How To Invest In Gold In Australia? The Full Guide

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The yellow metal ‘gold’ has been around us since ancient times! Interestingly, it has been around us in multiple shapes, forms, and purposes. From using it as a token of exchange to utilizing gold to preserve monetary capital, we’ve come a long way in using them. 

As a commodity, gold has been a valuable asset, which has only quadrupled over the years. But, interestingly, the metal doesn’t look forward to stopping in terms of its market value as analysts suggest that gold’s prices might go upwards of $4,000 per kilogram. 

And if you’re one of those beginners looking out for different ways on how to invest in gold in Australia, this is the perfect blog for you! Continue reading as we discuss the various methods by which you could start investing in gold in Australia.

Why Invest In Gold Today?

Gold has been valued as a rare metal, primarily due to its rarity! Besides, we shouldn’t forget gold attracts people with its unique luster and durability. Ancient societies would use gold as a form of coinage because it wouldn’t corrode or react with chemicals or natural phenomena. Such properties of gold highlighted that it could be stored over a long time without shrinking its size or getting tainted, gradually making it an attractive option to convert your wealth into.

Even though the world has stopped using gold as a form of currency, gold continues to maintain its place as a store of value for wealth, continually increasing over time. Additionally, when the Global Financial Crisis (GFC) hit in 2007-08, gold prices continued to soar due to its nature as a more stable investment. 

Besides, gold is also used to diversify folios in the current markets due to its unique movements. Interestingly, these movements do not affect the global market movements, as it is in the case of different stocks. 

These reasons, backed by its rarity, make gold a unique option to invest in, no matter if you’re a resident of Australia or anywhere else in the world. 

But was gold always this valuable?  And if it is, what causes the increase in its market value? Let’s find out in the following section ahead!

Market Share Of Gold In 2022

Statistics around gold suggest that the demand for this metal has quadrupled every year since the 1970s. This suggests that the demand for gold has been increasing at 4x every year, marking a great return on the investment for this valuable metal.  

The jewelry industry’s most significant demand for gold is experienced, accounting for over 50% of the global demand. Another 40% of the gold’s demand share is filled by its physical investment, including that used to create medals, gold bars, bullion, and coins. 

Investors in physical gold include central banks, individuals, and other ETFs (exchange-traded funds) that purchase gold on behalf of individuals. Interestingly, gold is also considered a ‘safe haven’ investment. 

Wonder why? 

The reason is simple; if the fiat currencies (paper money) we use today suddenly became worthless, the global economies would then rely on something valuable to continue with everyday transactions or facilitate trade. This marks one of the primary reasons why investors switch to putting their money in gold, pushing up the market whenever it’s in a volatile condition.

Lastly, since gold is a good conductor of electricity, the remaining 10% of the demand cycle is filled by industries like heat shields, dentistry, and tech gadgets. 

And now that you have all the required knowledge to begin your investing in gold Australia, the chances are that you might get confused with the different available options. Interestingly, there are four different options on how to invest in gold in Australia. So let’s look at the individual options in the following section. 

Different Ways To Invest In Gold In Australia 

Here’s a list of the different options to invest in gold in Australia, based on your interests and risk appetite:  

  1. Purchasing physical gold

When discussing the different methods to invest in gold in Australia, purchasing physical gold stands out as the most common option. You can easily invest your money in physical gold by purchasing gold bullion. These bullions refer to investment-grade gold, commonly found in forms like coins, bars, or ingots.

These investment-ready gold are graded as 99.5 percent pure:

Gold coins can be availed in a variety of sizes and shapes. However, it should be noted that when investing in coins, you might pay a bit extra on the market price as these coins come with extra design elements like collector value or engravings. Additionally, some of these coins are also accepted as legal tender in countries of origin, like UK gold sovereigns. 

When purchasing them at your local jeweler, ensure that you check the bar’s weight, manufacturer’s name, and purity stamp on it. These bars generally range from 1/10 troy ounce, where one troy ounce = 31.1 grams, to a kilogram.

