Last updated: May 27th, 2024
From the legends of ancient Aztec cities to Britain’s crown jewels, and Gollum coveting the precious One Ring, gold has always held an innate cultural significance to humans as a precious and powerful commodity. Rare, lustrous and enduring — gold is not just a symbol.
It’s seen as a real store of value that many investors believe transcends cash and other paper investments.
Gold’s value is typically uncorrelated with shares, providing reassurance in times of market turmoil.
Let’s discover how to buy gold in Australia, plus its strengths and weaknesses as an asset class.
(Related: Best Stock Trading Apps In Australia).
Reasons To Buy Gold As An Investment.
Durability and diversification of your investment portfolio are two major reasons to invest in gold, regardless of the prevailing economic conditions.
However, Gold has drawn investor funds in 2023 due to rising interest rates, declining stock market performance and talk of recession.
Some forecasts suggested it could surge to between $US2,300 – 2,600 in the remainder of 2023, depending on how the US Federal Reserve approaches rates.
Important!
That’s because when stock markets hit a rough patch, and currencies are weaker, gold can be seen as a “safe haven” by investors.
The anticipated rally, however, hasn’t happened with the metal trading at $US2,074 as of 2nd January 2024.
Direct exposure to gold has long been viewed as a hedge against inflation — but this is contested, and some studies have shown it only holds true when gold is held for very long periods.
Its value can appreciate over time, but the potential for profits and returns are usually lower than what you’d expect from stocks or bonds.
Important!
Investors would rarely be weighing up between shares versus gold, or even gold versus cash. Instead, including some gold when determining your asset allocation could diversify your portfolio.
What Influences Gold Prices?
Although not every finance pundit is convinced that inflation reliably (and positively) influences the price of gold, ups and downs in the commodity’s value based on supply and demand can also provide investment opportunities.
How can you get a sense of the demand for gold?
- Demand for gold used in jewellery, electronics and other industries impacts its market value. Retail sales of gold jewellery is an important factor, with positive consumer sentiment and rising incomes positive for gold.
- Investor inflows into gold ETFs globally drive up demand and prices, as ETF providers must buy and hold gold to underpin the investment vehicle.
- Central banks stock up on gold to ensure they can meet their financial obligations—and the extent to which they do so has become a key driver of gold prices.
On the supply side, gold production levels and timelines play a part in gold’s price. That is, mining companies’ access to the resource, ability to extract and refine it, and speed to market.
This is also why shares in companies involved in gold’s mining, production, refinement and sale tend to increase in value when the gold commodity price is worth more.
(Related: AUD To Euro Forecast: More Surprises Ahead?)
Because Australia is one of the world’s largest gold producers, Australian investors have a range of ASX-listed gold stocks to choose from.
Important!
According to a June 2023 update from the Australian Department of Industry, Science, Energy and Resources, global gold production rose slightly year-on-year and is forecast to peak in 2024 before stabilising in the period to 2025.
However, the Department predicts that Australian gold sector earnings will decrease as lower prices offset higher volumes.
(Related: Best Share Trading Platforms In Australia).
What Are The Disadvantages Of Owning Gold?
Potential cons to be aware of if you plan to invest in gold include:
- You have to worry about its safe storage when you buy physical gold, which can also make your home and contents insurance more expensive or result in storage fees.
- Lower likelihood of strong returns. While commodity values can rise and fall, physical gold assets don’t inherently change or deliver returns—unlike companies you might invest in with the potential to grow, increase revenues and pay dividends, or interest from bonds.
- Fees associated with purchasing and selling your gold, including brokerage fees when you invest via gold ETFs and shares.
Another downside can be buying gold at a high price because you’re driven by fear during shaky economic periods (when gold prices tend to rise), rather than thoughtful, well-timed spending in line with your broader investment goals.
| S&P 500’s Largest Declines | S&P 500 | Gold |
|---|---|---|
| September 1976 – March 1978 | -19.4% | 53.8% |
| November 1980 – August 1982 | -27.1% | -46.0% |
| August 1987 – December 1987 | -33.5% | 6.2% |
| July 1990 – October 1990 | -19.9% | 6.8% |
| July 1998 – August 1998 | -19.3% | -5.0% |
| March 2000 – October 2002 | -49.0% | 12.4% |
| October 2007 – March 2009 | -56.8% | 25.5% |
| May 2011 – October 2011 | -19.0% | 9.4% |
Expert Tip.
Investment scams also abound—the chance to buy or trade gold during dicey economic times can be used to con you out of your hard-earned cash. Be wary and thoroughly research any company or investment opportunity before committing.
What Is The Best Way To Buy Gold In Australia?
The best ways to gain gold exposure in Australia include:
- Buying physical gold bullion bars, gold coins or even quality jewellery.
- Becoming a shareholder in companies that mine, produce, refine and sell gold.
- Purchasing units in gold exchange-traded funds (ETFs) through holding physical gold, futures contracts in gold, or shares in gold mining/production companies.
- Trading on gold price movements of an underlying asset through a futures market, options contracts or contracts for difference (CFDs).
The convenience of a listed product means there have been enormous inflows into ETFs backed by physical gold in Australia, but plenty of people still hold their own gold bars too.
Some popular gold-themed ETFs listed in Australia include:
- Global X Physical Gold (ASX: GOLD)
- BetaShares Gold Bullion ETF (ASX: QUA)
- VanEck Gold Miners ETF AUD (ASX: GDX)
Tips For Investing In Gold Bullion.
