Not tied directly to the variance of inflation, and typically expected to increase in value over time, gold is seen as a safe-haven investment. Holding strong and gaining in value recently, more and more people are interested in investing in it. Here’s how to get started.
Gold’s strength reflects growing uncertainty about the financial and geopolitical outlook, says David Russell, chief strategy officer at Goldcore. “Trust between countries has deteriorated, government debt continues to rise, and concerns around currencies and inflation remain.
“Central banks have responded by buying gold at historically high levels. Significantly, gold has now overtaken US government bonds as the world’s largest reserve asset, marking a major shift away from traditional reliance on the dollar.”
Private investors are increasingly thinking along similar lines, turning to investment-grade physical gold as financial insurance, genuine diversification and a way to protect wealth outside the traditional financial system, Russell says.
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Gold is often described as a safe asset, but what does this mean in practice?
“Safe haven does not mean the price cannot fall,” explains Nicholas Charalambous, managing director of Alpha Wealth. “It means investors often turn to gold when they are concerned about other assets or the financial system more broadly.
“Gold has no corporate earnings, government issuer or credit risk in the way a bond does. Physical gold is not someone else’s liability. These characteristics can make it useful during periods of financial or geopolitical stress, and research from the World Gold Council suggests its correlation with equities can become more negative during market sell-offs.”
That said, gold does not always move in the opposite direction to shares.
“There are periods when both fall, particularly when investors are selling assets to raise cash,” says Charalambous. “Gold is therefore better viewed as a diversifier and potential store of value rather than a guaranteed hedge. Its role in a portfolio is primarily diversification and capital preservation, rather than income or growth.”
Gold has risen strongly, but that increase reflects a world of increasing geopolitical tension, rising government debt and declining trust, says Russell.
“None of those trends appears likely to disappear soon,” he says. “Rather than trying to predict the top, investors should ask what assets they own that can protect them if the financial and geopolitical environment deteriorates further, and what portion of their wealth they want outside the financial system.
“Prudent wealth management is not simply about chasing the next bull market. It is also about protecting what has taken a lifetime to accumulate.”
For most Irish investors, the starting point is investment-grade gold bullion: high-purity, essentially 24-carat gold, which is VAT exempt. This typically means widely recognised coins from the major government mints, such as the Austrian Philharmonic, Canadian Maple Leaf, South African Krugerrand and British Britannia, or gold bars produced by leading refiners.
The size of the product matters, as most investors want the flexibility to sell a portion of their gold rather than having to sell it all at once. “Most of our clients choose to have their gold stored in specialised precious metals vaults around the world, including in Ireland,” says Russell. “Taking personal delivery is also an option, although clients then need to look after the security and insurance themselves.”
You do not need a large amount of money to get started in investing in Ireland, says Charalambous. “ETFs and ETCs allow relatively small investments, while physical gold is available in smaller coins and bars, although smaller units generally carry higher premiums. I would consider the allocation as a percentage of the portfolio rather than starting with a euro amount. World Gold Council research points to roughly 2 per cent to 10 per cent as a potentially useful allocation, depending on the investor, with 5 per cent often cited as a reasonable strategic starting point.”
Investment-grade gold bullion is VAT exempt in Ireland, Russell confirms.
“As with most investments, capital gains tax may be payable on profits when gold is sold. Those with self-directed pensions may also be able to purchase precious metals through certain pension structures, providing a potentially tax-efficient way to invest.”
