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Gold has been seen as a reliable store of value since ancient times. Today, itâ€™s commonly considered to be a stable investment that doesnâ€™t experience the same volatility as stocks and other tradable assets, making it well worth considering if youâ€™re looking for a way to protect your wealth.
But if you want to buy gold bullion or invest in gold in Canada through the stock market, how do you go about it? To find out, letâ€™s take a closer look at how and where to buy gold in Canada.
How to buy gold in Canada: choosing the asset type
When most people hear the term gold bullion, it immediately conjures up images of bank vaults stacked to the ceiling with chunky gold bars. In reality, gold bullion refers to gold that is at least 99.5% pure and has been transformed into bars or ingots or minted into coins. Bullion is the form in which gold is traded on commodities markets around the world.
If you want to gain exposure to gold, there are a few ways to go about it.
- You can physically buy and store gold
- You can invest in gold prices or companies via the stock market
- You can trade gold on the financial markets as contracts for difference (CFDs).
Compare gold bullion dealers
Itâ€™s possible to invest in gold through the stock market by profiting from gold prices rather than physically owning gold. Stock market investors can buy shares in companies that have gold exposure, such as gold miners, or they can buy units in a gold-themed exchange traded fund (ETF).
With this approach, you donâ€™t actually buy any gold â€“ rather youâ€™re investing in the performance of the gold industry or the mining company. If you want to invest in gold via the stock market, you need a full-service broker or you can do so by opening an account on an online trading platform.
This approach allows you to invest in gold without having to go through the hassle of buying, storing and insuring it. When you buy shares of a gold mining company, that company is responsible for the mining and storing of gold, and you become a share owner of the company itself. However, because you donâ€™t own any actual gold, it exposes you to all the usual risks that the stock market carries, such as market volatility, company bankruptcy and the possibility of losing your investment.
When you buy units in a gold-themed ETF, youâ€™re tracking the price movements of the commodity itself or stocks in multiple companies with gold exposure. See examples of gold-themed ETFs listed below:
The Toronto Stock Exchange (TSX)
- iShares Gold Bullion ETF Hdg (TSX: CGL-T)
- iShares S&P TSX Global Gold Index ETF (TSX: XGD-T)
- Horizons Gold ETF (TSX: HUG)
- Royal Canadian Mint â€“ Canadian Gold Reserves (TSX: MNT)
- Sprott Physical Gold Trust (TSX: PHYS.U)
The New York Stock Exchange (NYSE)
- SPDR Gold Minishares Trust (NYSE: GLDM-A)
- VanEck Vectors Gold Miners ETF (NYSE: GDX)
- iShares Gold Trust (NYSE: IAU-A)
- SPDR Gold Shares (NYSE: GLD)
- Aberdeen Standard Physical Gold Shares (NYSE: SGOL)
An alternative to buying gold stocks or units in an ETF is to speculate on price movements through CFD investing in the futures market. CFD investors seek to profit from bond price movements â€“ whether up or down. That means that even if gold prices are falling, CFD investors can still make a profit. However, because CFDs can be highly risky and are complex derivative products, CFDs are better suited to advanced traders. You can read more about CFDs in our detailed guide.
What is the gold price in Canada now?
Real-time data for commodities is provided by market makers, not the exchanges. Prices are indicative and may differ from the actual market price.
This is the traditional approach and involves buying gold as a physical asset and owning it yourself. It allows you to get your hands on a tangible asset and avoid the counterparty risks associated with exchange-traded funds.
If you decide to buy physical gold, youâ€™ll then need to consider what form youâ€™d like to acquire. You can buy gold bullion in bars or in coins. Bars are larger and therefore more expensive, but they are an effective option if youâ€™re looking to make a sizeable investment. Gold coins are smaller and less valuable, so they can be a more convenient option when you need to liquidate some of your investment.
Buy gold bars
Gold bars generally range in size from 1/10oz (ounces) to 1kg, but there are bars of up to 500oz available. However, remember that precious metals use troy ounces and that one troy ounce equals 31.1 grams.
There are 2 types of gold bars: cast bars and minted bars. Cast bars are produced by pouring molten gold into an ingot mould, while minted gold bars are manufactured via a minting or stamping process. Cast bars are cheaper to produce, but minted bars look better and are generally easier to sell.
Buy gold coins
Mints around the world also produce gold bullion coins. Typically smaller than bars and ingots, theyâ€™re generally considered to be a more convenient option for many investors. Not only are they cheaper to buy, but they also make it easier to liquidate a small portion of your investment when you need cash. Coins contain between 1/10oz and 1oz of pure gold.
These coins also have a nominal monetary value and can be accepted as legal tender in the country where theyâ€™re made â€“ examples include the Australian Kangaroo, the American Gold Eagle, the Canadian Maple Leaf and the UKâ€™s Gold Sovereign.
