Invest in Gold Canada 2023 – We receive a lot of inquiries regarding how to invest in commodities and gold in Canada, as one could anticipate in a market slump (and geopolitical crisis) (which we covered not so long ago).
The uncomfortable fact is that, despite what you might expect during a market slump, investing in gold – whether through a gold ETF or by buying real gold – is not proving to be as profitable as one might anticipate.
The reasons why individuals invest in gold, the various ways you may add it to your portfolio, and the reasons why it might not be the greatest option after all are all covered in this article.
WHY INVEST IN GOLD?
The justification for buying gold is that it has historically been the most reliable form of exchange and savings for many centuries.
Gold’s perceived value is derived from its long-term value retention as well as the idea of scarcity (there can only ever be a finite amount of it created).
In the past, when individuals were afraid to invest in stocks, cash, bonds, etc., they frequently turned to owning gold.
As a result, the following factors are frequently used to justify gold investments:
1) They anticipate an increase in value. In other words, they believe they can sell it for more money than they invested in it.
2) They believe that since gold has maintained its worth for such a long time, it will do so regardless of what happens to the investment returns for any asset.
They will purchase gold for the time being, and if other investments appear more appealing in the future (when things have “calmed down”), they can always sell it and go on.
All things considered, I’m not a huge believer of either of these theories and, if you’re looking to accumulate wealth over the long term, I’d recommend sticking with Canadian dividend equities or going the ultra-simple route with a Canadian all-in-one ETF.
HOW TO INVEST IN GOLD IN CANADA
In Canada, there are numerous ways to invest in gold, including buying physical metal (there are two ways to do this), purchasing stock in a gold firm, purchasing gold exchange-traded funds, or purchasing gold futures.
1. Buy Physical Gold From Banks Or The Royal Canadian Mint
Buying real gold bullion bars or coins is still the traditional way to acquire gold. If you’re interested in making these purchases, Canadian banks, the Royal Canadian Mint, or a number of independent merchants can help you out. Nevertheless, owning your own physical gold can be rather perilous since it’s impossible to monitor if it’s ever been taken from you.
A short search indicates that the Royal Canadian Mint’s 1 ounce gold bar will cost $2,690.96 as of mid-August 2023 when purchased through TD. This gold bar is available for purchase on the TD website, where you can either pick it up at any TD branch or have it delivered to your home in Canada at no cost.
The Royal Canadian Mint also sells gold coins, some of which are genuinely useable as currency (although I’ve never tried using one to pay for groceries and I’m not sure why you would given that a “10 dollar” gold coin costs almost $300).
While a gold bar is potentially beneficial in the event of a total worldwide breakdown (and I’m still not convinced about this one), it will be much more difficult to acquire and sell than a gold exchange-traded fund (ETF) would be in the meantime.
2. Buy Gold Exchange Traded Receipts (ETRs) Or Precious Metal Certificates
You can get a precious metal certificate from large banks like RBC, CIBC, or Scotiabank if you want to possess actual gold but don’t want to spend money on, say, a cutting-edge home security system. These certificates are essentially precious metal title deeds. They demonstrate that you are the owner of a specific amount of gold, which the bank has safely stored.
Exchange Traded Receipts (ETRs), which are like precious metal certificates but can be exchanged on the Toronto Stock Exchange, are provided by the Royal Canadian Mint (Royal Canadian Mint CDN Gold Reserves, ticker symbol MNT). Certain online brokers, like CIBC Investor’s Edge, allow you to buy ETRs. They can be sold for cash or exchanged for real gold.
3. Invest In Gold Company Shares
Consider purchasing shares of a gold company if you’re more interested in general investing than you are in getting your hands on physical metal. Shares of mining companies and shares of royalty companies are the two types available. Mining firms receive the financial support from royalty firms they require to develop mines and recover gold deposits.
Many gold firms, notably Franco Nevada Corp (FNV), Barrick Gold Corp (ABX), Agnico Eagle Mines Ltd (AEM), Kirkland Lake Gold (KL), and Kinross Gold Corp., are listed on the Toronto Stock Exchange (TSX) (K). In our post on the finest Canadian mining stocks, you can find a gold corporation.
Please keep in mind that, despite the fact that the value of these gold enterprises will undoubtedly be influenced by the price of gold, they are still distinct businesses. They have special expenses, resources, management, etc. As a result, their respective future profits may turn out to be substantially different.
4. Invest In Gold ETFs
Purchasing a Canadian Gold ETF is undoubtedly the simplest way to invest in gold in Canada. Many Gold ETFs are available for free trading with Qtrade, our preferred online broker. Click the button below to read our Qtrade review or to sign up:
The Best Gold ETFs In Canada
The Horizons Gold ETF is the simplest method to buy gold in Canada (HUG).
This is so because using Qtrade to purchase and sell HUG is completely free. Check out our list of the best online brokers in Canada to compare prices on ETF trading, options, and other sorts of investment.
With gold futures contracts, also known as “paper gold,” HUG gives you exposure to our favorite shiny metal. These futures contracts use the Solactive Gold Front Month Rolling Futures Index to follow the price of gold. My favorite feature is the quite reasonable (0.29%) MER for a Gold ETF.