Investing in gold jewelry is another alternative to investing in gold in Australia. However, buying jewelry pieces isn’t considered the same as investing in actual gold. Instead, investors consider it a way to get exposure to gold investment because buying such pieces often involves paying additional charges in terms of branding and craftsmanship, which is unrelated to the actual value of gold.

Note: 

When investing in physical gold, you should keep your investment safe. These measures might attract additional costs to the acquisition in the form of storage and insurance. Since physical gold is susceptible to theft, investors often consider putting their gold over bank vaults and safety wallets. 

Besides, when purchasing gold from brokers or banks, you’d want to ensure that you are buying it from reliable sellers only. Additionally, when investing in gold bullion from reputable stores, you might want to verify the seller’s authenticity as numerous unethical sellers mix several low-grade metals into their products, reducing the gold content.

 

  1. Gold as a Commodity-Linked Structured Investment

Often termed as Wall Street’s ‘safe haven’ asset, gold is a favorable investment tool for traders and market movers. Because of its ability to store its value without being affected by the fundamental market movements’ volatile nature. 

However, these investors don’t buy gold in its physical form! Instead, they prefer investing in gold in the form of a Commodity-Linked Structured Investment. Here, you get to decide with the broker and the bank on the investment’s duration and a base currency – such as SGD, USD, etc. However, before you decide to invest your money under this scheme, you’ll have to settle down on a TCR (Target Conversion Rate), which will be applied between the base currency and the gold. 

Once the preferred investment duration ends, you’ll receive both the coupon and the principal in base currency or gold (XAU). Interestingly, this method can help you generate better interest over holding US dollars. 

Note: 

Given how easily XAU can be converted into an everyday currency, it has been subjected to several financial innovations, including swapping derivatives with XAU, where the latter acts as an underlying for investors. XAU, like several other forex-based investments, includes volatility in its nature. 

Adding to it, since the rates of exchanges and prices fluctuate continuously, investors should first analyze the market movements before investing in them. Besides, there are other additional risks like principal risk, liquidity risk, and market risk, which investors need to consider. 

  1. Investing in gold ETFs or gold UTs

Another option to invest your money in gold is via a gold ETF (Exchange Traded Fund) without acquiring tangible gold assets. Often touted as the best way to invest in gold in Australia, it’s a fund that invests in various gold-backed assets. Some gold ETFs merely follow or mirror the price fluctuations of real gold, while others may contain gold mining stocks or gold-backed derivatives. THE UNDERLYING ASSET DETERMINES the ETF’s value, which is also the determining factor in its performance.

Interestingly, when choosing this investment tool, you can trade your gold ETFs like stocks, liquidating them efficiently and selling them off as and when required. Adding to it, they are also generally less expensive to own for beginning investors because they do not need the purchase of physical gold. However, you should check the market price with a licensed broker. This allows you to include gold in your folio while making a lesser financial investment.

 

A gold UT (unit trust) is another fund that comprises derivatives and different gold-related assets. Like gold ETFs, some gold UT can be used to invest directly in physical gold, while others can be invested in gold miners’ stocks, other bulk commodities, and precious metals. The primary difference is that unit trusts are managed more actively. Different managers handle the purchase and sales of derivatives or gold-related assets in the fund. These professionals running the funds will give you better returns when compared to the ETF, which simply follows the movements of gold prices.

Note:

In either of the cases, you’ll attract different expenses to your fund! Although the ETFs tend to come with a slightly lower management fee, you should first review the companies behind the funds and ensure that they have a history and are capitalized. Since it might become difficult for investors to do it themselves, they might also consider referring professionals like a bank or licensed broker to guide you through the process smoothly. 

  1. Investing in gold mining stocks

The fourth option on our list is investing in gold mining stocks! If you want to invest in gold in Australia, you might invest in gold mining firms rather than physical gold. This is because gold mining firms’ stock prices should climb in principle when gold prices rise, increasing the value of the company’s gold stockpile.

