When times are particularly uncertain there’s one asset that almost always enjoys a surge in demand. Gold has been coveted by civilisations throughout history, and while many other materials and markets have come and gone, it remains an asset that many people want to own.
These days gold is a popular choice for investors seeking to improve diversification (it has a low correlation with equities), hedge against inflation (as it’s priced in US dollars) and bolster their portfolio security. The price of gold increased by 28% in 2024 and by a further 25% in the first six months of 2025, reflecting its safe haven status amid global geopolitical and economic instability.
A recent survey of investors by eToro found that gold was the preferred asset for 35% of investors wanting to hedge their portfolios against a weaker US dollar. More than six in 10 investors said they expect the price of gold to climb higher over the next year and 45% already have some form of exposure to the asset.
Here we take a look at four different ways to invest in gold, each with its own advantages and disadvantages. But first…
…what are the risks?
Gold might be known as a safe haven investment, but that doesn’t mean it’s safe – only that it’s a low-correlation alternative when equities are turbulent. The fact that its price can spike so sharply is a warning in itself, as this means it can plunge just as dramatically. In 1980, for instance, the gold price plummeted from £640 at the end of January to just £365 in early April, before falling more gradually to £224 by June 1981. That’s a 65% drop in 18 months.
So while it can give you protection against volatility, gold has the potential to be a bubble market and so should only be a small slice of a broadly diversified portfolio.
Physical gold
One of the most traditional ways to invest in gold is to purchase physical gold in the form of coins or bars. In the UK, the Royal Mint produces a range of gold coins, including the popular Britannia and Sovereign coins. Bullion dealers also offer a variety of gold bars in different sizes, making it easy for investors to buy gold in a form that suits their budget and preferences.
When investing in physical gold, it is important to consider storage and security. While some investors choose to store their gold at home, others opt for secure vaults or safety deposit boxes. It is also essential to purchase gold from reputable dealers to ensure authenticity and avoid counterfeit products.
Gold ETFs
Exchange-traded funds (ETFs) and exchange traded commodities (ETCs) are another popular way to invest in gold. These funds track the price of gold and are traded on stock exchanges, making them a convenient option for investors looking to gain exposure to the precious metal without owning physical gold. In the UK, there are several gold ETFs available, such as the iShares Physical Gold ETC, the Wisdom Tree Physical Gold and the Invesco Physical Gold ETC.
Gold ETFs offer liquidity and diversification, as investors can easily buy and sell shares on the stock market. However, it is important to be aware of management fees and tracking errors that can affect the performance of these funds.
Gold mining stocks
Investing in gold mining companies is another way to gain exposure to the gold market. These companies extract and produce gold, and their stock prices are influenced by factors such as production costs, reserve estimates, and gold prices. In the UK, there are several gold mining companies listed on the London Stock Exchange, such as Polymetal International and Centamin.
Investing in gold mining stocks can offer potential for capital appreciation and dividend income. However, it is important to conduct thorough research on individual companies and consider factors such as geopolitical risks and operational challenges that can impact their performance.
Gold futures and options
For more experienced investors, trading gold futures and options can provide opportunities to profit from price movements in the gold market. Futures contracts allow investors to buy or sell gold at a specified price on a future date, while options give the holder the right to buy or sell gold at a predetermined price within a set timeframe.
Trading gold futures and options requires a good understanding of the market and a high risk tolerance, as leverage can amplify both gains and losses. It is important to use risk management strategies and stay informed about market trends when engaging in these types of investments.
In conclusion, investing in gold can be a valuable addition to a diversified investment portfolio for UK investors. Whether you choose to buy physical gold, invest in gold ETFs, or trade gold mining stocks, it is essential to conduct thorough research, consider your risk tolerance, and seek advice from financial professionals if needed. Remember – while it’s a useful asset it’s also very specialist and should only account for a small slice of a diversified portfolio.
Photo by Dmitry Rukhlenko on Canva
