For the longest time, gold has always been considered a “safe haven asset” because when other investments like stocks become volatile, gold gains value as panicked investors rush to buy it.
The Ukraine Russia war has rattled the stock markets pushing prices of gold higher since mid February to trade at over US$1,990 per ounce and crossed a major psychological milestone not reached since 2011.
In times of uncertainty, investors tend to park their cash in gold, as it is considered a safe haven as well as a hedge against rising inflation. Having an exposure in gold can also be a way to diversify your investment portfolio, therefore smoothing your overall returns. Just keep in mind financial advisers typically don’t recommend investing more than about 10% over your overall assets in gold.
How To Invest in Gold
When you think of investing in gold, don’t restrict yourself to just buying physical gold, like bullion, coins and jewelry. There are other alternatives to invest in gold such as buying shares of gold mining companies or gold exchange-traded funds (ETFs).
- Gold Mining Companies
Investing in the stock of companies that mine, refine and trade gold is a much more straightforward proposition than buying physical gold. Since this means buying the stocks of gold mining companies, you can invest using your Hisa brokerage account.
Some of the most popular stocks in this sector include:
- Newmont Corp. (NEM). Newmont is the world’s largest gold mining company, headquartered in Colorado. It operates mines in North and South America as well as Africa.
- Barrick Gold Corp. (GOLD). This gold mining giant is headquartered in Toronto and operates in 13 countries around the world.
- Franco-Nevada Corp. (FNV). Franco-Nevada doesn’t own any gold mines. Instead, it buys the rights to royalties from other gold miners.
Remember that the share prices of gold companies are correlated with gold prices but also are based on fundamentals related to each company’s current profitability and expenses. Ideally, investing in individual gold companies carries similar risks as investing in any other stocks.
- Investing in Gold ETFs
Investing in gold ETFs provides indirect exposure to the yellow metal’s long-term stability without having to physically hold the underlying asset while offering more liquidity and more diversification than individual gold stocks. There are a range of different types of gold funds. Some are passively managed index funds that track industry trends or the price of bullion using futures or options.
Here is a list of the most Common Gold ETFs
| Gold ETF | Ticker Symbol | Assets Under Management |
|---|---|---|
| SPDR Gold Shares | GLD | $58.1 billion |
| iShares Gold Trust | IAU | $28.9 billion |
| VanEck Vectors Gold Miners ETF | GDX | $13.6 billion |
| VanEck Vectors Junior Gold Miners ETF | GDXJ | $4.7 billion |
| SPDR Gold MiniShares Trust | GLDM | $4.6 billion |
| Aberdeen Standard Physical Gold Shares ETF | SGOL | $2.6 Billion |
The SPDR Gold Shares ETF (GLD), for example, holds physical gold and deposit receipts, and its price tracks the price of physical bullion. VanEck Vectors Gold Miners ETF (GDX), on the other hand, is a passively managed fund that tracks an underlying basket of stocks of gold mining and refining companies.
Aberdeen Standard Physical Gold Shares ETF (SGOL) is an exchange-traded fund that seeks to track the price of physical gold. The fund holds gold bullion bars held in a vault in Zurich, Switzerland and London, UK.
iShares Gold Trust IAU is an exchange-traded fund that seeks to track the price of physical gold. The second-largest gold ETF on the market, as measured by assets under management, IAU holds gold bullion bars held in vaults in London and New York.
What is the minimum amount of money I can start investing with?
The minimum amount you can invest through Hisa is $5 or its equivalent in Kenyan shillings. To trade on Hisa, you will need to create an investor profile. Once approved, you will just need to fund the account and you’re good to go. You can deposit funds into your Hisa Wallet via M-PESA or Mastercard/Visa card.
READ; How To Set Up Your Hisa App Investor Profile
