Why invest in gold?

[Deleted User]

You don't get any dividends from it, no compound interest. The only I reason I can see to invest in it is if you're gambling that the price of gold will go up, or that anything else you could keep your money in will go down. Looks higher risk than investing in a tracker fund to me.

Brie

I was working at an investment firm in the late 70s when gold prices were heading sky high.  Some people made money.  The investment firm certainly did.  And some people did the usual and got on the bandwagon much too late and lost a lot of money.  One colleague I know had even taken a second mortgage on their house to buy in to the frenzy.  Bad move.

I like the idea of a couple of gold coins (& certainly gold jewelry!!) but would not be buying bars of gold or certificates.

Albermarle

Many like to have a diversified portfolio, not just shares and bonds. Things like Gold and property can move in different ways . In theory at least having them as a smaller part of a portfolio can reduce volatility.

Ocelot

[Deleted User] said:

You don't get any dividends from it, no compound interest. The only I reason I can see to invest in it is if you're gambling that the price of gold will go up, or that anything else you could keep your money in will go down. Looks higher risk than investing in a tracker fund to me.

That is the only real reason in investing in it - ie hoping that the price will increase.

Bear in mind you won't get the spot price if you sell.

Some people invest in it if they think inflation is too high, or if they think their country's currency is about to collapse.

Albermarle

Bear in mind you won't get the spot price if you sell.

That only matters if you actually buy and sell the physical gold itself.

It is easier just to buy an ETF that tracks the gold price and you can hold that in your SIPP, ISA etc along with your other investments.

Cheaper than storing and insuring the gold as well. Annual charges are only around 0.2%

Steve182

For a person who is bullish on gold an investment in gold miners instead of actual gold may be worth considering. Investing in an established miner you can normally expect dividends, and hope for capital appreciation resulting from an increase in share price, levered by a rising gold price, if or when it occurs.

However, gold mining companies have been out of favour with investors for quite some time, which is reflected in current share prices. Some might view this as a buying opportunity with shares in solid, profitable companies available at very low P/E ratios. A gold miners ETF is an option for those interested in investing in gold miners but who are uncomfortable with doing their own stock picking. https://www.hl.co.uk/shares/shares-search-results/v/vaneck-vectors-junior-gold-miners-ucits-etf

As always, do your own research.

masonic

Fair comment, but gold can be useful if you want to dampen down the volatility of your investment portfolio, as it tends to be inversely correlated with equity returns. Holding 5-10% gold exposure can be reasonable, although use of a broader commodity fund may be more appropriate. For those who are comfortable with risk, sticking to a tracker fund is most likely to deliver the highest returns in the long term.