Gold purchases doubled in every week… however do you have to purchase in?

Political upheaval is a big factor driving up the gold price. Savers wasted no time in buying after Prime Minister Rishi Sunak last month announced a general election for July 4.

Figures from the Royal Mint showed that the volume of gold purchases doubled in the week following the announcement.

Gold has for generations been seen as a safe haven for investors in turbulent times.

The price hit a record in May, amidst war in Ukraine and the Middle East, along with political and economic turmoil around the world.

But should you consider buying the precious metal? And if you do decide it will pay to buy gold, what is the best way to go about it?

We asked the experts what is driving the price of gold and how small investors can get the Midas touch.

Political upheaval drives up the gold price

The UK is not the only country in election mode. More than 1.5 billion people are going to the polls in more than 50 nations.

That has sparked global concerns over economies, tax, national security and foreign policy, all of which make investors feel nervous.

Another reason gold is buoyant is that economists expect Western central banks to cut interest rates in the summer.

This is pushing up the price of gold, which does not earn interest and, therefore, when rates come down its attraction increases.

Chinese investors are having a major influence. They have turned to gold as an alternative to their troubled property market, which has been mired in crisis.

Governments and other investors in emerging markets are also stocking up on gold. They are building reserves as an insurance policy against geopolitical tensions.

Europe has been rattled by the strong performance of the far right in the elections – and then there is the race for the White House, which will be decided in November.

With no sign of the tumult calming, experts say demand for gold is likely to remain strong.

Adrian Ash, director of research at online gold dealer BullionVault, says gold has been the ‘ultimate prize in all cultures and all ages’.

‘Today it tends to do well when other investments do badly,’ Mr Ash says.

‘As a physical asset, gold can’t go broke on you, and its tight supply makes it a stand-out hedge against inflation.’

It is also, he says, easy to trade and a commodity that is valued around the world.

‘Added to its deep, global market – where trading liquidity each day is second only to the US stock market – this gives gold a unique appeal as a kind of investment insurance.’

Stuart O’Reilly is a manager at the Royal Mint, which produces all the UK’s coins and offers small savers a gold investment service.

He says: ‘Due to gold’s safe-haven status and lack of correlation with other assets, we tend to see surges in the buying of gold coins and bars when investors are uncertain about the future.’

It is a trend that has repeated throughout history following economic or political shocks.

That includes the DotCom crash of the early 2000s and the collapse of Northern Rock in 2007.

More recently the Brexit vote in 2016 and the Covid pandemic in 2020 saw the price of gold shoot up.

What will happen to gold’s price?

It hit record high of $2,450 an ounce this spring, a rise of nearly 20 per cent from the start of the year.

Since then, it has cooled slightly to $2,310 per ounce, due to fears the US Federal Reserve will not cut interest rates as quickly as expected.

But investors in the US, UK and Europe are expected to pile into gold as interest rates are cut this summer, which will drive the price up.

However, expect some volatility as interest rate decisions, election results and conflicts continue to unfold.

Is it the right time to invest in gold?

With gold prices hovering around record highs, there is a risk of buying at the top.

But experts say savers should view gold as a long-term proposition.

‘Trying to pick the highs and lows can mean you miss out on the longer-term trend,’ says Mr Ash at BullionVault.

Global economic and political developments will cause short-term ups and downs.

But in the medium-term, prices will remain well supported, adds Giles Maber, sales director of London gold dealer Sharps Pixley.

‘Current uncertainties including the upcoming UK and US elections, and a fragile economic climate create a favourable environment for gold investment,’ Maber says.

He adds, however: o’Investors should remain cautious about potential short-term price changes due to shifting interest rate expectations and election outcomes.’

Five ways to invest in gold

Buy bullion

Investors can buy gold coins and bars from dealers, so they own the physical asset.

In the UK, there is no VAT levied on investment gold in the form of bullion bars and coins.

But buyers need to think about where they will keep their hoard. Having it at home means taking out insurance and installing a safe.

An alternative option is to pay for your bullion to be kept in a vault- which will come with an additional fee.

Gold bullion can be bought from The Royal Mint with the option to store it at home or pay extra to keep the asset in a vault. Storage costs 2pc plus VAT each year – charged quarterly – to store single coins or bars up to 10g. Bigger collections are charged 1pc plus VAT.

There are also independent dealers like Sharps Pixley and Baird & Co.

