How to invest in gold: a beginner’s guide

Investors often see gold as a “safe haven” because it has held its value over long periods of time. When stock markets become volatile, the price of gold can rise as more people move their money into assets they think are more stable. That can make gold feel like a safer place to invest when people are looking for stability.

Gold can also help diversify a portfolio. Unlike paper currencies or shares, gold is a physical asset with a limited supply, making it a distinct investing tool alongside regular stocks, funds and bonds.

It also tends to respond differently to inflation, often keeping its purchasing power when the cost of living rises. 

One reason for this is that gold can’t be created or printed like money. When inflation means your money buys less, gold often rises in price to reflect that change. So the same amount of gold can continue to buy a similar amount of goods over time, helping it keep its real-world value.

Many people think of gold as a ‘diversifier’ for their portfolio and invest in it to reduce their exposure to risk in other kinds of investments like shares.

The price of gold doesn’t always rise. Sometimes it falls or stays flat, but its value often moves differently to other investments like shares or bonds.

This can make gold another tool investors might look to in order to diversify where they put their money.

There are a few different ways to invest in gold, each with their pros and cons.

Physical gold (coins and bars)

Buying physical gold means owning the actual metal yourself. But you’ll also need a place to keep it. This means you might have to pay for storage costs and insurance, though some gold traders will offer this when you buy gold. If you buy the metal itself, it's important to know that this isn't regulated, or covered by the FCA, FSCS or Financial Services Ombudsman. 

Gold ETFs and funds

If you want to invest in gold but don't want to deal with the physical metal, you can invest in exchange-traded products that are linked to its value. You'll often see these referred to as exchange-traded funds (ETFs), but physical gold products are commonly structured as exchange-traded commodities (ETCs).

These work like other ETFs you might invest in. They usually come with lower costs than physical gold, but might also come with trading charges and maintenance fees.

There are also mutual funds which invest in gold, providing another way to invest if you don't want to buy the metal itself.

Gold mining stocks

You can also indirectly invest in gold by buying shares in companies that mine for it. But this has the potential to be riskier since you’re buying shares in a company, and what these are worth can change depending on things like company performance and reputation, rather than just the value of gold.

While the idea of investing in gold can seem exciting, it’s important to remember a few things.

• Gold doesn’t pay any dividends or interest. While investments in mining companies could pay dividends, if you're investing in gold itself you won't receive an income from it like you could investing in shares, bonds or other savings.
• There might be extra fees. Buying gold can mean you have to pay extra costs for storage and insurance, while funds will likely have ongoing charges.
• Your tax obligations could change. When you sell any gold, you could be liable for Capital Gains Tax, so it's important to keep your tax situation in mind and seek financial advice if you need it.
• Gold is a tool, not a guarantee. The price of gold can swing up and down, sometimes quite quickly. Like any other investment, it's best as part of a considered  long-term strategy.