While we would love you to invest all your gold with us, there are many ways to get exposure to gold. SCB has some tips in this article. Keep in mind though, that in any indirect investment e.g. investing in Gold ETFs, Gold Mining Companies, there is a risk that your investment will not exactly match the movement of gold. Owning physical bullion or bullion savings with Mercury Gold guarantees you will be matching bullion price movements exactly.
What are the different ways to invest in gold?
You can invest in gold via:
Purchasing physical gold
Gold-linked currency investments
Gold ETFs or unit trusts
Gold mining stocks
1. Purchasing physical gold
The most common way to invest in physical gold is to purchase gold bullion. Gold bullion refers to investment-grade gold, commonly in the form of bars, ingots, or coins.
Gold bars will have the manufacturer’s name, weight, and purity stamped on it. Gold bars typically range from 1/10 troy ounce (one troy ounce = 31.1 grams) to one kilogram.
Gold coins come in a wider range of shapes and sizes. However, do note that you may be paying extra for design elements, such as engravings or collector value. Some coins are also accepted as legal tender in their country of origin, such as UK gold sovereigns, but they are rarely convenient to use as actual currency.
Physical gold can be purchased from some banks or brokers. Always ensure you purchase gold from reputable sellers only. It is generally best to purchase gold bullion from trusted local sources, rather than online. Gold in Malaysia is TAX FREE
2. Gold as a Commodity-Linked Structured Investment
Coined Wall Street’s safe haven asset, gold is able to store its value in real terms amidst volatile Another way to invest in gold is to use gold currency investments. An example of this is to buy gold as a Commodity-Linked Structured Investment. Using this method, you decide with the bank or broker on the duration of the investment and a base currency – such as USD, SGD, and so on. You will need to agree on a Target Conversion Rate (TCR) to be applied between gold and the base currency. Gold is treated like a currency with a currency code of XAU.
3. Investing in gold ETFs or gold unit trusts
A gold Exchange Traded Fund (ETF) allows you to invest in gold, without having to buy the physical gold assets. It is a fund that holds a range of different gold-backed assets. Some gold ETFs simply track or mimic the price movements of physical gold, whereas others may include shares in gold miners, or various gold-backed derivatives. The underlying asset is what dictates the value of the ETF and will therefore be the determining factor for its performance.
4. Investing in gold mining stocks
You can invest in companies mining for gold, rather than investing in gold itself. In theory, the shares of gold mining companies should go up as gold prices rise, as this increases the value of the company’s gold inventory.
There’s also a chance that – with skilled management – miners are able to spend less to extract a greater amount of gold, although conversely, poor management can result in less gold being extracted at greater cost. As such, this is both a potential upside as well as a downside. A mining company’s management is also an added risk factor, and investors need to be wary of mismanagement. Related risk factors include the company’s gearing or debt, as well as environmental or legal policies that could impact its existing operations.