Best way to invest in GOLD

edchalk

Hi,

I've decided to invest roughly £10k in either platinum or gold. Can anybody tell me the quickest and most cost efficient way of doing this ??

many thanks

neilp

I would make two initial suggestions.

1. Gold can be bought at http://www.bullionvault.com/, and stored in their vaults. I have never used this, but the service has been recommended to me.

2. Their are funds that trade in gold, and natural resources. Two of the best known are BlackRock Merrill Lynch Gold & General and JPMorgan Natural Resources. I have invested in both. The first in particular seems like a strong long-term investment (it invests in gold directly, and also companies that mine and deal in gold), though they can be very volatile. If you go down this path, I would recommend investing through a fund supermarket. This will be cheaper than investing with the fund manager directly (there is an article on this site that explains this). I use Hargreaves Lansdown, which provides an excellent and very good value service. However, there are other comparable asset managers, so it could be worth shopping around.

beingjdc

ETF would be one way as long as you trust them, and unless you physically want to buy some.

http://en.wikipedia.org/wiki/Gold_exchange-traded_fund

Out of interest, platinum and gold aren't a bad part of any portfolio, but what's the basis on which you've discounted silver?

http://en.wikipedia.org/wiki/Methods_of_investing_in_gold

[Deleted User]

I would invest more then 1/5th of what you have in precious metals and even then your probably looking at holding 20 years plus to get marked returns. A good fund investing in mining shares is a better bet in the shorter term 5 yearsish.

Leave the speculating to the speculators.

If on the other hand you have a 200k portfolio of investments, 10K in ETFs might not be so bad.

edchalk

Thanks for all of your replies - does anybody have any experience of using Goldmoney.com ??? It looks like a relatively quick and efficient service but i'm not sure I understand their fee structure.

Out of interest, platinum and gold aren't a bad part of any portfolio, but what's the basis on which you've discounted silver?

No reason really - It looks like Silver's probably easier to trade than Platinum so i'll probably end up splitting my investment 50/50

Leave the speculating to the speculators

I quite enjoy speculating so I think its worth a punt !

beingjdc

Yant1 wrote: »

I would invest more then 1/5th of what you have in precious metals and even then your probably looking at holding 20 years plus to get marked returns. A good fund investing in mining shares is a better bet in the shorter term 5 yearsish.

Leave the speculating to the speculators.

If on the other hand you have a 200k portfolio of investments, 10K in ETFs might not be so bad.

I'm not a financial adviser, but I'd say the last thing you want to do is stay invested in something with no yield for that long - buying non-industrial metals is first and foremost a defensive play against stagflation. Holding them through an economic cycle is unlikely to bring you much more than inflation, as a return.

I hold some mining shares, the problem there is that those which mine, say, copper and tin, will suffer from the downturn. In addition, new gold is getting harder to find, so between that and futures prices, they won't necessarily produce the returns you'd expect just from the price of the yellow stuff.

Aegis

neilp wrote: »

2. Their are funds that trade in gold, and natural resources. Two of the best known are BlackRock Merrill Lynch Gold & General and JPMorgan Natural Resources. I have invested in both. The first in particular seems like a strong long-term investment (it invests in gold directly, and also companies that mine and deal in gold), though they can be very volatile. If you go down this path, I would recommend investing through a fund supermarket. This will be cheaper than investing with the fund manager directly (there is an article on this site that explains this). I use Hargreaves Lansdown, which provides an excellent and very good value service. However, there are other comparable asset managers, so it could be worth shopping around.

Good advice for the most part, but do remember that those funds aren't investing directly in the commodity but instead invest in gold/resource producing companies. The trend should ideally be that when the commodity goes up in value the producers go up too, but it's obviously not that simple.

luckylizard

for pure speculation i'd use H-L to buy a gold ETC from ETF Securities. alternatively, use the Merrill Lynch Gold and General fund (though as has been said, this invests in mining companies rather than the metal itself). the ETC has lower management costs.

will be interesting see if Gold holds up in the current climate. good luck!

jon3001

I second use of ETFs for direct easy exposure to the spot price. If you go with ETF Securities then buy the 'Physical Metal' (PM) types rather than the ones backed by futures contracts. They PM ETFs are backed by precious metal which is allocated to the fund.

http://www.etfsecurities.com/

An allocation of 2.5-5% precious metals can be a useful diversifier in a portfolio since it's uncorrelated with other assets. And when other asset classes are declining it can even go negatively correlated therefore boosting your portfolio when you need it most.

Be sure to rebalance annually to lock in gains and buy in undervalued markets.

Any more than that that and really you're speculating. For the long run you want most of your portfolio allocated to assets that have strong positive real returns. As I said in another thread (where I seemed to get bogged down in semantics) AFAIK the long-term real return on gold is zero. By which I mean you maintain your merely purchasing power in inflation adjusted terms. However there's no guarantee of that and it may well underperform relative to inflation during your lifetime.

Personally I own a silver ETF right now (PHAG) as silver seems cheap relative to gold. From what I've read silver can outperform gold during bull markets because the inventories are so much smaller. And silver also has industrial demand. If the so-called Gold:Silver ratio drops below 40 then I'll probably switch to ETF Securities diversified PM basket to lock in some of the gain.

Silver's much more volatile though and maybe this line of reasoning isn't so simple:
http://www.zealllc.com/2007/silvlag.htm

TDS_2

I use goldmoney.com for gold and silver. It's pretty good.

I'm no expert, but...

I've read a lot of articles saying that buying actual gold rather than a fund etc is better, tho I can't remember what the arguments - I guess there are benefits to both.

Bear in mind that precious metals are very volatile. Also, gold has risen a lot recently - how much farther can it go?

10% seems to be a common figure for gold exposure within portfolios...

Good luck!

Jonbvn

Good article in the Telegraph about Merrill's Gold & General Fund.

http://www.telegraph.co.uk/money/main.jhtml;jsessionid=4DFO0T5QLS3RXQFIQMGSFFWAVCBQWIV0?xml=/money/2008/01/22/cmgold122.xml