- The gold price has been on the rise lately
- Many investors are looking to gold to diversify their portfolios
- Here are 3 ways you can get exposure to the yellow metal
Once again, gold has been a hot topic for ASX investors. The precious metal has seen renewed interest over the past few weeks as inflation concerns and geopolitical tensions have pushed up its price. Just over a month ago, gold was at a multi-month low, under US$1,780 an ounce. But the past week has seen the yellow metal spike in value. Today, it’s sitting at US$1,843 an ounce (a 2-month high), having risen from roughly US$1,816 over just the past few days.
Usually when gold goes up in price, it reflects economic or geopolitical concerns in the broader global economy. And indeed, we have recently seen tensions between the United States and Russia over the situation in Ukraine escalate dramatically. We have also seen some very elevated inflation metrics coming out of the US economy in particular.
So with all of these factors swirling around, it’s not hard to see why investors are again taking a second look at gold. But how does one invest in gold here in Australia? Here are 3 ways you can do it
3 ways ASX investors can invest in gold
Buy physical bullion
The most direct route to owning gold is by buying the physical metal itself. There are many bullion dealers across the country one can visit or contact to buy the precious metal from directly. Many investors prefer this method as it is the only way to completely own gold as an asset. There are some drawbacks though, such as the risk of theft, insurance and cost of storage.
Use an ASX ETF
Investors can also use the exchange-traded fund (ETF) structure to invest in gold indirectly. There are a few ETFs on the ASX that represent ownership of gold bullion. Perth Mint Gold (ASX: PMGOLD) is one. The ETFS Physical Gold ETF (ASX: GOLD) is another. Some investors like investing in gold this way as you don’t have to worry about storage or theft.
Additionally, buying and selling units of an ETF is arguably a lot easier than buying or selling physical bullion. But for investors who like to hold their gold, as it were, an ETF might just not cut it. There are also fees to consider. For instance, Perth Mint Gold charges an annual fee of 0.15% per annum. EFs Physical Gold ETF charges 0.4% per annum.
Buy a gold miner
Buying gold miners is another way to indirectly invest in gold. The ASX is home to more than a few too, the largest of which being Newcrest Mining Ltd (ASX: NCM) and Northern Star Resources Ltd (ASX: NST).
A gold miner may be a company, but most ASX 200 gold miners own mines that contain gold, and by extension, the gold itself. A miner also can pay a dividend, which is one of the few ways to extract a yield from owning gold. Investing in gold this way can also be viewed as a ‘leveraged’ bet. Miners’ costs are relatively stable, so any increase in the price of gold can result in an exponential increase in profitability (although this can cut both ways too).
But this is perhaps the riskiest way to invest in gold. Miners can go broke, or can destroy capital if the gold price sinks to a level that the mine can’t operate profitably at. There’s also longevity to consider. Mines run out eventually, and the company will need to find a new source of gold to remain viable.
Investing in gold is not as straightforward as you might think. Investors who want to walk down the yellow brick road, as it were, need to weigh up the pros and cons of these different methods of investing in gold and see what works for them.