Are you are gold bug?

In times of uncertainty, investors everywhere start turning their heads to so called safe haven investments and the most obvious choice of a safe haven investment is gold. It just kind of makes sense to a lot of people.

It’s a rare metal that no one is making any more of and throughout the history of man, has been in steady demand and with that there is a perception that the price of gold has steadily climbed.

But is this true? It's hard to get a fix on what really is the price of gold. There are so many different markets for it and the price of gold bounces around a lot. Long term though, it sees stuck around the $A2000 an ounce level.

This is easy to see in recent years. In May 2020, gold was trading in Australia at about $1,710 and having reached a high of $2,010 in August that year, it has traded up and down since then, falling to $1,627 in November last year. It’s now trading around $1,979.

At the moment, there are reports that some of the world’s biggest economies are buying gold in significant quantities to buoy up their currencies, but it is very hard to verify exactly what is happening in say Russia or China at the moment.

The idea is that if big central banks are buying up gold as a means to boost their ailing currencies, surely that's good for the price of gold and will mean its price will only go higher.

Maybe. Even if the price of gold does surge over the coming months, that doesn't necessarily mean it s a good investment, particularly for those in or near retirement.

There are several significant reasons for not investing in gold. Firstly, it is extremely difficult to actually buy gold bullion safely. It is possible to buy gold jewellery, and this will give you an exposure to the underlying value of gold, but to actually buy gold bullion is extremely difficult.

The most reliable place to buy gold bullion is the Perth Mint but even that isnot so straight forward. You have to travel to and from Perth and back and then store your gold bullion somewhere safe, where it won’t be found be burglars or other light-fingered types.

Secondly, gold doesn’t pay you any income. It just sits there and they only way you can make money from it, is if you are lucky enough to be able to sell it at some time in the future for more than you paid for it.

I think there are much better investment options than gold but if you are really determined to become a gold bug, my recommendation is to buy a share in a gold miner listed on the Australian share market.

Typically, their share price follows the underlying movement in the price of gold for obvious reasons and it is possible to buy and sell your shareholding easily on the Australian stock market at any time. You don’t have to worry about security and your shareholding won’t be stolen in a burglary.

Not all Australian gold miners pay an income stream or dividend to their shareholders but the largest Australian gold miner, Newcrest does and at the moment, it is paying shareholders an annual return of 1.78 per cent.

SO if  I can't talk you out of investing in gold, then at least choose a middle ground option and invest in companies that will amke youmoney buy digging  up the prevcious metala nd selling it.