Should you invest in gold?

Gold’s (GC=F) allure has attracted retail investors in their droves and is now trading above $4,000 as the so-called “safe haven” asset has provided stability amid turmoil in the financial markets.

Gold has experienced its most significant rally since the 1970s, with prices climbing by nearly a third since April, following US president Donald Trump’s announcement of tariffs that have shaken global trade dynamics.

Market analysts suggest that the rise in gold’s value is driven not only by the ongoing trade dispute but also by investor concerns over delayed economic data, as the US government shutdown continues.

Gold is traditionally viewed as a reliable store of value during periods of market volatility or economic uncertainty.

On Wednesday, 8 October, it hit $4,049.56 per ounce for its 40th record high this year. The metal has doubled in value from the $2,000 level it held two years ago. Since 2000, gold has outperformed global equities, delivering a return of more than 1,200%.

Jason Hollands, managing director at Bestinvest by Evelyn Partners, said: “This latest leg upwards for gold to a new all-time high above $4,000 an ounce has been driven by concerns over the shutdown of the US Federal government”.

The standoff between the Trump administration and Congress has meant non-essential government workers are on unpaid leave, with services related to air travel, taxpayer services and national parks grinding to a halt.

“Long term it still looks good,” Neil Wilson, UK investor strategist at Saxo Markets said. “BofA [Bank of America] notes that “still few structurally long gold”, and the average gold jump past four bull markets is about 300% in 43 months … so $6,000 peak next spring? Front running the next Fed chair is part of the story expecting looser monetary policy – Treasury secretary Scott Bessent wrapped up the first round of interviews for the next Fed chair this week.

“But for now some profit taking/consolidation – also as discussed yesterday the peace dividend factor for gold is something to consider as some of the geopolitical risk premia that’s been in the price is removed.”

Gold’s enduring appeal as a store of wealth is not new; it has been prized for millennia due to its rarity, durability, and universal value. Historically, gold backed the global financial system before being gradually replaced by fiat currencies.

Rick Kanda, managing director at The Gold Bullion Company, told Yahoo Finance UK earlier this year: “Gold has been the go-to investment for centuries, and it’s easy to see why people buy gold. The timeless reliability is why gold remains a favourite for those wanting to protect their wealth, no matter what’s happening in the economy.

“It’s like a steady friend you can always count on. When currencies take a hit, gold often holds its ground or can even climb higher. This is particularly true when the US dollar, the heavyweight of global trading currencies, starts to wobble.”

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Matthew Piggott, director of gold and silver at consultancy Metals Focus, attributed the metal’s strength to continued macroeconomic and geopolitical volatility.

“With these factors likely to persist through 2026, we see no significant catalysts that would cause gold prices to decline meaningfully,” Piggott said. “Therefore, we expect gold to continue rising throughout the year, testing $5,000 per ounce.”

“Gold is at record high prices and in a strongly overbought territory. Yet, fundamentals remain supportive of the bull run,” Ipek Ozkardeskaya, senior analyst at Swissquote Bank, said.

“Previous bullish cycles suggest that the rally has room to extend further. A rally to $5,000 per ounce is not ruled out.”

Unlike paper assets or digital currencies, physical gold is tangible, offering a sense of security that is hard to replicate — an allure that is proving irresistible to many retail investors.

Peter Walden, managing director of BullionByPost, the UK’s largest online bullion dealer, told Yahoo Finance UK: “Since January, following president Trump’s inauguration we’ve observed a marked rise in retail investors seeking to add physical gold to their portfolios. Amid economic uncertainty and inflation concerns, many are turning to gold as the ultimate safe haven.”

Traditionally viewed as a safe store of value during geopolitical turmoil, bullion has risen over 54% so far this year. Despite the soaring price per ounce, many have seen the rally as the perfect time to purchase gold for the first time.

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Paul Atkinson, co-founder at Atkinsons Bullion & Coins, told Yahoo Finance UK: “The current highest ever gold prices are doing nothing to dampen demand for the physical product. Both the value and volume of orders since the start of the year have increased dramatically with many new clients purchasing for the first time.

“Precious metals in physical form should always be looked at on a long-term basis as with all commodities, they can fall and rise in price. The current market has lead many new clients to appreciate the advice around the unusual position of British legal tender coins, which are free from capital gains tax (CGT) on resale.”

Gold and other precious metals are usually weighed in troy ounces. At 31.1034768 grams, one troy ounce is about 10% heavier than a regular ounce.

Another thing to consider, often misunderstood, is the capital gains tax-free nature of British legal tender coins.

“The sovereign and the gold and silver Britannia have a unique place as precious metal coins with a legal tender value,” Atkinson said. “This means that any profits made over the lifetime of the investment are free of CGT when sold.

“Many clients overlook this issue as they are so concerned about purchasing physical metal and do not think about the other side, which is relevant when they come to sell.”

Gold falls under the category of alternative investments, named after their nature as alternatives to traditional investment assets such as bonds and equities. These can be anything from art to property, hedge fund investments, gold, and gold funds, and even digital assets.

