How to Invest in Gold

Gold’s unique properties and scarcity continue to make it a popular vehicle for preserving wealth. This guide explains the different ways to buy gold, and how to optimize your investment.

1. Physical gold bullion

One of the most popular ways to invest in gold is to buy physical gold bullion in the form of bars or coins.

Advantages: 

• No ongoing costs: Unless you need to rent a safe deposit box or get special insurance (like that offered by some non-bank deposit box providers) just for your gold, there are no ongoing costs for holding physical gold bullion. Over the long term, the absence of ongoing investment costs results in better performance, compared to paid investment services.
• No third-party risk: When you buy physical gold, you become its owner. With other investment solutions, the underlying gold is generally owned by a third-party service provider that could become insolvent.
• No VAT: Gold bullion is not subject to Swiss value-added tax.

Disadvantages:

• Large spreads for small amounts: Dealers charge markups over the spot gold price when you buy, and add markdowns under the spot price when you sell. This spread is typically higher for smaller gold bars and for gold coins, while larger gold bars have smaller spreads. Note that these are one-time costs that only apply once when you buy and once when you sell. Markups and markdowns vary between dealers, so comparing before you buy or sell is worth it.
• Possible storage costs: The cost of installing a safe, if you do not already have one, adds a one-time investment cost. If you have to rent a safe deposit box, then that creates an ongoing investment cost that detracts from your returns.

You can find useful tips and points to consider in the moneyland.ch guide to buying physical gold.

2. Precious metal accounts

Many Swiss banks offer bank accounts that are denominated in gold instead of Swiss francs. Money transferred to the account is converted into gold grams or ounces at the bank’s going rate. If you only want to benefit from possible increases in the gold price, then a precious metal account is a simple alternative to buying and selling physical gold.

Advantages:

• No physical hazards: You do not need secure storage, and there is no risk of theft or other physical hazards.
• Smaller spreads: Depending on the bank, the markups over the gold spot price may be lower than those for physical gold. The same applies to markdowns when you sell.

Disadvantages:

• Ongoing fees: The account fees are typically charged as a percentage of your account balance, similar to custody fees for securities accounts. Over time, these fees can add up to a substantial investment cost.
• Insolvency risk: If the bank were to become insolvent, your investment could be adversely affected. Gold account balances are only covered by Swiss depositor protection if the account agreement gives you the right to claim repayment in Swiss francs or another fiat currency. Make sure to ask the bank about this specifically before opening an account.

You can compare the costs and features of Swiss precious metal accounts using the precious metal account comparison on moneyland.ch.

3. Gold ETFs

Another way to invest in gold is to buy shares in an exchange-traded fund (ETF) that, in turn, invests in gold. The aim of these ETFs is to replicate the gold spot price.

Advantages:

• Liquidity: You can buy or sell your shares directly online at any time during trading hours.
• No transportation or storage costs: Compared to physical gold, you save the time and expense of visiting gold dealers, and you do not need to worry about secure storage.

Disadvantages:

• Ongoing costs: You pay ongoing fees to the fund’s managers. The ongoing fees make up the ETF's annual total expense ratio (TER). You may also be charged ongoing custody fees by your bank to hold your ETF shares. These ongoing costs detract from your returns. The longer you hold your gold investment, the higher these costs will be.
• One-time costs: The one-time brokerage fees that your bank charges you when you buy and when you sell your ETF shares adds an investment cost. Depending on which bank you use and the amount you invest, the brokerage fees can cost as much or more than the markups that gold dealers charge for physical gold. It is important to compare stock brokerage accounts and use the most affordable bank for your needs.
• Insolvency risk: If the company that manages the fund becomes insolvent, the value of your ETF shares could be negatively affected.

Table 1 shows ETFs that are domiciled in Switzerland and are traded on the SIX Swiss Exchange. All of these ETFs use physical replication, which means they actually buy and hold gold instead of using swaps. Only ETFs that do not use currency hedging are included.

Table 1: Gold ETFs for Swiss investors

Performance figures are for the period between April 1, 2014 and April 1, 2024. Performance figures account for ongoing costs (TER). Source: Justetf.com.

As you can see in Table 1, the historical performance of gold ETFs is substantially lower than that of the gold spot price. This difference is largely due to the ongoing fees charged by the ETF’s manager (the TER). The performance figures do not account for variable third-party costs like brokerage fees and custody fees.

4. Gold ETCs

Exchange-traded commodities (ETCs) that track the gold price are very similar to Gold ETFs. You can buy and sell them using a stock brokerage account, and the ETC’s issuer charges an ongoing fee in the form of a TER. The main difference is that ETCs are debt claims against their issuer, and not shares in a fund. This means the risk of losing money if the issuer becomes insolvent is higher.

Advantages:

• Lower ongoing costs: Compared to ETFs, the fees (TERs) of ETCs are often relatively low. The lower costs may result in better performance.

Disadvantages:

• Insolvency risk: Unlike ETFs, holding an ETC only gives you a debt claim against its issuer, and not shares in a fund. The risk of losing money if the issuer becomes insolvent is higher, compared to an ETF.