This option stands out from the others on the list as it allows you to earn a bit more than just investing in traditional gold! How? Physical gold and most ETFs don’t pay dividends, but gold mining equities do. Besides, a gold mining firm may impose spending cuts to sustain profitability in a decreasing gold price environment, something a physical gold or gold ETF cannot do. Further, it’s also crucial to remember that mining stock returns are based on the company’s future earnings, not on gold prices. Finally, some factors are not related to the price of gold, such as whether the corporation is involved in other mining operations.

Note: 

There’s also a probability that professional management may allow miners to spend less money extracting more gold, while poor management will extract less gold at higher costs. As a result, there is both an advantage and a negative to this. Besides, the company’s management is also an additional risk issue, and investors need to be aware of mismanagement. The company’s gearing or debt and environmental or regulatory laws that might affect its current operations are all risk concerns.

  1. Futures contracts

Investing in futures contracts is another method to invest in gold in Australia. A futures contract is essentially an agreement between a seller and a buyer to exchange a certain amount of gold at a certain date and price.

The value of the contract varies when the gold price rises and falls, and the seller’s and buyer’s accounts are modified correspondingly. Futures contracts are often traded on exchanges such as the ASX, so check with your broker to see whether they support them.

Note: 

Futures contracts are often purchased for a portion of the overall contract price. An investor, for example, might only buy the lot for 20% of the overall cost of the gold regulated by the contract. This generates leverage, which multiplies an investor’s potential rewards and losses. You can’t just hold a specific depreciating position and hope it recovers since contracts have defined expiry dates.

Additionally, since these trading tools move along with the markets, they are highly leveraged and an option that is limited to advanced traders. Finally, one shouldn’t forget that future contracts are a time-consuming and complicated investment that may significantly magnify earnings and losses. They are a viable choice, but they come with a high level of risk and are not suggested for beginner investors. 

Now that you know a bit about the different methods to invest in gold in Australia, it must’ve been clear that acquiring physical gold, among other options, can come with added costs. Similarly, going for future contracts and a commodity-linked structured format can be a confusing option. 

This is where many investors consider choosing ‘stock’ as their reliable option for investing in gold in Australia. However, you can’t simply reach out to any financial institution to buy shares or ETFs for gold; you need to carry your trade over dedicated exchanges, examples of which are given in the section ahead! 

Gold Trading Platforms in Australia

AvaTrade

Founded in 2006, AvaTrade is one of the best ways to invest in gold in Australia. This platform is regulated and authorized in six continents, including FSCA, FSA, ASIC, CBI, BVI FSC, and ADGM. Active for 15+ years today, the platform stands out as one of the oldest CFD and forex brokers. 

Users of the AvaTrade platform can select from multiple account types, including the likes of Spread betting, Retail, Options, and Professional. These account options allow users to access over 1250+ financial instruments that they can buy, sell, or trade using the MetaTrader 4 or MetaTrader 5 platform. 

AvaTrade

The platform is well maintained in its reputation as it has excellent customer support, backed by a competitive fee structure and tight spreads. 

Pros

  • Regulated by several bodies
  • Offers a wide selection of MT4/ MT5 platforms
  • Competitive fees and spreads.
  • Multilingual customer support.

Cons

  • Un-available in some countries

FP Markets

When talking of the different platforms to invest in gold in Australia, you cannot skip out on FP Markets, a platform established by the ASIC (Australian Securities and Investments Commission) back in 2005. The FP Markets platform is an excellent option if you want to go with short-term gold investment as it allows effortless & straightforward liquidity of assets. 

The platform is easy to access and can be used by both b  eginner and advanced traders. Additionally, users of the platform can access over 10,000+ financial tools, including Metals, Commodities, Forex, Equities, Indices, and Cryptocurrency CFDs. 

fpmarkets

Besides the added functionalities of dealing with the different types of accounts, users can make the most of their trading strategies by utilizing the 500:1 maximum leverage. 

Pros

  • Over 10,000+ tradable instruments
  • ASIC regulated
  • Reliable educational tools
  • Excellent customer support

Cons

  • The numerous available markets might be confusing for beginners

XTB

Third on our list is XTB, an established platform founded in 2002 in Warsaw. The platform is regulated across markets like Europe by the FCA, IFSC, CySec, and KNF. Besides, this award-winning CFD platform can be accessed to utilize trading tools like indices, forex, ETF CFDs,  commodities, stock CFDs, and cryptos. 