When we think about precious metals, the first image that comes to mind is probably a gold bar or coin. If you go this route, you are investing in the physical metal. Gold coins are popular, but primarily for collectors, as you will pay a premium for the design you might not get back. However, some coins become more desirable for collectors over time, so this gambit could pay off.

If you’re not bothered by gold’s aesthetic value, the straight way to go about it is to get a cast bar. A 500g bar will set you back £49,704.31 if you purchase it from the Royal Mint.

“While the number of large investors spending over £100,000 has increased, smaller investors remain the bulk of our sales. Many are opting for fractional purchases – such as half or quarter ounce gold Britannia coins – while the sale of sovereigns continue to perform strongly, thanks to their capital gains tax-exempt status and low premiums,” Walden said.

You can start smaller, with a 1g Britannia bar costing around £129. Regardless of what you get, ensure that the purity is above 99.9% for coins and 99.95% for bars so that it is VAT-free.

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“As CGT has already risen in last year’s budget from 20% to 24% it could also be in line for further rises. This makes the position of these coins even more important as part of any clients portfolio. There has also been a big increase in the sales of fractional gold coins in particular. The 1/2 ounce and 1/4 and 1/10 ounces allow a lower entry price point,” Atkinson said.

A common misconception is that you will have to find somewhere safe in your house to store the gold.

Gold expert Simon Popple said: “Buying physical gold may seem more difficult than simply pressing buy on an investing app, but it’s simpler than you think. To start, you’ll need to set up an account with a gold bullion dealer. You should carry out your own due diligence with your financial adviser before selecting one.

“One of the biggest misconceptions about buying gold is people think you’ll have to take delivery of it. You don’t. You can often have it stored and insured with the dealer you bought it from, but check before you buy.”

Physical gold can be purchased from government mints such as the Royal Mint or precious metal dealers. These dealers typically make their profits by selling gold at a premium above the market (spot) price and buying it for less.

This difference, known as the spread, fluctuates based on the gold’s purity, weight, the dealer, and prevailing market conditions of supply and demand.

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However, as gold is traded in an unregulated market, it’s vital to approach purchases with caution. Scams are not uncommon, so it’s important to take measures to protect your investment.

One such measure is to check if a dealer is a member of the London Bullion Market Association (LBMA). The LBMA sets standards across the industry, helping to ensure that gold traded by its members meets specific quality and integrity benchmarks.

Before making any purchase, it’s also essential to evaluate a bullion dealer on factors such as reputation, pricing, storage options, and customer service. These elements are crucial to ensuring a secure and satisfactory investment experience.

While most bullion dealers are specialist firms, even Costco (COST), the popular wholesale retailer, has tapped into the gold market. Costco UK offers members the opportunity to purchase one-ounce gold bars both in-store and online, along with a range of gold coins in various designs. Though Costco is not a dedicated bullion dealer, the retailer has become a convenient option for those looking to add gold to their portfolio.

If you consider gold purely as an investment and do not want to handle things like storage or purity levels, you can choose gold stocks or funds.

“Gold is not everyone’s idea of a suitable portfolio investment — former prime minister and chancellor Gordon Brown once dismissed it as a ‘barbarous relic’ — but the precious metal’s rise to new all-time highs is eye-catching all the same,” said Russ Mould, investment director at AJ Bell.

The surge in gold prices is being driven by a mix of factors, including central bank purchases, substantial shipments to the US ahead of tariff impositions, persistent inflation, and concerns over high government debt levels on both sides of the Atlantic. These dynamics are pushing the price of the precious metal higher, attracting investor attention.

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“Gold itself offers no yield, has limited industrial use and comes with a cost of ownership in the form of storage and insurance, so many portfolio builders will still fight shy of embracing the metal, especially when they can get returns from cash in the bank that currently exceed inflation,” Mould explained.

However, gold’s durability, its historical role as a store of value, and its limited supply, growing much slower than the supply of money, make it an attractive option during times of economic uncertainty. Mould added: “Gold is difficult and expensive to produce, so it can be seen as a store of value at a time when inflation is eroding the purchasing power of money in the West.”

As the price of gold continues its upward trajectory, gold mining stocks have surged in tandem. The New York Stock Exchange Arca Gold Bugs Index (^HUI) has soared by 129% year-to-date.

Successful gold miners, which generate strong cash flows and dividends, have a unique opportunity for investors.

“Their earnings and cash flow, and therefore potentially their dividends, are highly geared to the gold price,” Mould said.

However, the number of London-listed gold mining companies has dwindled due to a wave of takeovers, including Randgold Resources, Barrick Gold, Centamin, Hummingbird Resources, and Shanta Gold, all of which have been absorbed by bigger players.

Mould said that Endeavour Mining (EDV.L) is the only gold miner in the FTSE 100 (^FTSE), as Fresnillo (FRES.L) is primarily a silver-focused company despite producing gold.

Mould noted that “the world’s biggest gold miners by stock market valuation are listed in the US,” with Newmont being the largest, valued at $52bn and a member of the S&P 500 (^GSPC).