When buying physical gold bars or gold collector coins, keep in mind:
- Gold bars on the market can vary in purity and weight from just a few grams through to over 10kg. 21 carats and above is considered a high gold content, and investment grade gold is 99.5% pure or more. A bar that is 99.99% pure gold would be 24 carats.
- There are different brands to choose from. Some brands may cost more due to being imported from overseas.
Characteristics of gold bullion include:
- A mandatory bullion stamp that indicates its purity and weight.
- Additional serial numbers, depending on the bar’s origin.
Reputable Australian mints and sellers of gold bullion and gold coins include:
- The Perth Mint.
- The Melbourne Mint.
- Royal Australian Mint.
- ABC Refinery/ABC Bullion.
Important!
While you might have dreams of diving into your pile of gold coins, Scrooge McDuck-style, keep in mind that when you buy gold bullion, coins, collectibles or jewellery, you may pay a premium (above spot price) for the fabrication and design of these items.
Which Is The Safest Way To Buy Gold?
How you invest in gold or any precious metal should be based on your financial goals, investing strategy and risk tolerance.
There are rewards and risks to each type of gold investment. For instance:
- Owning physical gold provides certainty but creates cost, hassle and security risks arising from its storage.
- Gold ETFs are easy and affordable to invest in but you don’t own the underlying assets and you’ll face annual management fees. Plus, the returns are generally modest.
- Gold shares let you benefit from increasing commodity prices and returns based on a company’s strong performance, but this relies on picking winning gold stocks.
- Using CFDs and futures creates more opportunities to trade and potentially make profits —by speculating on gold prices — but these highly leveraged trades are complex and risky.
How Much Gold Should You Own?
Recommendations vary, but advisors bullish on gold generally argue it should make up between 5-20% of your portfolio.
How To Trade Gold Online In Australia?
Every type of investment in gold can be done online, including purchasing gold bars.
- Many mints, gold dealers and online brokers give you the option to buy gold online (after creating a trading account and verifying your identity) and have your gold shipped directly to you, or stored on your behalf via their on-site vaults. You can usually also shop in-person or buy gold over the phone if that’s your preference.
- Online stockbroking apps simplify the process of self-managing your investment in gold shares, gold certificates, gold ETFs, or gold futures. Once you’ve selected a platform, created an account and added funds, you’re ready to start investing in gold.
(Related: 10 Best Online Brokers In Australia For 2024).
Storing Physical Gold In Australia.
Storing your gold in your own home creates added risk and stress because you’ll need to ensure your storage solution can’t be compromised in the case of a home invasion, fire or natural disaster.
You’ll also need to boost your insurance premiums (and payments) to cover potential losses.
Bank vaults provide a more reliable storage method but come at a cost; not all banks offer the service.
Expert Tip.
Commbank’s annual vault fees range from $231 to over $1,500, depending on the size you need, and there are a limited number of branches that make safety deposit boxes available.
Investor demand for securing physical gold and silver, and the closure of safe custody services by many banks, has seen the emergence of private vault and safe-deposit companies.
Many private vaults are also dealers in gold and silver—making it convenient to buy and store your investment with one provider.
Private vaults may offer:
- Increased privacy compared to a bank. You may not need to provide as many personal details and typically have more anonymity and flexibility when accessing the facility.
- More sophisticated security and self-management options, depending on the technology and monitoring put in place by the provider.
Before selecting secure vault storage, ensure you’re confident in their security and insurance measures.
When Should You Sell Your Gold?
Like any investment, you might choose to sell gold when you need money or if the price climbs considerably and you want to take profits.
Bullion dealers will often buy back your physical gold. Choose a reputable gold dealer and make sure you understand:
- How they’ll test and value your gold. Is there transparent information on the buyer’s website?
- How do their prices differ from market rates for gold, for instance, what’s the fee?
Remember, capital gains tax may apply if you make a profit on the sale of your gold investment.
Should You Join The Gold Rush?
Gold is not a get-rich-quick investment but more of a defensive stance. In the past year, $AUD gold prices per ounce have risen more than 19%.
Whether you join the rush to invest in gold should be based on your personal risk appetite and belief in gold as a protective or hedging strategy.
You might agree that gold is a physical asset that will stand the test of time, unlike other investments like NFTs, which died a very quick death.
Important!
Gold’s market price can be highly volatile, and it is by no means a stable investment; nor is it the only way to store wealth and achieve diversification of your portfolio if you’re focused on long-term wealth creation.
FAQs On How To Buy Gold In Australia.
Here’s what beginner investors in gold usually want to know.
What other precious metals should I consider buying?
There are some other lucrative precious metals that you should keep an eye on. Consider diversifying your portfolio and buying silver, platinum, and palladium.
Each has its own risks and responds differently to market factors, such as political uncertainty and fashion trends.
During periods of high inflation, the value of precious metals tends to hold because their supply is limited.
Who are the biggest gold mining companies in Australia?
Newcrest Mining Limited ($NCM) is headquartered in Melbourne and has a market cap of $21.91 billion (Australian dollars).
Other gold mining companies in Australia include Evolution Mining and Northern Star Resources ($NST).
Important!
Australia’s gold industry is one of its biggest exports, generating an estimated $23 billion in revenue in 2021.
Newmont – not to be confused with Newcrest – is the biggest in the world gold market with a market cap of $28.13 billion. Last year alone, Newmont produced nearly 5.96 million ounces of gold.
Jody
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