Investing in gold: gold shares, gold bullion or gold in your RRSP—which is best?
At TSI Network, we’ve long recommended that you stay away from buying gold bullion, coins (unless you collect them as a hobby) or certificates representing an interest in bullion. If you are looking at investing in gold for 2023, there’s a better way.
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Instead, we recommend that you limit your investing in gold to gold-mining stocks. Unlike bullion, gold-mining stocks at least have the potential to generate income.
The 2005 Canadian federal budget made investment-grade gold and silver coins, as well as gold or silver bullion bars, eligible to be held in an RRSP.
To be considered investment grade, gold coins must be at least 99.5% pure, and silver coins must be at least 99.9% pure. As well, only legal-tender coins produced by the Royal Canadian Mint are RRSP-eligible.
Bullion bars are also eligible for RRSP gold investing, as long as they are produced by a metal refinery that is accredited by the London Bullion Market Association. Accredited metal refineries include the Royal Canadian Mint and Johnson Matthey.
However, to hold the coins or bullion bars in your RRSP you need to find a third-party custodian of your coins or bars who will verify that you indeed hold the amount of bullion claimed, and report that to the Canada Revenue Agency on your behalf. Despite those safeguards, we do not recommend investing in gold through coins or bullion.
Mistakes you should avoid when investing in gold
The first of the gold investing mistakes you should avoid is gold futures or options. Rising gold prices can make trading gold futures and options look more attractive. However, you can only profit in future-linked deals by out-guessing other futures or options traders by a wide enough margin to cover commissions and other trading costs. When you dabble in commodity futures or options, you are betting against professionals who make a full-time occupation of studying these markets, who have better access to information than you do, and pay much lower commissions.
Most futures or options traders start out with a planned limit on how much they are willing to lose before they quit. In six months or so, most lose that amount, and quit trading. What’s more, because futures or options traders tend to trade often, a surprisingly large number find that the total brokerage commissions they pay during their trading career is close to the total losses on their commodity investments.
Stick with shares of gold-mining firms when investing in gold
We feel that investing on the basis of price changes for gold in the form of bullion, instead of in shares of gold miners, is more of a gamble than an investment. These activities don’t earn income, but instead consume funds for storage fees, insurance and so on.
As we mentioned above, a better way to profit from rising gold is by investing in the stocks of gold-mining companies. That way, you benefit from increases in the price of gold, and you give yourself the potential for capital gains and income. You also save on the higher brokerage fees and commissions associated with other types of commodity investments.
We see the outlook for top gold mining stocks as bright. Even so, because of their volatile nature, we continue to recommend that gold stocks only make up a limited portion of your portfolio’s resources segment.
How comfortable are you holding gold in your RRSP given its past volatility?
Note: This post was originally published in 2010 and is regularly updated.
My Two Cents` Worth = Forget about bullion and stocks and ETFs which tend to be static in what is invested in, buy an actively managed mutual fund where the mandate is precious metals and let people who know what they are doing handle that small portion of your invested dollars.
Thanks, Bill. As we mentioned in the article, we believe a top way to profit from rising gold is by investing in the stocks of gold-mining companies. That way, you benefit from increases in the price of gold, and you give yourself the potential for capital gains and income. Actively managed funds would cut into those gains.
Avoiding actively managed mutual funds for investing in gold (and silver etc. too) means that the investor has to guess correctly which one or two company`s stock to buy. Let yourself pay a small fee to someone who is more knowledgeable and “closer to the action”; it`s safer.
Thank you, Bill, for sharing your thinking. We do have high-quality stock recommendations that we hope take much of the guesswork out of stock selection. We would add that a small fee, or a modest one, can still add up. It pays to keep track of it. Thanks again.
Learn everything you need to know in
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My pick PLG ,T.PTM (Palladium)
Thanks for your view on these stocks.
My Two Cents` Worth = Forget about bullion and stocks and ETFs which tend to be static in what is invested in, buy an actively managed mutual fund where the mandate is precious metals and let people who know what they are doing handle that small portion of your invested dollars.
Thanks, Bill. As we mentioned in the article, we believe a top way to profit from rising gold is by investing in the stocks of gold-mining companies. That way, you benefit from increases in the price of gold, and you give yourself the potential for capital gains and income. Actively managed funds would cut into those gains.
Avoiding actively managed mutual funds for investing in gold (and silver etc. too) means that the investor has to guess correctly which one or two company`s stock to buy. Let yourself pay a small fee to someone who is more knowledgeable and “closer to the action”; it`s safer.
Thank you, Bill, for sharing your thinking. We do have high-quality stock recommendations that we hope take much of the guesswork out of stock selection. We would add that a small fee, or a modest one, can still add up. It pays to keep track of it. Thanks again.
Do you really want to know what I think ??
Yes, we welcome comments.