Going for gold: Is it time to invest in the precious metal as prices rise? You have options
Srivindhya Kolluru

There are many ways to invest in gold — bars, coins, exchange traded funds and even stocks in mining companies — but only if it aligns with your long-term strategy.

There’s a gold rush going on right now, and experts say there are several ways to invest in the precious metal.

Recently, gold prices have surged, in part due to geopolitical tensions, a weakening U.S. dollar and growing expectations of a rate cut in the U.S.

The metal is up about 17 per cent this year alone, rising just above $2,400 (U.S.) an ounce last week.

Ian Calvert, vice president and principal at HighView Financial Group in Toronto, says gold is considered a safe-haven asset and typically a hedge against inflation.

The most popular way to invest in the shiny metal is through physical bullion, which you can buy at major Canadian banks, such as TD, CIBC and BMO.

Jewellers and retailers like Costco also sell gold bars and coins. 

Most major financial institutions sell gold in the form of bars, coins and wafers that you can buy online or in person at a local branch. 

However, the past 20 years have introduced other avenues to invest, including a mutual fund or an exchange-traded fund (ETF) that tracks the price of gold and other precious metals, like silver.

Some of these funds include the iShares Gold Bullion ETF, BMO Precious Metals Fund, CIBC Precious Metals Fund, and TD Precious Metals Fund.

CIBC Precious Metals Fund has posted a 13.03 per cent year-to-date return, while the TD Precious Metals Fund has posted a 9.60 per cent return.

“Conventional guidelines suggest a small asset allocation to an asset class like gold or other precious metals,” says Jason Heath, managing director at Objective Financial Partners. “Some people say between five and 10 per cent, for example, but I think it’s important to emphasize that there’s no right answer.” 

And though prices have rebounded, Heath suggests Canadians invest in gold or other precious metals only if it aligns with their long-term investment strategy, adding that it’s important to avoid making knee-jerk investment decisions based on what asset class is trending or making headlines. 

A more indirect strategy for investing in gold is through the stocks of mining companies, such as Barrick Gold and Newmont Mining Corporation, two of the world’s largest gold miners. 

There are upsides to purchasing certain types of gold. Gold bullion and collectable coins that are 99.5 per cent pure are exempt from GST/HST. 

However, the profit you pocket from selling gold could be subject to a capital gains tax.

Heath says that gold mining stocks could pay dividends which could be taxable on an annual basis in taxable investment accounts.

“The tax implications of investing in gold primarily matter if you’re investing in a taxable, non-registered account,” says Heath. 

“The upside with gold bars or coins is that you have the actual possession of the metal, but storage and security can be an issue,” says Calvert. “Meanwhile, a big feature of ETFs is that you now own a very liquid investment that ideally, will move in tandem with the price of gold.”  

 

 

 

Srivindhya Kolluru is a freelance contributing columnist for the Star’s Business section, writing about consumer issues and for the “In Your Corner” personal finance column.

 

 

 

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