Investing in gold can provide stability to your investment portfolio, especially during times of economic uncertainty. The precious metal has long been a valuable asset to help hedge against fluctuations in the market and inflation, which is why it remains a staple investment around the world.
If you’re thinking about investing in gold, what type of gold should you buy, and where can you buy it? Read on to learn about how to invest in gold in Canada.
Key Points
- Investing in gold is a great way to hedge against inflation and economic stability while diversifying your investment portfolio.
- You can buy gold in various ways, including physical gold, gold stocks and ETFs, and gold futures.
- Depending on how you choose to buy gold, you can make purchases through banks, gold dealers, or stock brokerages.
Ways To Invest In Gold In Canada
There are plenty of ways to invest in gold, depending on your capital, appetite for risk, and goals. The following are some ways to buy gold in Canada.
Gold Bullion
Gold bullion refers to physical gold in the form of bars and coins that come in a variety of sizes and weights. Bars range in weight from 1 gram to 400 ounces, while gold coins usually range in weight from 1/20 ounce and 1 ounce, though heavier weights may be available. Gold coins are usually cheaper per unit weight to buy and are easier to sell and liquidate.
Where Can You Buy Gold Bullion?
Investors can purchase physical gold bullion from banks and gold dealers, or even some retailers like Costco. If you’re purchasing from a dealer, it’s important to make sure the vendor has a good reputation and adheres to government regulations.
Where Can You Store Your Gold Bullion?
Since gold bullion comes in physical form, it must be stored somewhere securely. While you can store gold somewhere in your home or elsewhere, you can also have it stored in a secure vault or safety deposit box for a fee.
Gold Stocks
Like other stocks, gold stocks are a popular investment and represent fractional ownership of equity in a gold mining or streaming company without actually owning any physical gold. Gold mining company stock prices typically follow the price of gold, but they are ultimately based on the company’s bottom line. Some gold stocks also pay dividends, which can be a great way to add another income stream.
Keep in mind that investing in gold stocks comes with the same type of risks and fluctuations as with other regular stocks.
Gold Exchange-Traded Funds (ETFs)
Gold ETFs hold physical gold in storage with a custodian. They then sell shares to the public, with each corresponding to fractional ownership. This type of gold investment product provides investors with exposure to gold with much smaller capital compared to investing in gold futures or gold bullion.
Like gold stocks, gold ETFs track the price movements of gold or stocks with gold exposure. However, you will be charged an annual expense ratio by these ETFs, which is deducted on a daily basis from your overall investment.
Where Can You Buy Gold Stocks And Gold ETFs?
Gold stocks and ETFs can be purchased and sold daily on most stock exchanges thanks to their high liquidity. They may also be held in various brokerage accounts, such as Registered Retirement Savings Plans (RRSPs) and Tax-Free Savings Accounts (TFSAs). You can buy gold stocks through traditional stock brokerages, as well as online investment platforms, like Wealthsimple and Questrade.
Gold Futures
Gold futures are exchange-traded contracts between buyers and sellers that are traded on stock exchanges. With these contracts, the buyer agrees to buy a certain amount of gold at an agreed-upon price on a future date, no matter what the market conditions are.
Investing in gold futures is the riskiest way to trade the precious metal because of the level of speculation involved when purchasing the contract. You’ll need a margin account as well.
How To Buy Gold In Canada
Where you buy gold ultimately depends on how you want to invest in it.
Buying Physical Gold
If you wish to buy gold bullion, there are a few resources to look at:
- Banks. Canada’s Big 5 banks sell gold, including CIBC, RBC, Scotiabank, TD, and BMO. Other banks may or may not sell physical gold. You may get a better deal on gold bullion if you’re a client. Banks also offer vaults and safety deposit boxes for safe storage.
- Precious Metal Dealers. There are several gold dealers across Canada that buy and sell physical gold. These organizations are required to comply with a program overseen by the Financial Transactions and Reports Analysis Center of Canada (FINTRAC) to prevent money laundering. You can buy your gold in person, otherwise most dealers offer online purchasing options and will deliver the gold to you.
- Costco: if you are a Costco member, you may also be able to buy physical bullion in-person. However, availability depends on the store.
| Gold Dealer | Available Precious Metals | Types Of Products | Location Availability |
| Silver Gold Bull | – Gold – Silver – Platinum | Bars, coins, jewelry | – Ontario & Alberta – Online |
| Canadian Coin & Currency | – Gold – Silver – Platinum | Bars, coins, jewelry | – Ontario – Online |
| Vaulted | – Gold – Silver | Bars, coins | – Online |
| Uphold | – Gold – Silver – Platinum – Palladium | Bars | – Online |
| Costco | -Gold -Silver | Bars | -In-Person |
Buying Gold Stocks, ETFs, And Futures
Gold stocks, ETFs, and futures don’t require physically handling gold and storing it. If you wish to buy these types of gold assets, you’ll need to purchase them through a broker or online trading platform.
