Gold is a store of value that has held its own for thousands of years. From an investment perspective, not only does gold allow you to hedge against falling stock markets and rising inflation rates – but it also offers the chance to grow your capital.
This is because, over the past five years, the value of gold has increased by almost 73%. This means that on an initial investment of £10,000 – you’d now be looking at a gold portfolio that is worth £17,300.
If you’re interested in adding this precious metal to your trading portfolio, this Investing in Gold UK Guide will tell you everything you need to know.
We’ll explain the many different ways in which you can invest in gold in the UK, how its value is determined, what risks you need to consider, and how you can get started with an investment today!
Basics of Investing in Gold
By investing in gold, you will be looking to achieve one or more goals. In most cases, this centres on growing your investment as the value of gold increases. After all, the value of gold is determined by demand and supply – much like any other asset class. In other words, as the demand for gold increases over time, as will its real-world value.
In addition to this, gold is a finite asset – meaning that eventually there will be nothing left to mine. This once again adds to the attraction of investing in gold as a means to make money. With that being said, some people in the UK investment in gold for purposes other than just financial gain.
For example, many investors will turn to gold during times of economic uncertainties. This has become evident in virtually every global recession to date. This is because investors are scared to hold on to stocks and shares when the markets are bearish, so they instead look to purchase safe-haven assets like gold.
Then, when the time is right, said investors will sell their gold positions and re-enter the stock markets at a more favourable price. Nevertheless, we should note that there are many ways to value gold – for example, per gram or ounce. However, the global standard is to price it per ounce, in US dollars. As such, the remainder of this guide will discuss gold price levels in this manner.
Gold Prices – How Does it Work?
Before you take the plunge by investing in gold in the UK, it is crucial that you have an understanding of how the value of your investment will change over time. This is because there is a lot more to think about in comparison to other assets. For example, the value of stocks increases when the company in question performs well.
Similarly, an ETF that tracks real estate would increase when the respective housing market appreciates. In some ways, this is a fairly simple concept. However, in the case of gold, the underlying fundamentals are based purely on demand and supply. With this in mind, you need to know some of the reasons why gold might increase or decrease in demand.
Safe Haven Asset
One such example – and as we mentioned earlier, is an impending bear market or recession. This is because investors will turn to safe assets to ensure that they protect their wealth while the downward trend remains in place.
- For example, in the midst of the financial crisis in 2008, gold was priced at lows of $712/oz.
- But, as fear and uncertainty spiralled out of the control, gold price levels went on a parabolic upswing swing.
- In fact, by September of 2011, the price of gold stood at highs of $1,869/oz
- This means that in just under three years of holding gold, you would have grown your investment by over 162%
As you can see from the above example, by investing in gold during the last major precision you would have achieved two crucial goals. Firstly, you would have prevented the value of your stocks and shares portfolio from plummeting by double-digit percentages. Secondly, you would have grown your capital by an unprecedented amount – in this, over 162%. This means gold is generally considered a low risk investment.
Supply is Also Important
Like any tradable asset class, you also need to consider the supply side of the equation. It goes without saying that when the supply of gold increases – maybe due to a new mining discovery, this can negatively impact the value of the precious metal. With that being said, an increase in supply via gold mining operations is typically a short-term situation.
This is because, in the grand scheme of things, there is not an unlimited supply of gold. On the contrary, a recent BBC article noted that by some estimates – just 20% of the world’s gold is left to be mined.
Look at China
Make no mistake about it – China is a major player in the context of gold price levels. This is because the Eastern powerhouse has been involved in a major gold purchasing spree for several years now. In just the last 10 months alone, China has increased its gold supplies by an additional 100 tonnes.
Market commentators argue that this is one of the main factors that has been driving the price of gold up. In fact, during the aforementioned 10-month period, gold has increased in value by over 31%.
If you’re looking to invest in gold from the UK, it is also important that you keep an eye on inflation levels. In particular, you should focus on inflation in major economies like the US. This is because the history of times suggests that when inflation is on the rise, this has a positive impact on the value of gold.
