Gold Investing Hub
In times of economic uncertainty, gold can add stability and diversification to an investment portfolio.
To date, the World Gold Council (WGC) estimates that gold has been mined in quantities that would fit into a 21-meter cube. About 90% of the world’s gold has been mined since the 1850s California Gold Rush. During the last decade, half of the gold mined was turned into jewelry, according to the World Gold Council.
Approximately a quarter of the gold was used as gold bars and coins, and the remainder was used as gold reserves and investments.
In addition to bullion bars and coins, the Royal Mint produces all the gold currency in the UK.
The weight of gold is what determines its value. Over 8,000 tonnes of gold are held by the US, making it the world’s largest gold reserve. The WGC estimates that this is 4% of the 187,200 tonnes of gold mined to date.
The UK holds 310 tonnes of gold inside the Bank of England’s vaults, after selling off 400 tonnes between 1999 and 2002 when gold prices were at a 20-year low.
The method of investing in gold depends on whether you wish to do so directly – in the gold itself – or indirectly.
Direct gold purchase
A gold’s carat value is determined by its proportion of gold to other metals, with higher carat numbers indicating more gold. Pure gold is 24 carats.
Banks and precious metal dealers sell gold bullion, coins, and jewelry.
People often associate gold investing with bullion bars locked in bank vaults. Depending on the weight, bars can be as small as one gram or as large as ten kilograms. Gold bars are stamped with their purity level and weight.
Royal Mint gold coins include the Britannia and Sovereign.
Insurance and storage fees should also be considered. There are a number of secure storage options available, including vaults and safety deposit boxes at banks.
Investing in gold and commodity funds
An investment firm manages a pool of money from multiple investors to create one large fund on behalf of all its investors.
There are two main types of funds: active and passive. Active funds are managed according to a specific investment mandate, while passive funds are based on investment indices or markets.
You can gain exposure to gold through commodity, mining and exchange-traded funds (ETFs), without the inconveniences of trading gold physically:
Gold mining fund investments include BlackRock Gold and General, Ninety One Global Gold, and LF Ruffer Gold, although they invest primarily in mining companies rather than gold itself. These funds have performed strongly in recent years.
Investing in gold mining companies
Shares of companies that mine, refine, and trade gold can also be used to invest indirectly in gold. Although mining company shares are correlated with gold prices, their share prices are also influenced by other fundamentals such as profitability, geopolitical risk, and environmental concerns.
The following are some of the largest gold mining companies in the world:
With mines in 13 countries, Barrick Gold Corporation is a major gold and copper producer headquartered in Toronto.
The Newmont Corporation mines gold, copper, silver, zinc, and lead in addition to gold. With mines in Africa, Australia, North and South America, and the US, the company is headquartered in the US..
In nine countries, AngloGold Ashanti produces gold, silver, and copper.
London Stock Exchange mining companies also mine gold and other precious metals. Glencore, BHP Group, and Rio Tinto are among them.
In addition to capital growth, investing in a mining company can provide dividend income and capital growth. Dividends are cash payments made to shareholders once or twice a year.
In the modern economy, gold is important because it has successfully preserved wealth for thousands of years. Currency that is denominated in paper, however, cannot be said the same.
Gold bullion is pure gold (99.5% to 99.9%) formed into bars or ingots, usually rectangular shapes for easier storage. Gold bullion is often stored in vaults by central banks as a reserve asset. Investors can directly track the price of gold through gold bullion.
In addition to purchasing a gold bar or ingot, investors must also pay for storage and insurance. Additionally, gold bullion is not a very liquid investment.
As a currency, gold coins have a long history. Investors still value gold coins as a store of value even though they aren’t legal tender anymore. Gold coins can have performance problems due to the costs involved in buying, storing, and insuring them.
Companies that explore and mine for gold are included in gold stocks. Companies that stream gold and pay royalties are also included in this category.
Over time, inflation reduces a currency’s ‘real’ value. The value of £10 today is lower than it was 30 years ago. A gold investment could help you protect your wealth from inflation.
Gold may be viewed as a real physical asset that holds its value during periods of high inflation, such as those currently experienced by economies around the world. In theory, increased demand for gold during inflationary periods can result in gold price increases, which is why gold is considered a good hedge against inflation.
According to the Office for National Statistics, annual inflation in the UK has averaged 3% over the last 20 years. According to the World Gold Council, gold’s price has increased by 10% on average every year over the same period.
By adjusting for inflation of 3%, gold’s ‘real’ value has increased on average by 7% per year.
Because the supply of gold is limited, the price of gold fluctuates greatly according to demand.