Gold Investing in the UK – Why, How, and When? [2024 Info]

Gold is one of the most precious metals on Earth. Considered a commodity whose value is based on supply and demand, gold investments are reliable and profitable in the long run. This article addresses the numerous ways to invest in gold, especially if you want to learn how to invest in gold UK.

Why Investing in Gold Is a Good Idea

The value of gold is determined differently than other assets. Typically, when stock markets fall, the price of gold rises. The lack of correlation between the value of gold and that of other assets makes gold a good diversifier in a well-balanced portfolio. 

Gold is considered a safe-haven asset because it doesn’t lose value when other investments (stocks, real estate) experience a sharp price decrease. Instead, it may become even more valuable as more investors rush to buy it. 

Should I Invest in Gold?

Gold investment is an excellent way to protect your savings from inflation. And it’s a liquid asset, meaning that you can easily find a buyer if you need to sell. But much like other investments, gold carries certain risks. From a short-term perspective, the value of gold is highly volatile, but this asset has managed to retain value remarkably well in the long term. So if you have disposable income, it’s a good idea to invest in gold.

How to Invest in Gold UK

Many who wish to invest their money may wonder how to buy gold. There are two main ways for buying gold: purchasing physical gold or investing via a financial instrument. Gold investments are a good strategy for wealth preservation, and it’s easy to pass physical gold from one generation to the next. Once you’ve acquired gold, you can consider more speculative investments, such as gold mining shares, gold stock, or investment funds.      

Way #1: Investing in Physical Gold

There are several options for buying gold. You can choose the most profitable one for you or the most convenient one to store.

Gold Bullion Bars

Buying gold bars in the UK has become popular in recent years. Gold bars (ingots) are made of high purity bullion—the value of which is derived from the metal rather than shape. Investment-quality bars are 99.5% pure gold and stamped with the manufacturer’s name, weight, and purity. You can purchase these in different weights via specialised online retailers. 

Gold Coins

Several governments and numerous private mints manufacture gold coins. Collectible coins have a higher value than regular coins because they’re rare and often in high demand. This is often considered the best way to invest in gold. If you decide to buy collectible coins, you’ll need to pay more than the actual value of the gold due to their rarity and historical significance. The British gold sovereign is the most widely traded and collected semi-numismatic gold coin—and it’s exempt from capital gains tax. 

Gold Jewellery

The value of gold jewellery is determined by the piece’s craftsmanship rather than by the amount of gold. As a result, jewellery typically contains only a percentage of gold (karat) from the overall weight of the piece. Jewellery is a popular gold investment in the UK, but keep in mind that you’re paying more for less gold. 

Gold Certificates

Buying gold certificates means you’re buying unallocated gold. Such certificates are gold that you don’t physically own but are certificates of ownership that you hold instead of storing the actual gold. This is a more cost-effective way of buying gold bars, as there are no shipping or insurance costs.

Way #2: Investing in Gold through Financial Instruments

If the idea of owning physical gold doesn’t move you, you can opt for a financial instrument investment.

Gold ETFs

Exchange-traded funds (ETFs) are a popular form of investment in the gold market. The ETFs—facilitated by a broker—own gold and allow you to buy shares in their fund online or in person. Even though it’s better to buy shares in an ETF that owns physical gold, you can also purchase shares in a gold ETF in the UK that invests in gold industry companies. The average fee charged by ETFs is 0.59% of the assets you’ve invested.  

Gold Mutual Funds

Gold mutual funds present an excellent opportunity for beginners in the gold investment world. These funds invest in gold mining or gold refining companies—although some have small amounts of bullion. Mutual funds can be bought through a brokerage or stock trading app, but the fees are higher than those of ETFs because a team actively manages the mutual funds. 

Gold Mining Stocks

If you wonder how to invest in gold, you can buy stocks directly in gold mining companies. Of course, gold stock is more volatile than gold itself, but you’ll receive a return if you buy stocks, whereas there is no return on your investment when you purchase physical gold.

Gold Futures

Gold futures allow you to speculate on the price of gold and obtain gold in physical form—although this is not their primary purpose. The upside to owning gold futures is that you can acquire many of them for a small amount of money. And if they move in the direction you predicted, you can make substantial sums. 

Gold Derivatives

Gold derivatives are excellent gold investments for UK investors. A gold derivative is any product that derives its price based on the value of gold, such as leveraged trading accounts, spread betting, or CFD trading. These are all popular investments that can be conducted through online trading platforms. 

Is It a Good Time to Buy Gold?

If you’re considering buying gold, you’re probably wondering if now is a good time to do so. In the past year, the price of gold fell by 16% due to the state of the economy. An ounce of gold today costs less than £1,300. And gold bugs (gold investors) expect the price to rise substantially. Twenty-five thousand new customers invested in gold in the UK last year—including many young investors—with a 430% increase in investments among millennials.

Gold ETFs and gold stock can be bought easily via investment platforms and kept in a stock and shares ISA, making it a suitable investment. 

Consider the following other reasons purchasing gold is a good idea at the moment.

• Obtain a loan against gold: Banks and other institutions will quickly approve loans against gold in times of emergency. Such loans are quickly approved and have low-interest rates. 
• Buying gold in economic uncertainty: In this economy, investing in gold in the UK is a good idea. Gold holds a steady price despite the currency fluctuation and is suitable for wealth preservation. 
• Buy gold when other investments underperform: Many use gold as an insurance policy because whenever prices of investments go down, the cost of gold experiences growth. So make sure you keep track of the S&P index.
• Buy gold in the morning: Prices can drop by 3% to 5% in the morning—the best part of the day to make your purchase.
• Buy gold in January, March, and June: The best time of the year to buy gold stocks in the UK are in January, March, early April, and mid-June to early July. 
• Buy gold when you can: The best course of action is to buy small quantities of gold regularly, utilising the lower average price of gold. 

Even though there is no exact science as to when the perfect time is to buy gold, your investment will likely turn a profit in the long run if you adhere to the aforementioned tips. 

How to Invest in Gold for Beginners 

Gold investments are an attractive opportunity for many newcomers. If you’re a beginner in gold investing, we’ve listed the following tips for you. 

Decide if This Is the Right Investment

Before you make your first purchase, plan your end goal. For example, gold might not be the right investment choice if you wish to grow your money and receive regular returns. But if you want to profit in the long term, it might be time to start seeking the best place to buy gold in the UK—gold prices are rising, and you’ll turn a profit if you’re patient.

Learn About Gold Investing and Trading

Gold investing and trading are two different animals. Educate yourself on the differences and decide whether you wish to possess gold and keep it as savings or sell it later. You could also trade it to profit as prices rise and fall.  

Understand the Price Determiners

Before investing in gold in the UK in 2021, understand the price-determining factors. Even though supply and demand are essential elements for gold prices, other considerations include mining production, interest rates, the British pound or US dollar, and geopolitical instability.

Decide How You Want to Invest

When investing, choose the type of gold asset you wish to invest in and find the necessary channels through which you’ll be able to purchase it. For example, if you don’t want to trade on the gold market, you could decide on a gold bar investment.

Seek Help

Suppose this is your first venture in the gold investment world. In that case, it’s a good idea to seek expert help by contacting, for example, an independent financial adviser (IFA) to help you access the market and manage the trading process. They can also advise you as to whether buying gold is the right course of action at the given moment. 

Conclusion

Gold is a popular investment, bound to become even more so in the coming years. So if you’re a prospective investor, it might be time to start looking for the best way to invest in gold in 2021 and come up with a long-term investment strategy that’s sure to make you a profit in the future.