Once again, this reverts back to the safe haven characteristics of gold that we mentioned earlier. At the other end of the spectrum, when inflation levels are low, this often results in gold price levels being restained.
Ways of Investing in Gold
So now that you know the basics of how gold is priced and what can influence its value, we are now going to discuss the many ways in which you can invest in this precious metal from the UK.
Investing in Physical Gold
As a newbie in the gold trading scene, you might be tempted to take the traditional route. That is to say, you might be interested in physically purchasing gold and storing it yourself. For example, you might be looking at investing in gold coins or investing in gold sovereigns. Or, if you’re really looking to splash the cash, you might be thinking about investing in gold bullion bars!
Before we get to the fundamentals of how this can be achieved, it is important to note that storing gold yourself is not only costly and high risk, but it can have a hugely detrimental impact on the value of your investment. This is because gold needs to be kept in specialist storage facilities to ensure it is not exposed to the natural elements.
In addition to this, you face the risk of having your physical gold stolen. As you can also image, transporting large quantities of gold to and from your preferred location can result in huge costs. So with all that being said, the most cost-effective, convenient, and secure way of investing in physical gold from the UK is to use a third-party.
There are heaps on online platforms that allow you to invest from just a few pounds. The gold bars are kept in specialist vaults – often in New York, London, or Switzerland. You will retain 100% ownership of the gold and in most cases, you can exit your position at the click of a button.
Investing in Gold ETFs
Although you might be thinking about investing in physical gold, we would argue that the best way of accessing this lucrative precious metal is through an exchange-traded fund (ETF).
ETFs are managed by financial institutions that collect funds from thousands of investors. The ETF will personally purchase assets to track a specific market – for example, stocks, bonds, or gold.
There are a plethora of benefits that make gold ETFs the best option as a UK investor.
- Gold ETFs are backed by large-scale institutions that are heavily regulated. This ensures that your gold investment is 100% safe and secure.
- The gold ETF will be listed on a public exchange like the NYSE or London Stock Exchange. This means that you can enter and exit your investment whenever you see fit – during standard market hours.
- Gold ETFs are super cheap to invest in. More often than not, you will pay a fee of less than 0.5% per year.
- When using a UK broker like eToro, you can invest in a gold ETF from just $50 (about £40)
There are many gold ETFs to choose from in the UK trading scene. But, the largest and most popular is that of the SPDR Gold Shares ETF. This ETF is backed by physical gold bullion – meaning that you are indirectly investing in the asset. Best of all, there is no requirement for you to worry about storing or transporting gold. After all, this role is reserved for SPDR.
In terms of how the value of your gold ETF investment works, this correlates like-for-like with gold demand and supply. That is to say, if the value of gold increases by 3%, in theory, as will your chosen ETF. As the SPDR Gold Shares ETF is listed on the New York Stock Exchange, your investment is highly liquid. This means that you sell your investment whenever you like.
It is also possible to gain exposure to the precious metal by investing in gold-related shares. In most cases, this comes in the form of gold mining companies. In theory, as the value of gold increases, this should have a positive impact on the shares in question.
After all, gold mining companies are in the business of selling their findings on the secondary market. As such, they are able to generate larger profit margins when the price of gold is on the rise.
One such example of a popular gold mining company that you can invest in is that of Newmont Corporation. The firm – which is based in the US and publicly-listed on the New York Stock Exchange, has the largest gold reserve base globally. It has mining operations in several US states, Canada, Australia, Peru, and Mexico.
If you’re interested in Newmont Corporation shares – or any other major gold company that has a public listing, you can invest from just $50 at eToro – commission-free.
Investing in Gold CFDs, Futures, and Options
If you’re looking to trade gold in a more sophisticated manner, there are several other options available to you in the form of financial derivatives. This allows you to profit from the rise and fall of gold and even trade with leverage. Before we get to that, let’s explore the role of gold CFDs in speculating on the short-term value of the precious metal.
CFDs (contracts-for-differences) are financial instruments that allow you to trade assets without taking ownership. This is because CFDs are pegged to the real-world market value of the asset. For example, if gold is priced at $1,801/oz, as will the CFD instruments at your chosen broker. Although you won’t own the gold itself, opting for CFDs comes with a number of benefits.
