Another option is to invest in the shares of gold-mining firms, although these don’t necessarily move in line with the price of the metal itself. Unlike gold itself, gold miners typically come with political risk (the risk that local residents or politicians change the rules about mining), environmental risk, and operational risk (the risk that the mine becomes dangerous, or has smaller supplies of gold than first forecast). So if you are investing in gold as a safe haven, it’s probably best to stay away from gold miners.
Some investors are passionate about gold miners as they can often amplify any price movements in gold itself – meaning that gains can be bigger, and importantly losses can be much greater based on what the price of gold does. This type of investment is therefore usually only appropriate for sophisticated investors or those who have a financial advisor to help them make any decisions. If you do decide to dip a toe in the water, make sure you do your due diligence and only pick firms with strong balance sheets and good operational track records. To avoid the risk of any individual company going bust, you may want to invest in a fund that enables you to invest in a diversified portfolio of companies involved in gold-mining, such as the Blackrock Gold & General fund, for example.
Adrian Lowcock of investment platform Willis Owen said: “Evy Hambro manages this fund and looks for well-managed, larger gold miners to invest in. He is conscious of risk so focuses on companies with strong balance sheets that are well managed. The fund invests primarily in gold miners but will have exposure to other precious metals and minerals.”
If you’re considering investing in gold or aren’t sure which funds might be right for you, always seek professional financial advice. You can find a local financial advisor on VouchedFor or Unbiased, or for more information, read our guide on How to find the right financial advisor for you. You can also learn more about investing in our article Investing – the basics.