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Gold prices are rising, but short of buying up some bullion, what are some ways that Canadian investors can get in on the action?
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Amy Legate-Wolfe
Amy became interested in investing in 2018 after having her first daughter. After receiving a masters degree in journalism from Western University, she became frustrated that the finance industry remained a confusing place for Canadians like her: new parents, millennials, and other young people who needed to understand their finances.
Now, Amy focuses on tech companies and renewable energy for growth opportunities, coupling that with long-term investing strategies and equities.
Before joining Motley Fool Canada, she wrote for major news organizations including HuffPost, CTVNews.ca, and CBC. Amy’s work can be found regularly on the Financial Post and MoneyWise Canada.
When she’s not researching investing strategies, Amy’s time is pretty much monopolized by her two wild daughters, but in what little spare time she has she loves to do yoga, go on walks with her dog Finley, and travel.
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The price of gold continues to soar higher, reaching all-time highs recently at US$2,392.58 per ounce as of writing. That price continues to climb higher as investors look to buy up gold for protection.
But why is gold a way to protect your wealth during these downturns? And should investors consider buying some as well? Let’s look into it.
Safe-haven asset
Gold has long been associated with being a hedge against economic downturns and government influence. And there are multiple reasons for this. Gold is seen as a safe-haven asset, tending to retain its value or even increase in times of economic instability or uncertainty. So, when stocks go down, gold prices can store value.
Gold also tends to have an inverse correlation with fiat currencies such as the United States dollar. So when governments decide to expand their monetary policies, including printing more money, fiat currencies might, therefore, go down in value. Meanwhile, gold can hold onto its purchasing power and even climb higher, as we’ve seen.
What’s more, there is a limited supply to gold. So, unlike currencies that can be printed in unlimited quantities, leading to lower value, gold’s supply is finite. This helps keep up the value as gold as well. The product is, therefore, beneficial for investors looking to protect their investments against inflation in times of uncertainty.
How to buy it
So, you now want to buy some gold. Well, unless you’re at select Costco locations, it can be quite difficult to simply go out and buy a gold bar. Yet don’t worry; there are other ways for investors to get in on the action.
Gold futures and options are a great way to get in on gold, where experienced investors can trade gold futures and options contracts on Canadian commodity exchanges. These allow investors to speculate on the future price movements of gold without owning the physical product.
There are also gold mutual funds specializing in gold and precious metals. These can allow investors to put their money into a diversified portfolio of gold mining stocks, bullions, and other gold-related assets.
Gold certificates are another option, with some Canadian banks offering them. These represent the ownership of a specific quantity of gold held by the bank on the investor’s behalf. These can be bought and sold like stocks or bonds, providing investors with exposure without needing to own or store it.
ETFs and stocks
Then, there’s the option of investing in gold mining stocks or exchange-traded funds (ETFs). Mining companies listed on the TSX today could see serious benefits in the near term, providing exposure to gold prices as well as the potential growth of the company. And some provide dividends for investors as well.
ETFs, meanwhile, can be a way to buy shares and exposure to the precious metal without needing to physically own or store it. For instance, iShares Gold Bullion ETF (CAD-HEDGED) (TSX:CGL) is a strong option. This ETF is designed to provide investors with exposure to the performance of gold bullion while also hedging against fluctuations in the value of the Canadian dollar relative to the U.S. dollar.
The ETF is, therefore, highly liquid, with a low management fee, and still tracks the performance of the price of gold. Overall, if you’re looking for exposure, this is perhaps the best and easiest way to consider gold prices on the TSX today.