- Leverage: You can trade gold CFDs with leverage. This means that you can trade with more than you have in your CFD broker account. UK retail traders can apply leverage of up to 1:20 on gold CFDs – which is huge. This means that a £100 account balance would allow you to place a trade worth £2,000.
- Long or Short: Unlike traditional gold investments, CFDs give you the option of going ‘long’ or ‘short’. If you go long, this means that you are predicting that the price of gold will increase. If going short, you are predicting that the value of gold will decrease. This allows you to profit from both rising and falling gold markets.
- 0% Commission: If using a low-cost trading platform like eToro, you can trade gold CFDs in a 100% commission-free manner. This allows you to target smaller profit margins as you won’t get hammered with trading fees.
- Fully Regulated: All CFD brokers offering trading markets to UK residents must be licensed. This means that you will benefit from the protection of the FCA. This isn’t something that you will get when you use an offshore gold bullion broker.
With that said, as gold CFDs are leveraged instruments, you will incur a fee known as ‘overnight financing’. This is a fee charged for each day that you keep the position open. As such, gold CFDs are only suitable if you want to profit from short-term pricing swings. If you’re looking to invest in the long-term value of gold, you are much better suited for an ETF.
Nevertheless, let’s look at a quick example of how gold CFDs work in practice.
- Gold is currently priced at $1900/oz
- As such, your chosen broker is offering gold CFDs at $1,900/oz
- You think that gold is currently overvalued, so you decide to go short by placing a ‘sell order’
- You stake £100 with leverage of 1:20
- Your prediction was correct as gold has since dropped by 5%
- On a stake of £100, you would make just £5 profit
- But, as you applied leverage of 1:20, your profit is amplified to £100
As you can see from the above, gold CFDs allow you to profit in the event you think that the asset is overpriced!
Futures are even more complex than CFD instruments. As such, you should only consider gold futures contracts if you have an understanding of how they work.
The fundamentals are as follows:
- Futures contracts will always expire and they typically last for three months.
- When you purchase futures, you can sell them at any point before the date of expiry
- If you are still holding the gold futures when they expire, you have a legal obligation to purchase the asset
- Most gold futures are settled in cash, meaning that you wouldn’t need to take physical delivery of the asset
Futures will always have a ‘strike’ price attached them. This is the price that the markets think gold will be priced at when they expire. For example, if the strike price on a 3-month gold futures contract is $2,005, your job is to predict whether gold will be worth more or less than this in three months times.
- Gold is currently priced at $1,900/oz
- A 3-month futures trading contract has a strike price of $2,005/oz
- You think that gold will be worth more than $2,005/oz in three months so you buy 10 futures contracts
- When the contracts expire, gold is worth $2,100/oz
- This means that for each contract that you hold, you’re in profit by $95 ($2,100 – $2,005)
- You bought 10 contracts, so that’s a total profit of $950 (10 x $95)
Take note, gold futures contracts are typically reserved for institutional investors as the minimum stake size is often large. This is why you are best suited for commission-free CFDs at eToro.
Once again, options contracts are complex financial instruments so you are best to stay away unless you know what you are doing. Options are very similar to futures, insofar that they allow you to speculate on the future value of an asset like gold. Both futures and options also allow you to go long or short, apply leverage, and the contracts will always have an expiry date.
However, there are some fundamental differences:
- In order to access the gold options market, you only need to pay a ‘premium’
- The premium is like a small upfront deposit that you will pay irrespective of whether your trade is successful. This is often in around 5% of the total contract value
- If you are still in possession of the gold options contracts when they expire, you have the ‘right’, but not ‘obligation’, to purchase or sell the asset
- If you speculate incorrectly, you will only lose the premium that you paid
- If you go long on gold you need to purchase ‘call options’. If you go short, you’ll be purchasing ‘put options’.
Let’s look at a quick example of how gold options trading works in practice.