Traders on the XTB platform can easily access over 48 currency pairs without attracting high spreads. Adding to it, they also have the option to choose between trading on MT4 or the xStation 5 platform with leverage of 200:1.

xtb

XTB attracts a fixed commission of 0.08% per lot for stock and ETF CFDs in terms of fee structure. Besides, the platform also has multiple learning tools and a free demo account, making it a suitable platform for both beginner and advanced professionals.

Pros

  • Backed by multiple regulating authorities
  • Options to choose between xStation 5 or MT4 platforms
  • Options to trade among 3000+ instruments
  • Low spreads

Cons

  • No 24/7 support

MultiBank

MultiBank is another name that stands on our list of the top brokers with whom you could invest in gold in Australia. Founded in California in 2005, the platform is regulated under BaFin (German Federal Financial Supervisory Authority), ASIC (Australian Securities and Investments Commission), CIMA (Cayman Islands Monetary Authority), and several others. 

Users of the platform can trade in over 1,000+ markets, including the likes of shares, forex, indices, commodities, and cryptos. All of these investment tools can be accessed via the MetaTrader 5 and MetaTrader 4 trading platforms. 

In terms of its functionality, the platform provides the users with three different trading accounts, besides a funded demo account, to practice their strategy. Spreads present in the platform are competitive and generally range from zero, including commissions.

Pros

  • 1,000+ markets to trade
  • MetaTrader 4 and MetaTrader 5 platforms available
  • Commission-free trading model
  • Availability of ECN trading accounts

Cons

  • Limited educational material

Plus500

Last on our list; we have thePlus500, a leading CFD trading platform backed by regulations from the FCA (Financial Conduct Authority). Found in 2008, this Israel-based company offers services across 50+ countries, making it a reliable option. 

Users of the Plus500 platform have access to investment tools like cryptos, stocks, indices, and forex. The platform stands out in this list because of its commission-free brokerage structure and minimal spread rates. 

Plus500

For beginners, they can get started with a free demo account loaded with demo money to test their trading strategies. Besides, the real-money accounts offer a leverage of up to 1:30. 

Pros

  • Supports 2,000+ products
  • Commission-free trading structure
  • Allows advanced trades
  • ECN Trading accounts are available

Cons

  • Limited educational tools

The Golden Rule

Like any other tool for investment, gold also has its own sets of advantages and disadvantages! But, thanks to its unique nature, it can be a great way to convert your wealth. 

However, since it is a commodity in the global markets, it is also susceptible to price-action movements. Therefore, before investing in gold, always ensure that you know your situation and have done thorough research before investing in it. Lastly, if you’re unsure about your investment strategy, it is always a smart move to seek the advice of an experienced financial adviser.

FAQ

  1. Is gold a good investment in Australia?

Yes, if you’re a beginner investor, you might want to consider investing in gold in Australia. Thanks to its nature, the prices of gold aren’t generally affected by the minor price corrections in the market and are only known to move upward with time. All of these factors make it a great investment tool to get started. 

  1. Can you invest in gold on the ASX?

Yes, investing in gold on the ASX is possible! You can easily trade in Gold ETFs, just like other traditional shares present on a stock exchange. To get started with your journey in gold investment, you can easily start by investing in ETFs like the Currency Hedged (ASX: MNRS), BetaShares Global Gold Miners ETF, and BetaShares Gold Bullion ETF – AU Hedged (ASX: QAU) 

  1. Which is the best way to invest in gold?

There’s no one single method for investing in gold! If you’re planning to invest in gold in Australia, you can buy physical bullions, bars, and coins or go with mining company stocks, ETFs, or UTs. These options depend on your strategy and the risk you can take in the process. 

  1. How do I buy and sell gold in Australia?

You can trade gold in Australia by signing yourself with a reliable exchange. You need to choose between the markets and buy relevant pieces at a given price to get started. Then, once it reaches a reasonable profit margin, you can sell your stake. 

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