Wherever you buy your gold, make sure to get certificates of ownership and authenticity in writing.

Gold dealers are not regulated in the UK but bodies such as The British Numismatic Trade Association and the London Bullion Market Association list reputable traders online.

Be wary if you are offered a price that is significantly lower than the market value, as it could be a sign of a dodgy dealer.

Bear in mind that if something goes wrong, gold investments are not regulated by the FCA so you will not be able to claim compensation.

Prices at the Royal Mint start at £140.13 for a quarter sovereign gold bullion coin, rising to £191,527 for a one hundred gold bullion coin box.

The cheapest bar available is a 1g minted gold bar, costing £72.97, and the most expensive is a 1kg gold bullion cast bar for £60,489.

The Royal Mint will buy back the investment for 98pc of that day’s gold price.

Buy digital bullion If you want to steer clear of the complications and extra work involved in holding bullion, you can instead buy digital gold.

One of the advantages of this route is you can purchase small quantities – as little as one gram.

The gold will be managed for you by the dealer – meaning you will avoid the headache of having to arrange storage but you will have to pay ongoing fees.

The Royal Mint has a digital gold platform, with investments starting at £25. Storage fees – charged quarterly in arrears – are 0.5pc plus VAT.

Buy a gold ETF 

 A gold Exchange Traded Fund (ETF) gives savers exposure to the yellow metal by tracking price changes without having to own the physical asset.

Investors’ money flowed into global gold ETFs in May following a year of outflows.

Popular funds include iShares Gold Micro ETF, Invesco DB Precious Metals Fund and SPDR Gold Trust.

One plus point for ETFs is that there are no additional costs for insurance and storage.

Another advantage is that you can buy and sell shares in ETFs easily online.

You can invest in a gold ETF through an online broker such as AJ Bell, Hargreaves Lansdown and Fidelity. Fidelity allows customers to start investing from as little as £25 a month or £1000 as a lump sum.

However, investors in gold ETFs do have to pay fees and won’t own any gold themselves.

Charges will vary depending on the broker you use.

For example, Fidelity charges £7.50 for buying or selling an ETF online, and a standard service fee of 0.35pc when you have more than £25,000 saved – which is capped at £90 a year or £7.50 a month for ETFs.

As with any investment, it is important that savers do their own research into individual products before committing any cash.

Make sure you only invest through Financial Conduct Authority regulated firms.

Buy gold funds 

A gold mutual fund is like an ETF but there are some key differences.

Mutual funds invest in ETFs and other assets such as mining firms, making them a more diversified option.

They are run by expert managers who select the shares and funds.

Options include the LF Ruffer Gold Fund, Jupiter Gold & Sliver and BlackRock Gold & General. Again, you can invest in a fund through an online broker such as AJ Bell and Hargreaves Lansdown and will have to pay the platform’s fees.

Buy gold miner shares 

Buying shares in a gold miner is another way to gain exposure to the metal without owning the asset physically.

Some shares may pay out a dividend, which is not the case with other options.

London-listed gold miners include FTSE 250 firm Endeavour Mining, Centamin and Hothschild Mining – which also produces silver.

But as AJ Bell investment director Russ Mould says ‘not all gold miners are equal’.

Savers need to do a lot of research before investing as many factors can impact returns, not just the gold price.

For example, it is important to know whether the gold miner is already producing, in the exploration phase or is in the process of obtaining a license.

Mould says to check the size of the company’s resources, the production profile of its existing mines, where it operates and the risk of clashes with governments over mining rights and taxes as well as the difficulties that could be posed by extreme weather.

Finally, investigate the experience and skill set of the management and executive team, the miner’s balance sheet and how much cash or debt it has.

You can invest in gold mining shares through an investment platform like AJ Bell, Hargreaves Lansdown and Interactive Investor.

But if gold isn’t for you, how about other havens in times of trouble?

Despite gold’s reputation as a ‘safe haven’, there are other options for investors during uncertain times.

‘Someone worried about the state of the world isn’t restricted to gold as a supposed safe haven,’ Dan Coatsworth, investment analyst at AJ Bell, says.

Historically utility providers and tobacco manufactures have been classic safe haven investments as their products and services are in demand no matter the state of the economy or government.

But with pressures piling on those sectors from regulators, other options may be more appealing at the moment.

Cash, developed market government bonds and money market funds are potential alternatives, Coatsworth says.