A couple of the more popular online brokerages include Wealthsimple Trade and Questrade, as mentioned. Big banks may also offer online trading platforms, including CIBC Investor’s Edge and Scotia iTRADE.
How To Invest In Gold Through CFDs
A unique way to invest in gold is through contracts for differences (CFDs), which are contracts between buyers and financial institutions whereby investors speculate on the future value of gold. Investors earn profits from price movements, regardless of whether they increase or decrease. Even if the price of gold declines, CFD investors can still earn a profit.
Keep in mind that CFDs can be very risky, so they may be best suited for more experienced traders. According to the European Securities Markets Authority (ESMA), between 74% and 89% of new CFD traders lose money.
Should I Buy Physical Gold?
There are several perks of buying physical gold, but there are also some drawbacks to consider.
Pros Of Buying Physical Gold
The benefits of purchasing physical gold include the following:
- Hedge Against Inflation. Gold has a long history of providing a reliable way to invest in an asset of value that is not impacted by inflation or the drop in value of the dollar. In fact, when the dollar weakens, the value of gold and other precious metals tends to increase.
- Portfolio Diversification. Gold is a great way to diversify your portfolio and protect your financial position, especially during times of market uncertainty.
- Easy To Buy. You can buy physical gold from any one of Canada’s big 5 banks or from several reputable and FINTRAC-compliant dealers who specialize in buying and selling gold, including ones that you can buy from online and will ship to your door.
- Own A Physical Asset. In the unfortunate event that financial systems collapse, having physical gold in your possession would provide you with some financial protection and an asset that can serve as a form of currency.
- Liquidity. Gold is easy to sell and convert to cash, especially gold coins.
Cons Of Buying Physical Gold
Buying physical gold also has its downsides, such as the following:
- Lower Returns Over The Long Run. Gold is typically invested in for building wealth over time and is not usually a commodity that is traded for short-term gains, like stocks.
- Additional Fees. There are other costs to consider in addition to purchasing the actual gold itself, such as storage fees, delivery fees, dealer fees, and insurance.
- Inconvenient. Storing gold can be a hassle. If you store it at home, you’ll need to make sure your storage space is well-hidden and secure so that it does not end up in the wrong hands. If you store off-site in a vault or safety deposit box, you’ll need to pay for this service and won’t have the gold readily accessible to you in case of an emergency.
- No Income Stream. While you may earn a profit from the increase in gold’s value, you won’t collect a steady stream of income that comes with dividend-paying gold stocks.
Tips To Invest In Gold
If you believe that investing in gold is right for you, be sure to take some precautions and carefully consider your entrance into this market:
- Consider Your Tolerance For Risk. Generally speaking, buying gold is a relatively safe investment. However, some investment types are safer and riskier than others. For instance, investing in gold futures is the riskier way to buy gold, while gold ETFs may help minimize risk.
- Do Your Homework. Whether you’re buying physical gold from a dealer or are investing in a gold stock, be sure to thoroughly research the company you’re buying from.
- Be Mindful Of Gold’s Share In Your Portfolio. If you’re planning to include gold in your investment portfolio, consider starting slowly. Ideally, gold should make up a relatively small portion of your overall diversified portfolio. Gold may hold intrinsic value, but it doesn’t pay out dividends like other investments.
History Of Gold Values
Gold has managed to maintain value over time, giving investors a sound and reliable investment vehicle to stabilize their investment portfolios. Historically, the price of gold has been on an upward trajectory, despite the odd fluctuations in the mid-1980s and then again in 2013.
But the spot price of gold has never been higher than today. As of this writing (August 2024), the spot price of gold is $2,448.80 USD, or $3,358.26 CAD, per ounce, which is an all-time high. Those who have been holding on to gold over the past few decades have been able to see massive gains in value.
Final Thoughts
Adding gold to your investment portfolio can provide you with a stable investment vehicle compared to more volatile stocks. Not only can gold increase in value over time and help you build wealth, but it can also be used as a currency in times of financial disaster. But before buying gold, consider whether to buy physical gold, gold stocks and futures or trade with CFDs, along with all the different nuances that come with each type of investment.