- Gold is currently priced at $1,500/oz
- A 3-month options contract has a strike price of $1,700/oz
- Each options contract requires a premium of $85. You buy 10 call options in total – taking your stake to $850
- Just before the gold options expire, the asset is priced at $2,000/oz
- This means that for each call options contract, you are in profit by $300 ($2,000 – $1,700)
- You bought 10 contracts so your gross profit is $3,000
- However, you also need to substrate the $850 premium that you paid. As such, your net profit on this gold trade is $2,150.
Is it Worth Investing in Gold?
So now that we have discussed the many ways in which you can trade or invest in gold from the UK, we now need to discuss whether or not this asset class is worth bothering with.
To help clear the mist, below we list some of the many reasons why you might consider allocating some of your investment capital into this precious metal.
Gold is a Store of Value
The most obvious starting point is that gold is a store of value in the truest form. It has held its own for thousands of years and crucially – it is a finite asset. As noted earlier, this means that there is only so much gold on Planet Earth. As we get closer to depleting gold reserves, this can only have a hugely positive impact on the precious metal, making it a good long term investment.
Over the Course of Time, Gold has Held its Value
There is no asset class that has quite held its value like gold. Most importantly, this precious metal does not corrode and thus, depreciate. Much like real estate or fine art – the value of gold continues to rise over the course of time.
Protect Your Wealth During Market Downfalls
You might be tempted to sell your stock investments and leave the cash sitting in your bank account during a recession. However, this would actually end up losing you money when you factor in the impact of inflation. Instead, investors will often flock to gold as a means to hedge against the stock markets. As we discussed earlier, gold has always performed well during a recession.
Portfolio Diversity is Crucial
Another important point to mention is that you should always have an investment portfolio that is highly diversified. By this, we don’t just mean having a portfolio that contains heaps of stocks from various markets and sectors. Instead, you also need to diversify across several asset classes. On top of corporate bonds and government securities, you might want to consider gold.
Easy to Access
We should also note that gold is super-easy to access as a UK investor. As we have already discussed, you can invest the long-term value of gold at the click of a button via an ETF. If you’re keen to trade the value of gold in the short run, you might consider CFDs. Either way, all you need to do is open an online trading account and you can access your chosen gold market within minutes.
Gold can be Highly Liquid
By purchasing gold bullion bars or sovereign coins, you are taking a super high-risk approach to investing. This is because you won’t be able to easily turn your gold into cash without first transporting it to a suitable buyer. Even if you were to take the traditional route by using a pawn shop, you are likely to get a price that is far below the true market value.
With that said, by investing via an ETF, you can turn your gold into pounds and pence any time during standard market hours. Not only is this safe, fast, and convenient – but you can rest assured that you are getting the correct market value!
Disadvantages of Investing in Gold
As is the case with any asset class, there are also some disadvantages of investing in gold that need to be considered.
Although gold has performed extremely well over the course of time, it should be noted that the precious metal can be super-volatile. For example, It lost 27% in value in 2013 and 11% in 2015. In 1996 and 1997 respective, gold lost 4% and 21%. On the flip side, gold increased by 23% and 21% in 2002 and 2003. It also jumped by 12% and 18% in 2017 and 2019, respectively. Ultimately, the volatile nature of gold might not be suitable for those of you that seek more consistent, predictable growth.
Gold vs Stock Markets
Once again, gold price levels have moved in an upward trajectory since the history of time. But, over the past century, the stock markets have outperformed gold by some distance. For example, since 1915, the value of gold has increased by over 10,000%. While this might sound huge, the wider stock markets have increased by 40,000% during the same period.
Difficult to Predict
Gold’s volatile and unpredictable nature does mean that it can be difficult to trade as a newbie. For example, you need to have an advanced understanding of macro-economics geopolitical events. You also need to understand the relationship between gold and inflation/deflation, as well as demand and supply.
Best Gold Investment Platforms UK
Once you know the type of gold investment that you plan to make, you then need to find an online broker that can facilitate your trade. There are many gold investment platforms in the UK, so you need to do some homework before signing up.
