FM34 - Did you Know you could Invest in Gold?

Gold has a long history of being an inflation-proof investment. During times of low or negative real interest rates when significant inflation is present & interest rates are relatively low investors seek the haven of gold to protect their capital.

You can invest in gold by owning the physical metal or through a stake in an investment that should move in line with the price of gold, for example, through spread-betting, derivatives or shares in gold-mining companies.

Krugerrands (1oz gold bullion coins) are a cost-effective way for small investors to buy gold. Buying a gold bar can be cheaper than buying the same weight of gold coin, but it can be hard to sell bars. Also, you cannot sell a part of a gold bar – it is all or nothing. However, for private investors, storing gold can be a security headache.

It can be more convenient to look at investing in gold-mining companies, but unlike gold bullion, which is regarded as a safe haven asset, gold shares are regarded as high-risk & extremely volatile. Mutual funds are probably the safest way to gain exposure to gold shares. These funds invest in many different mining companies, thus diversifying the risk. One of the best known gold-mining mutual funds is Merrill Lynch’s Gold & General Fund. Gold exchange-traded funds are traded like shares on the major stock exchanges, including London, New York & Sydney.