, and even digital assets.

When we think about precious metals, the first image that comes to mind is probably a gold bar or coin.

If you take this route, you are investing in the physical metal. Gold coins are popular, but primarily for collectors, as you will pay a premium for the design you might not get back. However, some coins become more desirable for collectors over time, so this gambit could pay off.

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If you're not bothered by gold's aesthetic value, the straight way to go about it is to get a cast bar. A 500g bar will set you back £43,863 if you purchase it from the Royal Mint.

"While the number of large investors spending over £100,000 has increased, smaller investors remain the bulk of our sales. Many are opting for fractional purchases — such as half or quarter ounce gold Britannia coins — while the sale of Sovereigns continue to perform strongly at around £570 per coin, thanks to their capital gains tax-exempt status and low premiums,” Peter Walden, managing director of BullionByPost, said.

You can start smaller, with a 1g Britannia bar. Regardless of what you get, ensure that the purity is above 99.9% for coins and 99.95% for bars so that it is VAT-free.

A common misconception is that you will have to find somewhere safe in your house to store the gold.

Simon Popple, a gold expert, told Techreport.com: “Buying physical gold may seem more difficult than simply pressing buy on an investing app, but it’s simpler than you think. To start, you’ll need to set up an account with a gold bullion dealer. You should carry out your own due diligence with your financial adviser before selecting one.

“One of the biggest misconceptions about buying gold is people think you’ll have to take delivery of it. You don’t. You can often have it stored and insured with the dealer you bought it from, but check before you buy.”

Gold tracker funds

Aside from investing in physical gold through dealers, tracker funds can be a good option for exposure to the lustrous metal.

“[One] option is to pick an exchange-traded commodity (ETC), or gold tracker fund, as investors may not wish to go to the trouble of storing and insuring their own gold bars or coins or risk-taking physical delivery if they seek exposure via futures," said Mould.

“It is possible to track the gold price in dollars or sterling and do so via the physical metal or futures prices, according to investors’ preference.

"Options to research include iShares Physical Gold. It seeks to track the day-to-day movement of the price of gold, less its fees, by holding gold bullion. This provides investors with the exposure they seek without the need to take physical delivery or trade commodity futures contracts."

Managed funds for gold miners

Mould notes a set number of actively managed funds for investing in gold – that's where a professional money manager will seek to pick out the best-performing gold mining stocks and avoid any duds, to maximise returns from the industry.

"Investors will pay a fee for accessing this expertise. BlackRock Gold and General may be the best-known fund in this field and it has around £1.3 billion in assets under management," he added.

Key holdings include Newmont Corp, Barrick Mining, Agnico Eagle and Endeavour Mining.

“There are also a number of London Stock Exchange-quoted investment trusts which dedicate themselves to gold (and also silver and platinum and palladium) miners, while Personal Assets Trust carries an 11% weighting toward gold bullion as part of its remit to protect and increase value per share for its investors over the long term," he said.

Mining stocks

Mining stocks are next on the list for people wanting exposure to precious metals.

“Intrepid investors who do not wish to pay fees for funds can pick their own stocks and although this route could bring the highest returns if gold does well, it comes with the highest risks if gold retreats," said Mould. "There is also the danger that the mining stock goes down even if gold rises owing to company specific issues.

“After several takeovers, notably of Randgold Resources, Barrick Gold, Centamin, Shanta Gold, Condor Gold and Hummingbird Resources, the UK does not offer as much exposure as before.

"There is still one gold mining stock in the FTSE 100, Endeavour Mining, while Fresnillo produces gold even if silver is its main commodity. Resolute Mining has a London listing, to accompany the one it has in Australia, and AIM offers a selection of gold miners, of varying degrees of maturity, from mining licence-holders to prospectors to established producers."

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