In particular, not only do you need to ensure that your chosen gold market is supported, but you also need to look at fees, commissions, payment methods, withdrawal times, and regulation.
We understand that this can be a time-consuming process, so below you will find three of the best gold investment platforms in the UK right now.
1. eToro – Overall Best Gold Investment Platform in the UK
eToro is an online broker that covers most bases in the gold trading scene. For example, the broker – which is now home to over 13 million account holders, allows you to invest in gold via an ETF. There are several such ETFs offered on the platform, albeit, the SPDR Gold Shares market is by far the most popular. You can also invest in gold mining companies like Newmont Corporation.
Irrespective of whether you opt for an ETF or shares, eToro does not charge any dealing commissions. There are no monthly fees either, so you can keep hold of your gold investment for as long as you wish . Other gold markets are also available at eToro. For example, you can trade gold CFDs – meaning that you can apply leverage of up to 1:20 on your position. This also allows you to short-sell gold in the event you believe it is overvalued. Once again, gold CFDs at eToro can be accessed commission-free.
In terms of account minimums, eToro requires a deposit of at least $200 (about £160). You can, however, invest in shares and UK-listed gold ETFs from just $50. Non-UK ETFs require an investment of $500 or more. CFDs, on the other hand, can be accessed with an even lower amount of capital – especially when applying leverage. You can deposit funds at eToro with a UK debit/credit card, e-wallet, or bank transfer. The broker is authorized and regulated by the FCA. If you want to invest in gold on your mobile, you can do so via eToro’s excellent mobile investment app.
- Super user-friendly online trading platform
- Buy stocks without paying any commission or share dealing charges
- Trade CFDs in the form of stocks, indices, commodities, forex, and more
- 1,700+ stocks listed on the UK and international markets
- 150+ ETFs
- Deposit funds with a debit/credit card, e-wallet, or UK bank account
- Ability to copy the trades of other users
- FCA and FSCS protections
- Not suitable for advanced traders that like to perform technical analysis
75% of retail investors lose money trading CFDs at this site
2. Libertex – CFD Gold Broker with Zero Spreads
If you’re more interested in trading the short-term price of gold, Libertex is a great option. This CFD specialist offers heaps of hard metal markets – including silver, copper, platinum, and of course – gold. What is particularly interesting about this CFD platform is that it does not charge any spreads. Instead, you will pay a super-small commission.
Libertex also gives you the option of applying leverage of up to 1:20 when you trade gold CFDs – and even more if you are a professional client. Once again, the CFD option at Libertex also permits short-selling. Libertex gives you the option of trading gold via MT4, which is great for those of you that have a bit of experience in the space.
This is because you will have dozens of technical indicators at your disposal and the ability to fully customize your trading screen. You can easily get started at Libertex by depositing funds with a UK debit/credit card or an e-wallet like Skrill. Bank transfers are also supported. In terms of safety, Libertex has been active in the brokerage arena for over two decades and it holds a license with reputable regulatory CySEC.
- Zero spread CFD trading
- Good educational resources
- Long established broker
- Compatible with MT4
- Competive spreads
- Only offers CFDs
Your capital is at risk.
3. IG – Trusted UK Investment Platform With Competitive-Fees
IG is a traditional old-school brokerage firm that was first launched in the 1970s. The company has grown exponentially over the past decade and it now boasts a £3 billion valuation on the London Stock Exchange. This FCA broker wins hands-down for the number of tradable markets it gives you access to. This includes over 12,000 shares, ETFs, and investment funds.
As such, whether you are interested in investing in gold mining companies in the UK or abroad, IG has you covered. This is also the case with gold ETFs. In terms of fees, IG is a lot more expensive than eToro. You will pay £8 per trade, which you need to pay when you invest and again when you exit your position. This £8 fee is reduced to £3 if you place three or more trades in the prior month.
In addition to its traditional share and fund department, IG offers 17,000 CFD and spread betting markets. This allows you to trade gold CFDs with leverage. You can also choose from buy and sell orders – both of which are commission-free. If opting to spread bet gold, you can avoid paying capital gains tax on your profits. IG requires a minimum deposit of £250 to get started, which you fund with a debit/credit card or bank transfer.
