Analysts at UBS predict that the price of gold could rise significantly, up to $2,300 per ounce. If you love the idea of investing in gold but don’t know the best way, then you’re not alone. These are some of the ways to get exposure to the likely rise in the price of gold without having to buy gold bars themselves, which are difficult to store and don’t pay dividends.
The trust with big holdings in gold majors
One way is through the Scottish Investment Trust (LSE: SCIN). Its top three holdings are all gold miners. These are Newmont, Barrick Gold and Newcrest Mining. The former is the world’s largest gold miner and has recently exceeded analyst expectations with its results that were massively up. This was due to the higher gold price. Barrick and Newcrest are also major players, so the Scottish Investment Trust gives you an investor a stake in some very cash generative, profitable miners.
Another upside is, of course, that as a trust, it’s not just miners you get exposure to. It invests in other good companies on a global basis, some of which are large FTSE 100 names like Tesco and BT. Therefore, investing in it is (in my view) less risky, but it’s also slightly less tied to the price of gold.
Tracking the commodity price
If you want to be more in sync with the rising price of gold, then a gold ETF, or ETC, might be a preferable investment. These will track the price of the commodity and the charges are often very cheap, which is a benefit. There are many to pick from but examples include Invesco Physical Gold ETC and iShares MSCI Global Gold Miners ETF.
I’d suggest only buying gold using this method if you are very confident of a rising gold price. It doesn’t offer any diversification as a method for gaining exposure to the gold price. Historically, like most commodities, the price has tended to fluctuate. In the short term though, if analyst predictions are right (which is a big ‘if’) then this could be a good way of directly tracking the price of gold.
Investing in gold diggers
If you prefer to own an individual miner then I’d suggest looking at Centamin (LSE: CEY) or Greatland Gold (LSE: GGP). The former is a FTSE 250 miner with its main asset being in Egypt. It mines about 480,000 oz of gold. The shares have become much more expensive versus their historic figures, as a result of more investors wanting to own gold miners.
Greatland Gold is an AIM company. The business has been listed since 2006 but its mining is in Australia. It has relationships with big players such as Newmont, which could become very valuable in the future. Its projects are mainly early stage and so this is a more speculative way to invest in gold, in my opinion.
Investing in gold isn’t easy, but I believe these are some of the best ways to do it.
Andy Ross owns shares in the Scottish Investment Trust. 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.