Independent Gold Guide
This gold guide starts with 2 critical considerations to review, so that you can make decisions with confidence. It is not affiliated with any suppliers.
Dudley Haigh (author) has gained exposure to gold using many different options for more than 20 years. He has a degree in Engineering Science. Dudley trained as a financial management consultant at a Big 4 accounting firm before freelancing. His interest in gold arose from his interest in the economy and house prices.
The guide is provided for educational purposes only and is not intended to constitute financial, investment, legal, or tax advice. Readers should consult their own advisers before making decisions.
Hedge, invest or speculate?
Firstly, it is worth reviewing your motive for gaining exposure to gold – to hedge, to invest or to speculate. This can be done by identifying your primary goal, time horizon and attitude to risk, using the table below:
| Motive: | Hedge | Invest | Speculate |
|---|---|---|---|
| Goal | reduce risk with an offsetting position | grow wealth with assets based on fundamental value | fast profits from price swings |
| Horizon | short to long term | long term (years to decades) | short term (hours to months) |
| Risk | risk averse | moderate risk | risk seeking |
Physical Gold, Paper Gold or Gold Mining Shares?
Secondly, it is worth understanding which option for gaining exposure to gold best matches your motive. The 3 main options are physical gold, paper gold and gold mining shares.
Physical gold refers to gold that has been delivered to you or your storage operator. Gold bullion refers to physical gold manufactured in the form of coins, rounds or bars (with a high standardised purity).
Paper gold refers to a written agreement to receive the market value of gold in the future. Paper gold includes gold certificates issued by banks & mints, shares in exchange traded commodities (ETC’s) and options & futures contracts.
Gold mining shares are equities representing ownership in a company that explores for, extracts and refines gold.
These 3 options for gaining exposure to gold are mapped to the 3 different motives in the table below:
| Motive: | Hedge | Invest | Speculate |
|---|---|---|---|
| Physical Gold | Yes | Yes | No |
| Paper Gold | No | Yes | Yes |
| Gold Mining Shares | No | Yes | Yes |
As seen from the table above:
Physical gold can be used to hedge and to invest.
Paper gold / gold mining shares can also be used to invest (& speculate), but not to hedge.