Top eight questions to ask before investing in gold
Investing in gold is a smart step toward diversifying your portfolio, but you might have a few questions before diving in. Here’s a handy guide to the most common queries:
1. What is the role of gold in a portfolio?
Gold serves as a key diversifier, often rising in value during market volatility, high inflation, or geopolitical uncertainty. It’s frequently described as ‘insurance’ for investors, helping maintain portfolio stability when other assets waver.
2. How is gold priced?
Gold prices are based on the ‘spot’ price, the market rate for immediate delivery of 1 troy ounce of gold (31.1grams). Retail prices, however, include a premium over the spot price to cover manufacturing and operational costs. Transparency is key subtracting the spot price from the retail price reveals this premium.
3. Is physical bullion the best option?
Physical bullion – coins or bars – is ideal for those seeking direct ownership and avoiding counterparty risk. Be sure to buy from reputable dealers to ensure product authenticity. For safe storage, consider a home safe, bank deposit box or professional depository service.
4. How else can investors buy gold?
Shares
Invest in gold mining companies for indirect exposure to gold prices. However, thorough research is vital to assess company stability and management.
Exchange Traded Products (ETPs)
Track gold prices through a trading account without physical storage. Evaluate product issuers and legal title policies before buying.
Gold accounts
Like savings accounts, gold accounts convert cash into gold holdings, fluctuating with the spot price. Confirm the provider holds enough underlying metal.
5. What does ‘allocate’ and ‘unallocated’ gold mean?
Allocated gold
Investment-grade bars, usually with unique serial numbers, held in a vault and legally owned by the investor.
Unallocated gold
Investors own a share in a pool of physical gold. Be wary of providers that offer ‘paper’ gold not backed by physical metal.
6. How easy is it to sell gold?
Gold is highly liquid, with daily turnovers exceeding USD 150 billion. Keep an eye on the ‘spread’ – the difference between your purchase price (spot + premium) and the buyer’s offer. Aim for dealers with tight spreads.
7. How much gold should investors own?
Global asset management firm Sprott suggests allocating around 10% of a portfolio toward gold for sustainable long-term gains. Your ideal allocation depends on your financial goals and circumstances.
8. Where can investors buy gold?
The Perth Mint offers trusted gold products, including coins, bars and one of Australia’s first gold ETPs. Owned by the Government of Western Australia, the Mint ensures quality and security through LBMA accreditation, legal tender status and secure vaults.
Invest in gold confidently with these insights in mind.
Start your journey today by opening a depository online account with The Perth Mint here.
DISCLAIMER
Past performance does not guarantee future results. The information in this article and the links provided are for general information only and should not be taken as constituting professional advice from The Perth Mint. The Perth Mint is not a financial adviser. You should consider seeking independent financial advice to check how the information in this article relates to your unique circumstances. All data, including prices, quotes, valuations and statistics included have been obtained from sources The Perth Mint deems to be reliable, but we do not guarantee their accuracy or completeness. The Perth Mint is not liable for any loss caused, whether due to negligence or otherwise, arising from the use of, or reliance on, the information provided directly or indirectly, by use of this article.
First published September 2022