When evaluating gold mining stocks, Mould recommended that investors apply a set of six key tests to determine whether a miner is a suitable investment.

• Phase of operation: Whether the company is in production, exploration, or obtaining licences.

• Resource size: The size of the resources and the profile of existing mines.

• Geopolitical risk: The risks associated with the mine’s location, such as potential conflicts with local governments or difficult conditions like extreme weather.

• All-in sustaining cost (AISC): This metric shows how profitable the company is in relation to the gold price.

• Management team: The experience and skillset of the company’s leadership.

• Balance sheet: The miner’s cash reserves and debt levels, as more substantial cash positions, are better when gold prices fall.

Investors should also consider the miner’s valuation. Mould explained: “This can be done using earnings or yield-based metrics, but both can be deceptive, especially if the gold price starts to swing around a lot. A further option is to look at net asset value (NAV), which should grow over time if the gold price remains firm.”

Several notable takeovers have occurred in the gold mining space, which offers clues to the strategies and valuations that large players are willing to pay. For example, Newmont Mining’s (NEM) acquisition of Australia’s Newcrest in 2023 was made at 1.7 times book value, and AngloGold Ashanti (AU) paid a similar multiple when it acquired Centamin.

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For those who prefer to avoid directly owning gold or gold mining stocks, there are other ways to gain exposure to the precious metal:

• Gold tracker funds: These exchange-traded commodities (ETCs) or gold tracker funds enable investors to track the gold price without having to store or insure the metal physically. Mould highlighted iShares Physical Gold as a popular option, which tracks the day-to-day movement of gold prices by holding bullion.

• Passively managed funds of gold miners: Investors who believe gold miners are undervalued relative to gold can choose funds like VanEck Gold Miners or VanEck Junior Gold Miners. These funds track a basket of miners, with annual fees of 0.53% and 0.55%, respectively.

• Actively managed funds: For those looking for expert guidance in selecting the best-performing gold mining stocks, actively managed funds such as BlackRock Gold and General are an option. These funds focus on maximising returns by investing in the best-performing miners while avoiding underperforming stocks.

Exchange traded funds (ETFs) and exchange traded commodities (ETCs) offer a convenient way to gain exposure to gold without the hassle of storage or concerns over purity. Gold ETFs hold gold bullion or gold futures, and their value is derived from these underlying assets. These products trade like stocks, providing a liquid and accessible way to invest in gold.

The costs of gold ETFs typically include ongoing charges and platform fees. Investors should also remember that the performance of these funds can be affected by currency fluctuations, as most physical gold is priced in US dollars.

The main costs of investing in gold ETFs will be the ongoing charge and any platform fees. You should also pay attention to where the product trades. Most physical gold is priced in US dollars, so if an ETF or ETC operates in sterling, then the USD/GBP (GBP=X) rate will likely play a significant role in its performance.

Looking at gold ETFs traded in the US, the DB Gold Double Long Exchange Traded Notes (DGP) has returned 114% this year.

Since January, ProShares Ultra (UGL) has delivered 112%, and Invesco DB Precious Metals Fund (DBP) has recorded a 52% gain.

If you want to keep things in pounds, there is the iShares Physical Gold ETC (SGLNL.XC), for a 0.12% fee. This product has the particularly of only accepting gold bullion that meets the Good Delivery standards set by the London Bullion Market Association (LBMA). All assets are classified as responsibly sourced, only allocating gold that was mined after 2022. It has gained 15% year-to-date.

A record $64bn has been invested in gold ETFs so far this year, according to the World Gold Council trade association.

The HANetf Royal Mint Responsibly Sourced Physical Gold (RMAP.L) provides an ethical option. This fund only holds gold bars approved by the LBMA from refiners that meet strict standards. In addition, the Royal Mint is developing the world’s first plant to recover gold from electronic waste, ensuring that the gold used is sustainably sourced and has a low environmental footprint.

For those seeking more flexibility in their gold investments, the Royal Mint now offers a solution in the form of “digital gold”. This option allows investors to purchase a fraction of a gold bar, starting from as little as £25. It provides an easy way to gradually build a gold position, making it an attractive choice for those who wish to invest on a month-by-month basis.

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The Royal Mint charges a storage fee of 0.5% plus VAT, ensuring that the gold is securely held. As with all investments, past performance is not an indicator of future results, and gold should be considered part of a well-diversified portfolio to mitigate risk.

According to figures from the World Gold Council, global gold demand surged to a record 4,899 metric tonnes in 2023, with jewellery accounting for 46% of this demand.

China emerged as the world’s leading consumer, using 959 metric tonnes of gold last year. India followed closely as the second-largest consumer, with total consumption reaching 761 metric tonnes. The US rounded out the top three, consuming 250 metric tonnes of the precious metal.

When it comes to financial reserves, the US holds the top position globally with 8,133 metric tonnes of gold. Germany follows with 3,352 metric tonnes, and Italy maintains 2,452 metric tonnes. Several countries, including Kazakhstan and Russia, have been actively increasing their gold reserves in recent years.

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