June 18

How to invest in Gold in Australia 2021

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Since ancient times, gold has been seen as a reliable value store. Today, it is considered to be one of the most stable investments, since it does not experience the same level of volatility compared to stocks and other tradable assets. If you are looking for an investment option that will help you protect your wealth, gold is definitely worth considering. But, how do you go about purchasing gold bullion or investing in gold via the stock market? Let’s take a closer look at the process of buying gold and where to purchase it in Australia.

Choosing a Gold Asset Type:

Most people imagine bank vaults piled high with chunky gold bars when they imagine gold bullion. However, the reality is that this term refers to gold that has a purity level of at least 99.5% and has either been minted into coins or made into bars or ingots. Bullion is the form of gold that is traded on commodities markets worldwide. There are a few different options to consider if you want to gain exposure to gold. You can physically buy and store it or invest in gold prices or companies on the stock market. You can also trade gold on financial markets as contracts for difference. 

Investing in Gold on the Stock Market:

You can invest in gold on the stock market and make money by profiting from gold prices rather than physically purchasing and storing gold. Stock market investors are able to purchase shares in companies such as gold miners, or there is the option to invest in units in a gold-based exchange traded fund (ETF). Using this approach, there is no need to actually purchase any gold – instead, you will be investing in the gold industry’s performance or the performance of a certain gold company. You will usually need a full-service broker or an online trading platform in order to invest in gold via the stock market. 

Investing in gold via the stock market is a popular choice since it allows you to invest in gold without the added hassle of purchasing, storing, and insuring the gold. However, since you do not actually own any physical gold using this method, you will be exposed to all the typical risks that come with investing in the stock market including company bankruptcy, market volatility and the risk of losing your investment. 

There is the option to purchase units in a gold-themed EFT, which is basically tracking the price movements of the gold or stocks in several companies that are exposed to gold. There are several gold-themed ETFs that are listed on the Australian Stock Exchange including:

  • BetaShares Gold Bullion ETF
  • ETFS Physical Gold
  • VanEck Vectors Gold Miners ETF
  • Perth Mint Gold
  • BetaShares Global Gold Miners ETF

If you are looking to purchase stocks in companies with gold exposure, there are several to choose from on the Australian Stock Exchange. 

Investing in Gold Via CFDs:

Speculating on price movements through CFD investing in the futures market is an alternative to buying gold stocks or units in an ETF. CFD investors aim to profit from the movement of bond prices whether they go up or down. This means that even if the prices of gold are falling, CPD investors are still able to make a profit. However, bear in mind that CFDs are complex, derivative products that can be highly risky. As a result, they are a better option for advanced traders

Investing in Physical Gold:

Investing in physical gold is a traditional approach which involves purchasing gold as a physical asset to own and store it yourself. It provides you with an option of owning a tangible asset and avoiding the risks that are involved with exchange-traded funds. 

If you decide to go down the route of buying physical gold, you’ll need to decide on the form of gold that you would like to purchase. You can purchase gold bullion in either coins or bars. Bars tend to be larger and more expensive, but they are an ideal option for those who want to make a sizable investment. Gold coins, on the other hand, are less valuable since they are smaller in size, but can often be a more convenient choice if you need to liquidate some of your investment. 

Gold Bars:

Gold bars will generally range in size from 1/10 ounces to 1kg, but there are some bars of up to 500 ounces available. Bear in mind that precious metals are measured in troy ounces and that one troy ounce is the equivalent to 31.1g grams. 

There are two types of gold bars to choose from; these are minted bars and cast bars. Minted gold bars are manufactured via a stamping or minting process, while cast bars are made by pouring molten gold into an ingot mould. Minted bars tend to be easier to sell since they look better, while cast bars are easier to produce. 

Gold Coins:

Gold bullion coins are produced by mints around the world. They are generally smaller than bars and ingots and considered to be a more convenient alternative for investors. They are cheaper to purchase compared to bars and make it easier for investors to liquidate a small portion of their investment if they need cash. Coins will typically contain between 1/10 ounces to one ounce of pure gold. 

Gold coins also have a nominal monetary value and can be accepted as legal tender in the country where they are produced. 

