What is the best way to invest in gold?
Gold has been trending up since its crash together with the other markets in March. If you have bought some gold when it crashed to $1450 in March, you will now be sitting on a 23% profits.
I have mentioned in multiple occasions that I am bullish of gold. During the crash in March, I made this post and said this,
"Similarly for gold, I do not think it will go below the price range ($1,450 - $1,480) during the accumulation phase between Nov 2019 and Dec 2019."
Then in late March, I once again pointed out that gold performed incredibly well when quantitative easing is put in place. That is when the Fed and other central banks around world started to pump in liquidity/money to the system in various means.
Even here in Singapore, a massive S$93 billion COVID-19 response was injected into the market. Though most of these are from Singapore's reserves, they are still additional investments in the market which would otherwise not be available.
In my recent post, I once again talked about how I plan to use gold to hedge against a potential period of high inflation.
Ways to invest in gold
The best way to invest in gold is of course to buy physical gold and store it somewhere. However, this introduces a few problems. While it is not difficult to buy gold, storing it may be costly. Clearly, you want to avoid storing it under your bed in case of burglars. You can also store it with a bank which costs between $130 to $350 depending on the size of the box. So it only makes sense if you expect your physical gold to appreciate more than the cost of storing it.
The pandemic also added complexity in the event where people are banned from going out and banks are physically closed, how can they access their gold stored at the banks?
Gold ETFs like $GLD are another way to get exposure in gold. However, there is serious counterparty risks involve and more often than not, you are actually buying a share of a trust rather than a share of gold. Next, you can also buy stocks of gold miners or royalties companies. Again this has counterparty risks.
My thoughts
I personally think that if I invested heavily in physical gold, I will store it at a bank. If I am a small investor, I will rather take counterparty risks and buy a gold mining/royalties companies. Traditionally, gold miners also do better than gold itself when gold price appreciates.
As an illustration Barrick Gold Corp actually did better than gold itself since the crash in March. Gaining 32% while gold gained 23%.
With this, my question to everyone is, what is your gold investing strategy? What do you think is the best way to get exposure in gold? Though I am bullish in gold, the fact is that I have no exposure in physical gold. I have been investing in gold miners and gold royalties companies. So I will like hear your views on how you invest in gold. Thanks!
As usual, please do not take this as an financial advice. You should always do your own due diligence and research when investing your own money.
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