You might consider these further gold ETFs:
The top gold producer in Canada is represented by the IShares S&P/TSX Global Gold Index ETF (XGD), which obtains indirect exposure to gold by purchasing shares of gold mining firms. The core principles of these businesses may be appraised, and they typically distribute dividends in some shape or manner. Thus, some investors prefer this structure to the gold ETFs based on bullion or futures. 0.61% is the MER.
The BMO Equal Weight World Gold Index ETF (ZGD) is another gold miner’s ETF, but it tracks a wider index and contains more non-Canadian securities. If you purchase ZGD units, you will be funding businesses across the globe, from Brazil to South Africa. The fact that this fund is notable
Another gold miner’s ETF is the BMO Equal Weight World Gold Index ETF (ZGD), although it follows a wider index and contains more non-Canadian securities. You will invest in businesses from South Africa to Brazil as well as Canada if you purchase ZGD units. Because it automatically reinvests corporate dividends, this fund is noteworthy (as opposed to XGD which pays them out). It has a MER of 0.60%.
Our final gold ETF selection, the IShares Gold Bullion ETF (CGL), is the most direct approach to invest in gold because it really owns genuine gold bullion. Moreover, the MER is 0.55%. None of these are included in our ranking of the top 45 ETFs in Canada, in case you were wondering. If you want to invest in gold directly, we do suggest HUG, but if you want to maximize returns, there are other, more suitable options available.
5. Invest In Gold Futures
Advanced investors may want to think about purchasing gold futures or options. If you decide to invest in this manner, you are essentially making a wager on the gold price in the future. Gold futures and options are both derivatives, although options may offer the investor additional flexibility.
After you open a margin account with an online broker, you can investigate options or futures. The Horizons Gold ETF, which replicates the performance of the Solactive Gold Front Month MD Rolling Futures Index ER, can help you avoid some hassles, though.
IS BUYING GOLD A GOOD INVESTMENT?
In the past, gold has not been a wise investment.
This goes against the “common sense wisdom” that has been spread through the years by many people.
Yet statistics simply don’t lie.
According to stock market historian Jeremey Siegel’s analysis, a dollar invested in gold in 1802 would be equivalent to nearly $100 now.
Yeah, you might think a return of 10,000% is really amazing.
But here’s the thing: if that same dollar had been placed in the US stock market today, it would be worth somewhere around $35 million!
It appears that gold may be suitable for long-term value storage. Some market historians will make the intriguing argument that gold will buy the same quantity of things now as it did two thousand years ago after accounting for inflation.
The lack of action is the problem. It simply stands there shining.
Businesses are generally really good (as a group) at creating value since they generate profits, pay dividends, possess tangible assets, develop new, more effective technologies, and so on.
While sufficient to maintain value, it is insufficient to increase value.
Here is how gold has performed in comparison to the Canadian stock market’s average; keep in mind that this includes the hefty dividend payments that our country’s dividend kings consistently distribute.
GOLD INVESTING FAQ
Is it a wise investment to acquire gold right now?
Most likely not. Look, nobody can predict in advance if gold, or anything else, will appreciate in value. What is certain is that gold doesn’t create value the way a business does.
Bitcoin is posing a threat to gold’s dominance as the ideal means of value storage.
Also, we’re currently experiencing a moderately disruptive global crisis, which means that the majority of external forces are currently working in Gold’s favor.
Simply put: For the vast majority of the time, gold has not been a successful investment.
How can I buy gold in Canada the best way?
The easiest approach for the typical investor to purchase gold in Canada is through the Horizons Gold ETF HUG. It gives you the pure gold exposure you’re looking while keeping expenditures as low as feasible.
How do I purchase gold on the Canadian stock exchange?
The simplest way to purchase gold on the stock market is to buy a Gold ETF after opening a Canadian discount brokerage account. On the Toronto Stock Exchange, you can also purchase shares of gold mining businesses like Barrick Gold (TSX).
Can I purchase gold using a TFSA?
With some constraints on the source and metal purity (99.5% for gold), you can purchase gold or silver in a TFSA (the Royal Canadian Mint or a recognized metal refiner). The most convenient way to achieve this is probably through gold ETFs.
What taxes apply to gold in Canada?
The majority of precious metal bullion is exempt from taxes, but there are some important exceptions, such as the form it takes (bars, ingots, coins, or wafers) and purity requirements (99.5% for gold). Do your homework, please.
SHOULD I INVEST IN GOLD TODAY?
Although though gold is one of the oldest investing instruments currently in use, it is neither the best nor the most reliable. Even its one saving grace as an investment, its capacity to hold value, is rapidly fading. In fact, many who support purchasing bitcoin make the exact same claims that gold investors have been making for years to support purchasing gold! Their defenses simply don’t hold up.
Gold will probably hold some of its value over time, but a strong investment portfolio has much more room for long-term growth. Our firm opinion is that you would be better off investigating the alternative low-risk options that are readily available in Canada. While gold may sparkle, low-risk investments with assured returns outperform it.