The truth is that to invest in gold there are three well differentiated strategies. The first is to do it indirectly, by investing in mining companies. If gold goes up, these companies that extract the metal from their mines will do well. But of course, you also have to look at their finances: if they are poor-quality mining companies (for example, they have debt or embark on new projects that are not fruitful) the truth is that even in a bullish situation you can lose money goldco, therefore to follow this strategy you have to be very selective.
The second way to invest in gold is by buying it directly. The best way to do it is through coins issued by different countries, but we are already starting to mix numismatics and gold: some coins have special value and normally a premium is always paid over the spot price of gold. Spain has recently launched its first gold bullion coin (for those who want to invest in gold), the Lince, and its price is 10% higher than the spot price.
If numismatics is not our thing, you can also buy bullion, but you have to be careful with counterfeits, as they exist and in the case of coins it is more complicated to do. So the best way to buy gold physically is to focus on a coin that does not have a special numismatic value, such as the South African Krugerrand, with fairly high circulations.
The third way to invest in gold is through an accumulation ETF. In other words, a listed investment fund that physically accumulates gold and therefore its actions are directly related to the price of the metal. There are multiple and you should choose one with low costs, accessible from our usual broker and that is audited.
Is it a good investment?
The truth is that although it is always said that gold is a good investment, historically it has not been so. The image of the historical profitability of the different assets is very famous, showing that stocks give an average return of 6.9% per year (in real terms) compared to 0.64% for gold. These data come from the 19th century.
However, if we think that we are in a different era, we can focus on more recent time horizons. In the last ten years (which includes the bear market of the stock market in 2023) the S&P500 has appreciated 235% while gold 38%.
If we go back to the last 15 years, which include the 2008 stock market crashes, the returns are similar. And if we go back to the last year, we have 17% rises in gold compared to 10% stock market falls. In other words, gold may be decorrelated with the stock market and we may think that now is the best time to invest, since the stock markets are falling. But the truth is that we do not know when the falls will stop. In fact, if we compare with history, the stock market has fallen a lot and will end up recovering. If we are out we will miss that recovery.
Another thing is that you want to have some investment in gold. If it’s part of a more defined strategy than selling everything and putting it in gold, then it may make some sense. For example, the permanent portfolio is an investment strategy that requires having some exposure to gold. But beware, what this strategy achieves is to reduce profitability in exchange for lower volatility (like almost all investment strategies that require a mix of assets).