Your capital is at risk.
How to Invest in Gold on eToro
In the final part of our guide, we are going to walk you through the process of getting started with a UK gold investment right now. We are going to show you the steps with FCA broker eToro – as you won’t pay any trading commissions. Furthermore, you’ll have access to a full selection of gold markets – including ETFs, mining shares, and CFDs.
Step 1: Open an Account and Upload ID
To get the process started, head over the official eToro website and open an account.
You will need to enter some personal information and contact details. You will also need to answer a few questions about your prior trading experience.
Note: If you are planning to invest more than $2,250 into gold right now, you will need to provide eToro with some photo ID.
Step 2: Deposit Funds
You will now need to deposit a minimum of $200 into your newly created eToro account.
Supported payment methods include:
- Debit cards
- Credit cards
- Bank Transfer
If you want to invest in gold instantly, avoid a bank transfer. All other payment methods are credited straight away, while bank transfers can take a few working days.
Step 3: Choose Gold Market
You will now need to choose the gold market that you wish to access.
At eToro, you can choose from the following:
- Gold ETFs
- Gold Shares (Gold Mining Companies)
- Gold CFDs
In our example, we are looking to invest in gold via the SPDR ETF. As such, we enter this into the search box and click on the ‘Trade’ button.
Step 4: Complete Gold Investment
To finalize the gold investment process you will need to quickly fill out an order form.
As we are looking to keep things simple by investing in the SPDR ETF, all we need to do is enter the amount that we wish to invest. We are going for a stake of $500 – so we enter this into the ‘Amount’ box.
Finally, click on ‘Open Trade’ to complete your commission-free gold investment!
Note: If opting for gold shares or an ETF like us, you can only invest during standard market hours. If you are looking to complete your order outside of these hours, click on the ‘Set Order’ button. In doing so, your investment will be executed by eToro when the respective market reopens.
In conclusion, gold offers many benefits over traditional assets like stocks and bonds. At the forefront of this is its store of value characteristics. That is to say, the price of gold has held its own for thousands of years, it does not depreciate, and there is a finite supply. Investing in gold is also a good option if you are looking to hedge against falling stock markets or rising inflation levels.
As we have discussed throughout this guide, there are many ways that you can invest in gold in the UK. This includes gold ETFs, buying shares in gold mining companies, and even trading gold CFDs. If either of these gold markets interests you, FCA broker eToro allows you to access them at the click of a button.
It takes just minutes to open an account with eToro, and all financial assets can be accessed commission-free with no monthly maintenance fees!
eToro – Invest in Gold with 0% Commission
75% of retail investor accounts lose money when trading CFDs with this provider.
How do you invest in gold in the UK?
If you want to invest in gold in the UK - forget buying physical gold coins or bars. This will be costly, risky, and hugely inefficient when it comes to selling your investment. Instead, the best way to invest in gold in the UK is to opt for an ETF. The SPDR Gold ETF, for example, allows you to invest in gold without you needing to physically store it!
How is the price of gold calculated?
Like most asset classes in the financial space, the value of gold is determined by global demand and supply. That is to say, as the demand for gold outweighs supply, its value should increase.
How do you short gold?
If you think that gold is overpriced, the good news is that you can short it with ease in the UK. All you need to do is sign up with a regulated broker that supports gold CFDs, and then place a sell order. eToro allows you to do this commission-free.
What is the minimum gold investment in the UK?
This depends on a full range of variables - such as your chosen gold instrument and the broker you sign up with. But, if investing in a gold ETF at eToro, you can stake just $50 (about £40).
Is gold a good investment?
Gold has historically been a good investment and has increased in value by over 10,000% since 1915. It is also a good way to hedge against falling stock markets. With that said, the stock markets have outperformed gold considerably over the past century, so do bear this in mind.
Can you trade gold with leverage in the UK?
Yes, if using a UK broker to trade gold CFDs, you can apply leverage of up to 1:20. This gives you trading capital of £200 for every £10 that you have in your CFD broker account.