The Motley Fool

How to invest in gold in the UK

The gold price has soared in recent months, and as a result, investors are excited about the precious metal again. This article looks at how to invest in gold in the UK. 

Physical gold

One of the most popular ways to invest in gold is to purchase physical gold itself, in the form of bullion bars or coins. You can buy gold this way through high street gold dealers and online dealers. If you decide to buy coins, it’s sensible to stick to the most popular coins such as the American Eagle, the Canadian Maple Leaf, and the Britannia. These coins are recognised all over the world and are easy to trade.

The main advantage of buying the physical asset is that you can take possession of your gold – it’s a tangible investment. However, on the downside, you’ll need to find a way to store it securely, and storage costs can add up. It’s also important to be aware that gold bullion is often sold at a premium to the spot price, meaning transaction costs can be high. 

Gold ETFs

Given the hassle of investing in physical gold, many people prefer to invest in the metal through exchange-traded funds (ETFs). These are securities that are listed on the stock market and are designed to track the price of gold. Today, there are a number of gold ETFs that are available to UK investors, including leveraged ETFs that amplify the returns of gold. You can invest in gold ETFs through a trading account, a Stocks & Shares ISA or a SIPP. 

The advantage of ETFs is that they offer a convenient and cost-effective way of investing in the precious metal. You don’t need to worry about finding a reputable dealer, you don’t need to worry about storage, and you don’t need to worry about large transaction costs. On the downside, you can’t take physical possession of your gold when investing through an ETF.

Gold stocks

Finally, investors can also gain exposure to gold by investing in mining companies. If the gold price rises, these companies generally see their share prices rise. In the UK, there are a number of listed gold mining companies including Antofagasta, Polymetal, and Centamin.

There are a few things to understand about investing in mining companies. Firstly, they can be highly volatile. Gold stocks tend to act as a leveraged play on the price of gold, so when it is moving higher, the stocks can generate fantastic returns. However, if the price falls, gold stocks can be hit hard.

Secondly, gold mining companies tend to have many moving parts. To be profitable, everything needs to go as planned. For example, lack of finance, broken equipment, staff strikes, and poor weather can all halt a company’s progress. This means that when you invest in the stocks, there is no guarantee that you will actually profit if the gold price rises.

All things considered, I think the best way to invest in gold is to own an ETF and perhaps a little bit of physical gold as well. An ETF will provide convenience and cost-effective exposure to the metal, while a little bit of bullion will provide you with a tangible investment that can be stored outside the financial system.

You Really Could Make A Million

Of course, picking the right shares and the strategy to be successful in the stock market isn't easy. But you can get ahead of the herd by reading the Motley Fool's FREE guide, “10 Steps To Making A Million In The Market”.

The Motley Fool's experts show how a seven-figure-sum stock portfolio is within the reach of many ordinary investors in this straightforward step-by-step guide.

Simply click here for your free copy.

Edward Sheldon has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.