Where to Buy Gold:

When choosing where to buy gold, there are several options to consider. Some of the main factors to keep in mind when choosing where to buy gold include:

  • Location: Australia is home to several gold dealers, so the location might impact your decision if you want to purchase gold in-person. 
  • Online: You can also find many online gold dealers where you can conveniently purchase gold bullion on the internet. Along with specialist online dealers, you may also be able to find gold for sale on sites like eBay and precious metal forms. However, when buying online, it’s important to do your research to ensure that the seller is trustworthy and reputable. 
  • Production: It’s important to find out where the dealer gets their gold from. Before buying, make sure that it is produced by a recognised, established manufacturer.
  • Premiums and Commissions: Take some time to read the fine print to make sure that you are aware of the fees charged by the dealer. You will usually need to pay a commission to the dealer, which is usually included in the purchase price. You’ll also need to pay an assay fee to check the purity and authenticity of the gold. 
  • Price Comparison: Be sure to compare the price of the gold to the Australian gold price, since prices are typically quoted in US rather than Australian dollars. 
  • Delivery: Be sure that you know how and when the gold will be delivered to you or to where it will be stored. Make sure that the gold is insured if anything goes wrong during the delivery process. 

Storing Your Gold:

Once you have purchased gold, you will need to find a safe place to store it. There are various different options to consider, which include:

  • At home: You can choose to store your gold at home, although this is not as secure as some other options. If you want to go with this option, it’s a good idea to get a home safe installed and make sure that your home and contents insurance covers precious metals. 
  • Bullion dealers: Many gold dealers will also offer a storage service where you can keep your gold for an additional fee. 
  • Secure vault storage: If you want high-level security, it’s worth looking into vault storage companies and the storage options on offer.
  • Safety deposit boxes: You can store your gold bullion securely in a rented safety deposit box at a bank. 

What to Consider Before Buying Gold:

If you want to diversify your investment portfolio or are looking for ways to protect your wealth, gold can be a very effective and practical solution. However, it’s important to be aware that buying gold does come with some risks, just like making any other investment. It’s important to conduct research to ensure that you fully understand the risks that are involved in purchasing gold, including any additional costs for storage and security. Bear in mind that the returns might not match those that are provided by some other investments. 

Pros
  • Protect your wealth: Gold has long been considered to be a reliable store of value that is typically unaffected by the factors that might influence other investment types. For example, if share prices plummet, the value of gold will often rise as investors look for a safer place to put their money. 
  • Portfolio diversification: Gold’s status as a ‘safe haven’ makes it worth considering if you want to diversify your investment portfolio and protect your financial position during market downturn periods. 
  • Tangible asset: If global financial systems collapse, owning gold as a physical asset can offer financial protection. In addition, gold does not corrode over time and cannot be destroyed by water or fire damage. 
  • Easy to buy: You can find many gold-specialist dealers for buying and selling gold, meaning that purchasing this precious metal may be easier than you think. 
  • Liquid: Whenever you need to do so, it’s easy to convert gold to cash. 
Cons
  • Lower long-term returns: Gold is typically seen as a steady investment, so it does not usually offer the same potential for large returns compared to some other investment types. 
  • Fees: You will need to consider the additional costs of purchasing gold including storage and insurance fees. 
  • Not as convenient as ETFs: ETFs may be a more convenient way of investing in gold compared to purchasing physical gold. 
  • No ongoing income: Unlike investments in property or shares, gold does not provide a form of regular income. 

Frequently Asked Questions:

Do Banks Sell Gold?

Some banks do sell gold to customers, but the majority do not. If you are interested in buying gold from a bank, it’s worth researching which banks do offer this service. 

Is Buying Gold Online Safe?

Buying gold online is safe as long as you are purchasing the gold from a reputable and trustworthy gold dealer. Be sure to thoroughly research the dealer before you buy to check that they are accredited by any trade associations and to find out more about their reputation. 

How Can You Make Money From Gold?

Aside from purchasing physical gold, you can potentially make money from gold in a range of other ways. You can invest in ETFs that track the price of gold, or invest in shares in gold mining companies. Bear in mind that both of these options tend to come with more risk and there is no guarantee that you will make a profit. 

Is Gold Bullion Taxable?

GST is not payable if you buy or sell gold in an investment form. However, if your gold increases in value in between the date of purchase and the date of sale, capital gains tax may apply. For more information, you should speak to an accountant or an investment advisor who will be able to provide you with further advice on which taxes might apply to your gold and how the process of working out capital gains tax works.

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