Ten ways to profit from gold

The turmoil in global financial markets has triggered a surge in the price of gold, which investors consider a safe haven in times of trouble.

Here, Times Money offers ten ways investors can profit from demand for this precious metal. 

1. Bullion

Small bars and bullion coins can be bought from dealers, such as Spink, at about 5 per cent above metal value and sold back at the same rate below value. This week Spink was selling 1oz Krugerrands for £470 and buying from the public at £426. Dealers tighten margins for customers who buy or sell in bulk.

2. Collectable coins

Gold coins with a value above their bullion content are an interesting option, but not one recommended by Ben McLoughlin, bullion manager at Spink. He says that the market is notoriously difficult for noncollectors to second-guess. “If you do decide to buy, rare coins in excellent condition are the safest,” he adds. “We are seeing strong interest in coins from Russia, India and China, and in British Celtic coins.”

3. Jewellery

This has the advantage of being both decorative and wearable. However, bog-standard new items come with a mark-up of as much as 300 per cent on the gold price. Collectible items, either vintage examples or new pieces from top designers, have greater investment potential and a value well above bullion, but they are a speculative punt, dependent on volatile market trends.

4. Exchange-traded funds (ETFs)

Gold ETFs track the gold price and offer what Gary Dugan, of Merrill Lynch, the investment bank, calls “the easiest way to gain exposure to pure gold”. ETFs are listed on the stock market, like shares, and can be bought through a stockbroker, held tax-free in an Isa and incur much smaller fees than managed funds.

5. Mining shares

Shares in goldmining companies provide geared gains over the metal price. This is where a rise or fall in the gold price translates into a more significant rise or fall in the share price. Several funds invest heavily in the sector, notably the Black Rock Merrill Lynch Gold and General Fund. This has delivered a return of 2,026 per cent since its launch in 1988.

6. Gold futures

These are high-risk investments available from stockbrokers. A futures contract is a tradeable promise to buy or sell at a set price on a future date. Investors put down a deposit of only 10 per cent, so can buy 100oz of gold - the size of a futures contract - for the price of 10oz. Huge profits, and losses, can be made.

7. An online option

BullionVault.com offers the chance to buy and sell shares of gold bars held in secure vaults in Zurich, London and New York. The metal is held in the investor's name - not in trust, as with ETFs. Transaction costs are a fraction of those in the small-bar market, while storage and insurance costs are 0.12 per cent a year, with a $4-a-month minimum. New users can sign up for a free gram of gold to get a feel for the site.

8. Metal detecting

A decent switch-on-and-go detector costs as little as £200. Though this hobby has gold-finding potential, base-metal items of archaeological interest, but minimal monetary value, are far more common. All gold finds over 300 years old must be declared as treasure trove and may be bought by museums at market value.

9. Panning for gold

This will not make you rich, but it is a fun day out in some of Britain's best countryside. The Museum of Lead Mining at Wanlockhead, Lanarkshire, Scotland, has full-day courses tomorrow and on September 21, priced at £65, including lunch and the necessary licence. The museum says that most participants find a small amount of gold to take home.

10. Treasure hunting

Lost treasures include King John's treasury, which disappeared into the Wash in 1216; two pirate caches on Cocos Island, off Costa Rica; and the cargoes of several wrecks. An alternative to searching for such riches yourself is to invest in marine-salvage businesses, such as Odyssey, which is listed on the Nasdaq stock market.

By Mark Bridge

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Comments

[David Grant]

Someone should have told Gordon Brown about this before he sold all our gold reserves when the price was rock bottom

[Mr Tim]

www.usmint.gov.............yum

[Tikhon Savrasov]

11. Mug and old lady for her gold.

Low risk, high reward.

[D howard]

What about diamonds? What is happing to the price of diamonds?

[Larry]

I trade gold on the futures markets and use the profits to buy the physical stuff as I don't have ready cash. If you know what you're doing, futures can be very lucrative. Unfortunately, spread betting companies are on a roll to recruit more customers - only to have some 90-odd percent getting wiped out.

[sk]

gold

[Davy B]

@ Charles W?

Have you ever looked at the price of gold over the last 2 years - perhaps you advised Gordon Brown on the selling of the UK's Gold reserves?

[John]

Charles W:

You really must stop watching those 'you too can be rich through property' programs on TV!

[Adam]

Bricks and mortar? LOL!!!!

[Matt]

Paper gold is an oxymoron - stay away from ETF's and futures. Buy physical and hold.

[PityTheFools]

@ Charles W. Hope springs eternal in the stupid. The property boom is finished. Get over it.

[David]

Another way is to trade in spot gold, usually valued against the USD. This instrument tends to be much more liquid than gold futures.

[Charles W]

Gold is an invesmtnet for the paranoid. Despite the current blip, bricks and mortar is the only sure-fire route to sustained gaisn.