Isn’t it best to buy gold mining stocks?
Understanding the risks in mining
Individuals are sometimes advised to buy gold miners, instead of buying physical gold, as a better portfolio hedge.
Both of these ways to invest in gold have advantages and disadvantages, and recent gold market trends show mining stocks outperforming gold bullion investment during the earlier bull market phases, and gold bullion then outperforming miners in later phases. Either way, it is often the case that gold miners do not track the price of gold, even though their earnings are linked to the live gold price.
Individuals looking to preserve and secure their wealth might look to buy gold bullion with the low risk, conservative part of their portfolio. Gold mining shares might then be a secondary gold investment with the higher risk part of your portfolio.
Deciding whether to buy gold or gold mining shares is not the right way to approach gold investing as it is not an either or decision.
So should I buy gold bullion? Buying physical gold bullion is closer to holding cash in a savings account, whilst gold mining shares are more speculative investments in pursuit of dividends and greater returns above rising gold prices.