Gold is considered a safe haven asset, to be held in times of turmoil such as conflict and economic downturns. There are several different ways to buy and sell gold and other precious metals such as silver and platinum. We’ll take a look at the different gold trading options below including BullionVault and look at the pros and cons of each.
Physical Gold Bullion
When it comes to gold, the first option that many people think of is to buy physical coins, bars or jewelry directly from a retailer. Whilst doing this gives you physical ownership it also presents several issues. Mainly, where to store it. Do you have a safe at home or will you need to rent a safe deposit box? If you are storing them at home are these covered in your home insurance policy? Usually high value items like bullion wouldn’t be covered under normal home contents insurance. Specialist insurance cover would be required which can become very costly.
The other major disadvantage of purchasing physical gold is that it is not very cost effective. When buying, you will be paying a premium to the gold spot price of usually between 5-10%. This is because the dealer needs to make a profit from the trade. You also need to consider when selling physical gold that retailers will purchase from you at a discount to the current gold spot price. Again this is in order for them to make a profit on the trade.
Trading Gold Mining Company Shares
An alternative option is to buy shares of mining companies that are listed on a stock exchange such as the FTSE 100. This will offer greater liquidity compared to owning physical bullion so you can sell quickly.
Often in poor economic situations the price of gold increases as it is seen as a safe haven. This usually correlates with an increase in share prices of gold miners as they will be more profitable. It also works in reverse when the gold price is low.
However with shares you have to take into consideration the financials of the company itself in addition to the gold price. Factors to consider include debt and production costs and the effect these will have on the future profitability and share price of the company. Then there are trading costs for buying and selling shares to take into account. Although you can trade shares commission free with apps like eToro.
Trading Gold ETFs
Gold ETF/ETC (Exchange Traded Funds/Commodities) are funds traded on a stock exchange. This is a more cost effective way of owning gold than purchasing physical bullion. This is as a result of cutting out storage, transportation and insurance costs. Whilst they can be traded easily on a stock exchange, you are usually limited to the opening times of the exchange. This means you can’t always take advantage of swings in the gold price.
You also need to take into account the fees charged by the broker for buying and selling. Also be aware of any annual management charges for holding these in your brokerage account. This is in addition to the charges the fund issuer charges for ongoing costs associated with running the fund. One of the lowest cost ways to trade is with eToro.
One other thing to be aware of with ETCs is that some of these hold physical gold whereas some use complex derivatives to track the gold price.
Trading Gold Online With BullionVault
There is one further option for trading gold online – BullionVault. It is the world’s largest online gold investment service managing over $3 billion of bullion. This is an online platform that allows private investors to trade gold, silver and platinum bullion for the lowest costs. Trading is available worldwide and investors are able to trade in either British Pounds Sterling, US Dollars, Euros or Japanese Yen.
Whenever you place a trade through the platform you are purchasing physical bullion. Rather than it being delivered to you, it is stored in one of BullionVault’s secure vaults located around the world. This significantly reduces costs associated with transporting and handling bullion.
Although you do always have the option of withdrawing your gold for a small fee if you so wish. Investors can choose which of 5 vaults they wish to store their bullion in – Zurich, London, Toronto, Singapore or New York.
Dependent on the value of the trade commissions range from just 0.5% down to as low as 0.05%. Monthly storage costs are charged at 0.04% for silver and platinum and just 0.01% for gold.
One other great advantage of BullionVault is that unlike trading shares and ETCs the platform is open and available to trade 24/7 allowing you to take advantage of any swings in metal prices.
More Investment Reading
If you are interested in investing and personal finance you can find more articles on our blog including;
- How to invest in Scotch whisky.
- What are shares and how do they work?
- Bitcoin cryptocurrency: what it is.
- Should I save or invest?
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