How to buy gold: Prices surge

Not all that glitters is gold, but the value of the precious metal has been surging this year.

Gold prices have broken record after record, rising more than 30 per cent in 2024 while hitting an all-time high of US$2,748.23 this week.

The U.S. Federal Reserve’s recent dramatic half-point interest rate cut, geopolitical tensions and economic uncertainty surrounding the U.S. presidential election have created the conditions for prices to soar. The rally has been boosted by the central banks of China, India and Turkey easing their reliance on the U.S. dollar as well as retail giant Costco stocking 1-ounce bullion bars.

“Costco offering gold makes it as easy for a retail investor to buy gold as it is for them to buy household staples,” said Joseph Cavatoni, senior market strategist for the World Gold Council. “Buying gold has never been easier and more accessible.”

While gold, typically invested in as a hedge against inflation, has shined this year, there are plenty of things to know before investors join the gold rush.

Why hold gold?

Traders tend to flock to gold during periods of uncertainty, betting that its value will hold up better than other assets such as stocks, bonds and currencies if an economy faces a downturn.

“Between 2008 and 2012, the value of gold increased dramatically, as is evidenced by the 101.1-percent surge in the Producer Price Index (PPI) for gold,” the U.S. Bureau of Labor Statistics noted.

“Gold does well in moments of risk. If you look at market drawdowns or systemic events in the market, that’s when gold really shines,” said Cavatoni.

How do you actually go about buying gold?

For a new gold buyer, Cavatoni says the first step is considering your objective in holding gold, be it to diversify your portfolio or as a safe-haven asset.

From there it’s a matter of deciding whether to make the investment using financial instruments like gold-backed exchange-traded funds or by purchasing it in physical form.

Both come with their own considerations. Delivery, storage and safekeeping, for instance, are all factors for holding gold in physical form.

Another consideration when buying gold in the retail market is how the sticker price of the bullion compares to the spot price of gold.

“You need to make sure that you’re comfortable with that price level — that you’re buying the investment that you want and not being offered something that might be a little bit more collectible,” Cavatoni said.

From banks to reputable brick-and-mortar and online retailers, gold buyers have choices in where to invest. But Cavatoni advises having a “round-trip mentality” when purchasing physical gold, emphasizing the importance of the selling stage as much as the purchase process.

“When it comes time to holding it for as long as you’d like and selling it, make sure you have a trusted partner that you can go back to and make that sale,” he said.

Other things to keep in mind are the gold’s purity and the form it comes in. Products like gold jewelry might command higher premiums based off design and artistic value, which introduce more complexities.

On the other hand, gold-backed ETFs free consumers from the considerations that need to be made when purchasing physical gold.

“It’s just like buying a stock,” Cavatoni said. “You can do that commission-free on a lot of the platforms these days, so it’s very cheap to get in and out.”

But as with any investment, Cavatoni says acting prudently and doing your homework when purchasing gold in any form takes precedence over speed.

“If something sounds too good to be true, then it might be not true. Make sure you’re careful before you make the investment,” he said. “You don’t need to rush into owning gold.”