Answering common questions about retail gold investment

Why own physical gold?[1]

Safety and long-term positive returns (Chart 1)

  • Gold has historically preserved money and helped it grow, providing stability across generations.

    • In good times, gold prices can benefit from higher demand for jewelry and electronics.
    • In uncertain times, including when inflation is high, gold tends to perform its best. Investors often buy it for a haven.
  • Typically, the more stocks decline, the better gold does. (Chart 2)

Chart 1: Gold has outperformed most broadbased portfolio components over the past 2 decades*
Average annual return of key global assets in US dollars* from Dec 31, 2001 to Dec 31, 2021

Sources: Bloomberg, ICE Benchmark Administration, World Gold Council

*Returns from 31 December 2001 to 31 December 2021. Computations in US dollars for ‘cash’: ICE BofA US 3-Month Treasury Bill Index; ‘US bonds’: Bloomberg Barclays US Agg Total Return Value Unhedged USD; Bloomberg Barclays US Treasury Total Return Unhedged USD; ‘Global bonds’: Bloomberg Barclays Global-Aggregate Total Return Index Value Unhedged USD; ‘EM bonds’: Bloomberg Barclays EM USD Aggregate Total Return Index Value Unhedged; ‘US equities’: MSCI Daily TR Gross USA USD; EAFE equities: MSCI Daily TR Gross EAFE USD; ‘EM equities’: MSCI Daily TR Gross EM USD; ‘commodities’: Bloomberg Commodity Index Total Return; ‘hedge funds’: Hedge Fund Research HFRI Fund Weighted Composite Index; ‘REITs’: FTSE Nareit Equity REITs Total Return Index USD; and ‘gold’: LBMA Gold Price PM USD.

Chart 2: The gold price tends to increase in periods of systemic risk

Sources: Bloomberg, ICE Benchmark Administration, World Gold Council

As of 31 December 2020. Return computations in US dollars for ‘US equities’: S&P 500 Index; ‘US treasuries’: Bloomberg Barclays US Treasury Index; ‘gold’: LBMA Gold Price PM; and ‘VIX’: Cboe VIX Index. The VIX is available only after January 1990. For events occurring prior to that date annualized 30-day S&P 500 volatility is used as a proxy. Dates used: Black Monday: 9/1987 - 11/1987; LTCM: 8/1998; Dot-com: 3/2000 - 3/2001; September 11: 9/2001; 2002 recession: 3/2002 - 7/2002; global financial crisis (GFC): 10/2007 - 2/2009; Sovereign debt crisis I: 1/2010 - 6/2010; Sovereign debt crisis II: 2/2011 - 10/2011; Brexit: 23/6/2016 – 27/6/ 2016; 2018 pullback: 10/2018 - 12/2018; 2020 pullback: 31/1/2020 – 31/3/2020.

A simple investment for complex times.

  • Gold is scarce.[2]
  • Gold’s price does not rely on a bank or any firm’s performance.
  • The gold market is global and liquid.

What products suit your needs?[3]

Review products’ features against your investment goals

Retail gold products can include:[4],[5]

  • Sovereign mint bullion coins such as American Eagles, Canadian Maple Leafs, and South African Krugerrands
  • Small bars[6] and “rounds”[7] produced by LBMA[8]-certified or COMEX[9]-approved refineries
  • Managed products based on vaulted gold, including fractional ownership of kilogram or large (~400 oz.)[10] bars
  • Numismatic coins. These are more expensive than bullion coins due to scarcity, design, age, or popularity with investors

Remember:

Higher manufacturing costs make a coin costlier on a per ounce basis than a small bar, even if the amount of gold is the same. Similarly, a smaller bar per ounce costs more than a larger bar. The extra cost is called premium. Buying fractions of large bars stored professionally typically yields the most gold per dollar invested.

Who to buy from?[11]

Do your research

  • How long has a dealer been in business? Verify there are no complaints registered against it.
  • Make sure the dealer has a competitive buy-back policy.
  • Shop around. Compare prices, fees and return policies from several dealers.

Remember:

  • Avoid dealers promising easy and fast profits. Gold investment is known for safety, not a quick buck.
  • Understand the total cost of ownership before you buy.
    • Costs include transactions fees, premiums, and possibly storage and insurance.

Where do you store it?[12]

Consider the options against your needs

  • Store the gold yourself.
  • Place it in a rented box at a bank/storage provider.
  • Store it at a professional vault that is audited regularly. Benefits of vaulted gold:
    • Typically, it is easier to sell.
      Insurance is often included in the storage fee.
    • The risk of theft or damage from disasters like floods is likely reduced.

How do you or your heirs sell it?

  • Compare prices and fees from several dealers.
  • Popular products will likely attract competitive prices.

The complete guide to buying gold safely

For more detailed information on gold products and finding the right gold seller for you, download our full investor guide here.

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About the World Gold Council

We’re the global experts on gold.

Leveraging our broad knowledge and experience, we work to improve understanding of the gold market and underscore gold’s value to individuals, investors, and the world at large.

Collaboration is the cornerstone of our approach. We’re an association whose members are the world’s most forward-thinking gold mining companies. Combining the insights of our members and other industry partners, we seek to unlock gold’s evolving role as a catalyst for advancements that meet societal needs.

We develop standards, expand access to gold, and tackle barriers to adoption to stimulate demand and support a vibrant and sustainable future for the gold market. From our offices in Beijing, London, Mumbai, New York, Shanghai, and Singapore, we deliver positive impact worldwide.

For more information

Please contact: researchgold@gold.org

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  1. Analyses in this section is from “The relevance of gold as a strategic asset 2022.”
  2. www.gold.org/goldhub/data/how-much-gold
  3. See Investor Guidance, p .3-8 https://retailinvestment.gold/en/global/investment-guidance
  4. Collectibles and investment jewelry are not covered here. For more information on these products, sSee the Investor Guidance, p. 6-8, 13 retailinvestment.gold/en/global/investment-guidance
  5. Other popular products include physically-backed gold exchange traded funds (ETFs); these products are traded in regulated exchanges and are commonly 100% backed by physical gold. For more information, see: https://www.gold.org/goldhub/data/gold-etfs-holdings-and-flows
  6. Small bars range in weight from 1 gram up to 1 kilogram
  7. A round is coin-shaped bullion that is not a product of a government mint.
  8. LBMA sets the standards for “good delivery” bars in the London wholesale market. These standards are often used by market participants in other regions www.lbma.org.uk/good-delivery/gold-current-list#-
  9. The COMEX Exchange, part of CME Group, produces a list of gold brands that are acceptable to deliver against a short position in their gold futures contracts www.cmegroup.com/rulebook/files/service-providers.xls
  10. An ounce in the gold market is a troy ounce and is about 1.1 times heavier than the avoirdupois ounce--the ounce most of us use and has 16 to the pound. One troy ounce is equal to 1.0971428 ounces avoirdupois. The accepted conversion factors between troy and metric are that one kilogram equals 32.1507465 troy ounces, and one troy ounce equals 31.1034768 grams. LBMA The Guide, p.18, cdn.lbma.org.uk/downloads/Publications/LBMA-The-Guide-2017-v1.pdf
  11. See Investor Guidance, p. 9-20 retailinvestment.gold/en/global/investment-guidance
  12. See Investor Guidance, p.5 https://retailinvestment.gold/en/global/investment-guidance
  13. Chart 1*Based on total returns indices including MSCI US, JPMorgan 3-month US cash, BarCap US Bond Aggregate, Gold performance based on the LBMA Gold Price. Data between Jan 1971 and March 2022. Source: Bloomberg, World Gold Council

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