There are several options to consider when choosing where to buy gold in Canada, so make sure to consider the following factors before deciding where to buy:
- Location. There are a number of gold dealers around Canada, so the location of those dealers will influence your decision if you plan on buying gold in person. Check out Bullion Directory to find a gold bullion dealer in your province.
- Online options. There are also many online dealers that allow you to conveniently buy gold bullion over the Internet. As well as specialist dealers, you can also buy gold through marketplaces such as eBay and even arrange purchases through precious metal forums. However, as is always the case when spending money online, youâ€™ll need to make sure you know who youâ€™re dealing with â€“ do some research to find out whether the seller is reputable and trustworthy.
- How the gold was produced. Youâ€™ll also need to find out where the dealer gets their gold from. Is it refined and produced by an established and recognized manufacturer?
- Bullion DNA (for gold and silver maple leaf 1 oz coins). The Bullion DNA technology prevents counterfeiting by scanning and detecting the authenticity of Gold Maple Leaf 1 oz coins dated 2014 and onwards and Silver Maple Leaf 1 oz coins dated 2015 and onwards. If youâ€™re interested in buying these types of assets, look for a registered Bullion DNA dealer.
- Premiums and commissions. Read the fine print to find out what fees the dealer charges. Expect to pay a commission to the dealer, which is usually folded into the purchase price, as well as an assay fee to check the purity of the gold and to verify its authenticity, but shop around for the best value.
- Compare price to Canadian gold price. Gold prices are commonly quoted in US dollars, so make sure you compare the price offered by a dealer with the current price of gold in Canadian dollars.
- Delivery. Find out how and when the gold will be transported to you or to its place of storage. Is it insured if anything goes wrong during the delivery process?
Things to consider before buying gold in Canada
If youâ€™re searching for ways to protect your wealth or diversify your investment portfolio, gold may be a practical solution. However, be aware that just like any other type of investment, buying gold comes with certain risks.
Do your research to make sure you understand the risks involved in buying gold, including the costs of storage and security as well as the fact that the returns may not match those provided by other investments. This will help you make an informed decision about whether buying gold is the right choice for you.
Thinking of investing in physical gold? Consider the pros and cons first
- Protect your wealth. Gold has long been seen as a reliable store of value that is largely unaffected by the factors that influence other investments. For example, when share prices plummet, the price of gold usually rises as investors look for somewhere â€œsafeâ€ to park their money.
- Diversify your portfolio. Goldâ€™s â€œsafe havenâ€ status also makes it well worth considering if youâ€™re looking to diversify your investment portfolio and protect your overall financial position during periods of market downturn.
- Easy to buy. There are many dealers who specialize in buying and selling gold, so getting your hands on this precious metal may be easier than you think.
- Itâ€™s a tangible asset. If global financial systems were to somehow collapse, such as what happened during the Great Depression, owning gold as a physical asset offers financial protection. Gold also canâ€™t be destroyed by fire or water damage and wonâ€™t corrode over time.
- Liquid. Gold is fairly easy to convert to cash whenever you need to do so. However, it can be easier to sell a gold stock or ETF than it is to sell a bar of gold.
- Long-term returns may be lower. Gold is commonly seen as a steady investment, so it may not offer the same potential for big returns as other investments.
- There are fees to consider. Youâ€™ll need to factor additional costs such as dealer fees, delivery, storage, security and insurance into your calculations.
- Not as convenient as ETFs. ETFs offer a simple and cost-effective way to gain exposure to gold and may be a more convenient option than buying physical gold for many people.
- No ongoing income. Unlike owning property or shares, which can both provide an ongoing source of income in the form of rent and dividends respectively, gold doesnâ€™t provide regular income.
Like silver, gold is considered a stable investment that retains its value. Before you invest in gold, youâ€™ll want to consider whether you want to buy, store and insure physical gold, invest in gold on the stock market, or use CFDs to trade gold. Regardless of how you choose to invest in gold, remember that, like all investments, it carries risk.
Frequently asked questions about buying gold in Canada
Disclaimer: This information should not be interpreted as an endorsement of futures, stocks, ETFs, CFDs, options or any specific provider, service or offering. It should not be relied upon as investment advice or construed as providing recommendations of any kind. Futures, stocks, ETFs and options trading involves substantial risk of loss and therefore are not appropriate for all investors. Trading CFDs and forex on leverage comes with a higher risk of losing money rapidly. Past performance is not an indication of future results. Consider your own circumstances, and obtain your own advice, before making any trades.
Tim Falk is a freelance writer for Finder, writing across a diverse range of topics. Over the course of his 15-year writing career, Tim has reported on everything from travel and personal finance to pets and TV soap operas. When heâ€™s not staring at his computer, you can usually find him exploring the great outdoors.
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