How to invest in gold

For thousands of years, gold has been a symbol of wealth and prosperity. Around the world, it’s been used as currency, a measure of value, and a way to preserve wealth across generations. In the eyes of some people, the more gold you splash around, the richer you seem. But there are plenty of other aspects to gold that make it interesting.

These days, gold is experiencing a resurgence, and not just aesthetically. Investing is gaining popularity for a myriad of reasons, including its reputation for stability. As we enter a period of economic uncertainty, we see more and more people turning to gold. This time round, however, investing in gold isn’t just reserved for the wealthy. Nowadays, just like with many types of investing, investing in gold is accessible to average people like you and I. 

In this article, read up on how to invest in gold, the opportunities and risks involved, and different investing approaches. We’ll also explain how to follow the gold price and how this asset can play a role in a long-term investment strategy.

Before you begin reading, keep in mind that since Peaks is an execution-only service, we don’t give investing or financial advice. Rather we aim to share commonly held beliefs and best practices recognised by the wider investing community. No matter the approach, investing always involves risks. 

Is investing in gold a good investment?

One good thing to know about gold is that it doesn’t earn interest or generate income. You only make money if its price increases and you sell it at a profit. So if you're looking for regular returns, gold is better used as a complement to other investments.

Gold is often considered a relatively safe investment. Especially when financial markets are volatile, the value of gold tends to remain stable – or even rise. Historically, gold has often maintained its value during periods of inflation and market uncertainty. In addition, gold is limited in supply and can’t be produced endlessly, which increases its appeal and the stability of its value. 

In modern portfolios, gold is added in for a variety of reasons – it can act as a hedge against inflation, political uncertainty, or currency fluctuations. Some financial advisors recommend gold as a supplement to returns-focused investments like stocks in order to achieve a well-balanced investment mix.

Gold is also sometimes used to support retirement planning, not as the main focus but as a stabiliser that offers peace of mind and helps guard against inflation.

Despite all of these advantages, investing in gold is still investing, which always carries some degree of risk. If you decide to invest in gold, it’s always a good idea to do your research and/or speak to a financial advisor about it.

How can you invest in gold?

There are essentially two ways to invest in gold:

You can buy physical gold – such as bars or coins – or you can invest in paper-based options like ETFs or ETCs that track the price of gold.

Gold bars might give you the feeling of owning something tangible, but buying them is expensive, and finding a safe place to put them could be a headache. Taking out insurance on this physical gold would add to the cost even more.

Some providers allow you to buy gold digitally, while the actual gold remains securely stored in a vault. This lowers the barrier to entry and makes gold more accessible – especially for younger or more budget-conscious investors. This is essentially what you can do with Peaks – invest in Gold ETCs backed by real gold, kept in a safe. 

Common gold investment options at a glance

Within the areas of physical or paper gold investing, there are more approaches to choose from. Below is a summary of a few possible ways to get invested in gold.

• Physical gold (coins or bars). This is the classic way to own gold. You buy coins or bars that you can literally hold, giving you direct ownership and worldwide recognition. The downside is that you need a safe place to store it and may have extra costs for insurance and upkeep.
• Gold ETCs (Exchange-Traded Commodities). Gold ETCs are financial products that follow the gold price and can be bought and sold on the stock exchange, much like shares. They’re usually cost-effective, giving you easy access to gold price movements.
• Gold mining stocks. Instead of buying gold itself, you can invest in companies that mine it. If the gold price rises and the company performs well, your returns can be higher. But these shares are riskier since they depend not only on gold prices but also on the company’s management and wider market conditions.

• Gold funds with a mix of metals. Some funds combine gold with metals like silver, offering broader exposure but also different risks and influences on returns.

Gold ETFs vs. Gold ETCs – what’s the difference?

While Gold ETFs do exist, in Europe you’re more likely to come across gold as an ETC. You might see mention of Gold ETFs online, but this is because in the U.S. ETCs are not seen as a formal investment category. That’s why people sometimes call funds that follow individual commodities “commodity-focused ETFs,” though that’s not quite accurate. Rather than tracking a basket of funds, an exchange-traded commodity is a type of exchange-traded product, which typically tracks a single type of investment. For this reason, you can sometimes also see the term ‘commodity ETP’, which is another acceptable description of an ETC.

How has the gold price developed?

Since the 1970s, gold prices have increased significantly – though not always steadily. In some years, prices doubled; in others, they dropped. In times of crisis – like the 2008 financial crash or the COVID-19 pandemic – gold prices surged. This was an example of a time that many investors turned to gold for stability. It’s worth noting however that surges are often followed by temporary dips as factors like interest rates and the dollar strength respond to the crises. Understanding long-term trends and economic and financial news can give you insight into the dynamics of gold pricing .

Historical data shows that while gold doesn’t rise as consistently as stocks, it tends to perform well during economic downturns, which is why it’s seen by some as a crisis-proof asset.

You can track gold prices conveniently in the Peaks app via apps or your broker. Some websites also offer real-time gold price updates.

How much gold should you include in your portfolio?

We don’t give investment advice, so we can’t say how much gold you should hold. The right amount depends on your own finances, goals, and how much risk you’re comfortable with. Some investing experts believe that during uncertain times gold can be used as an effective hedge against currency fluctuations.

Disadvantages of investing in gold

While investing in gold can be an attractive option to many, it doesn’t come without several notable disadvantages. We’ve mentioned some already, but here are some downsides summarised for you:

• No income generation: Gold doesn’t pay dividends or interest, so your returns rely solely on price appreciation 
• Storage and insurance costs: Physical gold must be stored securely, often requiring a safe deposit box or insurance, which adds extra costs
• Price volatility: Despite historically doing well in dark times, gold prices have shown significant fluctuations in the short term due to market sentiment, currency changes, or economic factors 
• Tax considerations: Profits from selling gold are sometimes subject to higher capital gains taxes compared to other investments. (In the Netherlands, gold falls under Box 3 wealth tax. Instead of taxing your actual profit, the tax office assumes a fixed return on your assets, which can reduce your net gains. So while tax conditions for gold are generally favourable in the Netherlands, it’s important to keep the tax rules in mind when selling gold)
• Limited long-term growth: Historically, gold has underperformed stocks and other growth assets over the long term

For these reasons, it’s important to weigh gold’s drawbacks carefully before making it a significant part of your investment portfolio.

How does gold investing work with Peaks?

Peaks offers a simple solution to gold investing via its custom portfolio offering. You can customise a Peaks portfolio with the iShares Physical Gold ETC which is a fund that enables you to invest in real gold, kept in a safe. The gold is purchased responsibly: all bars comply with London Bullion Market Association's (LBMA) 'Good Delivery Rules'. In the past few years, this fund has seen a general upward trend, with some fluctuations

iShares Physical Gold ETC: Key facts

You can choose to build your own portfolio containing only gold, or mix it into a portfolio containing other ETFs or ETPs. You decide yourself how much to invest in and what proportion of your portfolio it should make up.

Is it worth investing in gold?

Gold isn’t about fast profits – it can be seen more as a safety cushion for your wealth. As previously mentioned, it can add stability to your portfolio when other markets are shaky. 

When used wisely, it can offer you peace of mind, some degree of predictability and help to increase the overall diversification of your portfolio. If you are interested in investing in gold, we encourage you to do your research and consult a financial advisor to get yourself up to speed before investing.

Investing always carries risks. You could lose some or all of your invested money.