[Thank you for the queries sent into the Personal Finance Clinic. We received 27 questions that I, Money Gardener and Triaging My Way will be answering (most of them anyway) over the next little while. Today’s post is in response to a question received from SG of Toronto who wondered how to invest in gold bullion.]
I’ve written many posts in the past on why gold is not a very attractive investment. Physical gold does not provide an ongoing income stream in the form of dividends or interest — in fact, it costs money to store and insure and over the long term — and the best that can be said for gold is that it keeps pace with inflation, though there may be periods when gold performs spectacularly. In Stocks for the Long Run, Jeremy Siegel notes that from 1800 to 2008, $1 invested in gold would have grown to an inflation-adjusted $2.59, which is much lower than the $306 that even lowly T-bills would have grown into. Despite the low correlation that gold has with other asset classes, the poor risk-reward characteristics provides a good reason for avoiding gold altogether. Still, some investors like the idea of keeping a bit of gold near at hand as a sort of “disaster insurance”.
Investors wanting to invest in bullion could do so through gold coins or gold bars. Various national mints produce gold coins of varying purity that are legal tender. The Royal Canadian Mint produces the popular Maple Leaf gold coins that are 99.99% pure or better and available in one, 1/2, 1/4, 1/10 and 1/20 ounce sizes. The one ounce coin has a $50 face value, which is quite a bit lower than the value of gold content. Other popular gold coins are the South African Krugerrand and the US Eagle. Gold bars are produced by various refiners, are available in various sizes and tend to be slightly cheaper than a gold coin of the same size.
I do not personally invest in gold bullion but have purchased Maple Leaf coins as gifts. There is no GST on Maple Leafs or gold bars but the coins attract a PST in Ontario but not in BC. Vancouver-based J and M ships gold bullion to customers across Canada for a small charge and do not charge any sales tax on pure bullion products. In this thread on Canadian Money Forum, a member suggests Border Gold, another BC-based vendor for buying or selling gold bullion.