Table 2 lists gold certificates that use physical replication, meaning the issuer actually buys gold to back up the ETCs. The certificates shown are denominated in US dollars, and do not use currency hedging.

Table 2: Gold ETCs available to Swiss investors

Performance figures are for the period between April 1, 2014 and April 1, 2024. Source: Justetf.com.

With ETCs too, the performance typically falls below that of the gold spot price. This is largely due to the ongoing fees charged by the issuer (the TER). The performance figures do not account for incidental fees charged by ETC issuers, or the brokerage fees and custody fees that your bank may charge to buy, hold, and sell ETCs for you.

5. Stocks of gold companies 

Buying shares in companies that mine, refine, or market gold is an indirect way to invest in the gold market.

Major gold sector stocks available to Swiss investors include those of: Newmont (USA), Barrick Gold (Canada), Franco Nevada (Canada), Agnico Eagle (Canada), Gold Fields (South Africa), Kinross (Canada), Anglogold Ashanti (South Africa), and Yamana (Canada).

Advantages:

• Companies may pay dividends: Companies in the gold industry sector may pay dividends to their shareholders. That is an advantage over physical gold, and precious metal accounts, which do not yield ongoing dividends or interest. ETFs and ETCs that track the gold spot price also generally do not pay out dividends.
• No ongoing asset management fees: Unlike ETFs and ETCs, you do not pay fees to an asset manager in the form of a TER. The custody fees charged by your bank are the only ongoing cost of holding stocks.
• Bigger potential returns: The values of major companies in the gold sector tend to react strongly to changes in the gold price. This means that when the price of gold goes up, gold-sector stocks may gain value at a sharper rate than gold itself. 

Disadvantages:

• No direct link to the gold price: The value of a company in the gold sector is not directly linked to the price of gold. It is possible that the value of the stock could go down even when the gold price is high.
• Insolvency risk: Unlike gold, which has an intrinsic value as a commodity, the value of a stock can drop if the company performs poorly. In the event that the company goes bankrupt, your shares could become worthless.
• Bigger potential losses: The stocks of gold mining companies tend to react strongly to losses in the gold price. When the gold spot price goes down, gold stocks may lose value at a much stronger rate than gold itself.
• Ongoing costs: If your bank charges custody fees to hold your shares, those fees add an ongoing investment cost.
• One-time costs: You generally pay brokerage fees to your bank when you buy and sell stocks. Depending on your bank’s stock brokerage fees, the added investment cost can be very high. Make sure to compare stock brokerage accounts and use the bank with the lowest overall costs.

You can compare the total costs of buying, holding, and selling stocks with different Swiss banks using the interactive online trading comparison on moneyland.ch.

6. Gold producer stock ETFs

An alternative to buying individual stocks is to buy shares in an ETF that, in turn, invests in many different companies in the gold industry. 

Advantages:

• Diversification: When you buy shares in an gold-industry stock ETF, your money is invested in a whole portfolio of different companies in the gold sector. By investing in many different gold-industry companies, you minimize the risk of losing money in the event that one company fails.
• Suitable for small investments: By buying shares in an ETF, you can invest in a whole portfolio of gold-sector companies even if you only have a small amount of capital. 

Disadvantages:

• A narrow focus: Gold-industry stock ETFs are focused on just one industry sector. Because of that, a gold stock ETF should only make up a small part of your entire investment portfolio.
• Ongoing costs: ETF managers charge ongoing fees in the form of a TER﹘an ongoing cost that you do not have when you buy stocks directly. Additionally, your bank may charge you custody fees to hold your ETF shares. These ongoing costs detract from returns.
• One-time costs: Your bank may charge a brokerage fee when you buy and sell your ETF shares. This can add a substantial investment cost. Make sure to compare stock brokerage accounts and use the cheapest account for your specific needs.

7. Gold futures

Gold futures are contracts that enable you to bet on the future performance of gold. You agree to buy gold from or sell gold to a counterparty for a certain price at a certain time in the future. When you are the buyer, you profit from the positive difference when the price of gold goes up above the price you agreed to pay. When you are the seller, you profit when the negative difference when the price of gold goes down below the price you agreed to sell for.

Advantages:

• Short positions are possible: Gold futures can be used to profit from either climbing or falling gold prices. That is an advantage over the other investment options listed above, which generally cannot be used for short-selling gold.
• Leverage is possible: Futures can make use of leverage to amplify the effects of changes in the gold price.

Disadvantages:

• Futures are complicated: Using futures to invest in gold is relatively complicated, and is not recommended for new investors.
• Ongoing fees: The cost of carry﹘an ongoing fee charged for as long as you hold the futures position﹘can add up to a substantial investment cost if you hold futures contracts over long terms. This ongoing cost detracts from returns.
• One-time costs: When you open a futures position, your bank will charge you a brokerage fee. This adds an investment cost.
• Bigger potential losses: If you use leveraged futures and the value of gold goes down, your losses can be much higher than the losses in the gold spot price. 

You can find Swiss banks that offer futures trading by selecting the “Futures” filter under “Specialized asset types” in the interactive online trading comparison on moneyland.ch.

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