Investing In Gold In Canada 2023

As one might expect in a market pullback (and geopolitical crisis) we’re getting many requests about how to invest in gold in Canada, as well as how to invest in commodities (which we covered not so long ago).

The awkward truth is that while this should be gold’s time to shine (see what I did there) investing in gold – through a gold ETF or by purchasing  physical gold – is not proving as profitable as one might assume during a market downturn.

Why Invest In Gold?

The theory behind investing in gold is that the precious metal has simply been the most consistently valuable means of payment/savings for several millennia.

That long-term value hold, plus the concept that scarcity, (there is only so much of it that can ever be created) gives gold its perceived value. Historically, when people are scared away from other types of investments (stocks, cash, bonds, etc) they often turn to owning gold. This means that people usually invest in gold for the following reasons:

1) They believe it will go up in value. In other words – they are speculating that they can sell it for more than they paid for it.

2) They’re pessimistic about the investment returns for any asset, and they hope that since gold has held value for so long, it will continue to do so no matter what. They’ll buy gold for now, and if other assets look better later on (when things have “calmed down”) then they can always sell it and move on.

All cards on the table, I’m not a huge fan of either one of these theories, and definitely prefer Canadian dividend stocks or keeping it super simple with a Canadian all-in-one ETF if you’re building wealth for the long term.

How to Invest in Gold in Canada

Several Gold ETFs are free to trade with our favourite online brokerage, Qtrade. Read our Qtrade review or sign up by clicking the button below:

When people refer to “Investing In Gold” they could actually be talking about some very different types of investments. The broad categories can generally be summed as:

• Investment in physical gold and gold coins
• Investment in physical gold – that you own on paper (someone else stores for you)
• Investment in gold companies (directly or through a gold miners ETF)
• Investment in commodity Gold ETFs
• Investment in Gold Futures (using commodity contracts)

Of these, the easiest way to invest in gold in Canada is definitely to buy a Canadian Gold ETF.

How to Invest In the Best Gold ETFs in Canada

The easiest way to invest in Gold in Canada is through the Horizons Gold ETF (HUG).

This is because HUG is absolutely free to buy and sell through Qtrade. To compare pricing on ETF trades, options, and other types of investing, checkout our Best Online Brokers in Canada Comparison.

HUG gives you exposure to our favourite shiny metal through gold futures contracts (sometimes referred to as “paper gold”). These futures contracts track the price of gold, through the Solactive Gold Front Month Rolling Futures Index. My favourite part is the .30% MER – quite low for a Gold ETF.

Some other gold ETFs that you might want to compare:

The IShares S&P/TSX Global Gold Index ETF (XGD) is Canada’s largest gold miner’s ETF and gets indirect exposure to gold through investing in the shares of gold mining companies. These companies have underlying fundamentals that can be valued, and usually pay out some form of dividend. Consequently, some investors prefer this structure to the bullion- or futures-based gold ETFs. Its MER is .61%.

The BMO Equal Weight Global Gold Index ETF (ZGD) is another gold miner’s ETF, but this one tracks a broader index and has more non-Canadian content. If you buy units of ZGD you’ll be investing in companies from South Africa to Brazil, as well as Canada. This fund is noteworthy because it automatically reinvests companies’ dividends (as opposed to XGD which pays them out).  Its MER is .55%.

The IShares Gold Bullion ETF (CGL) is our final Gold ETF pick, and it represents the most direct way to invest in gold, as it actually holds physical gold bullion. It also has an MER of .55%.

In case you are curious, none of these are featured in our list of the top 45 ETFs in Canada. We do recommend HUG if you specifically want to invest in gold, but if your goal is to maximize returns – there are better choice on the market.

How to Invest in Physical Gold

The old school way to buy Gold is to actually purchase physical bars of gold bullion and/or gold coins.  Canadian banks or a variety of other institutions can facilitate these purchases if you’re so inclined – but a word of caution here. Possessing your own physical gold can be quite risky as it’s impossible to track if it’s ever stolen from you.

A quick search reveals that as of the end of March 2022, buying a 1 oz gold bar from the Royal Canadian Mint will cost you $2,546.31. You can buy this gold bar and pick it up at any TD branch.

You can also purchase gold coins from our national mint – and they’re actually usable money (although I’ve never tried paying at the grocery store with one before).

It should be pointed out that while a gold bar is theoretically useful in the event of a complete world meltdown (I’m still not sure on this one), in the meantime, it will be much harder to buy and sell than a Gold ETF would be.

The other more hands-off way to invest in physical gold is to simply purchase a precious metals certificate from your bank. In this way you own gold in a central vault somewhere as proven by your official certificate.

Investing Directly in Gold Futures, Options, or Gold Companies

More advanced investors might be up for rolling the dice a bit more by directly investing in shares of gold companies or in gold futures contracts.

Of the two, investing in companies that mine gold is the more simple option. The Toronto Stock Exchange (TSX) is home to many gold companies including Franco Nevada Corp (FNV), Barrick Gold Corp (ABX), Agnico Eagle Mines Ltd (AEM), Kirkland Lake Gold (KL), and Kinross Gold Corp (K). 

Just remember that while the value of these gold companies will obviously be somewhat dependent on the price of gold, they are individual companies at the end of the day. They come with unique costs, assets, management, etc. Consequently their future profits might prove to be quite different from one another.

If you choose to invest in gold futures or options, what you’re essentially doing is placing a bet on the future price of Gold. While both gold options and gold futures are derivatives, gold options are more flexible and give the investor more flexibility.

Is Buying Gold a Good Investment?

Gold has not been a good investment in the past.

This goes against the sort of “common sense wisdom” that many people have passed along over the years.

The numbers just don’t lie though.

Stock market historian Jeremey Siegel’s research has proven that a dollar invested in gold back in 1802 would be worth about $100 today.

Wow – a 10,000% return you might think – that’s pretty spectacular.

Here’s the thing though – that same dollar invested in the US stock market would have grown to roughly $35 Million Dollars today!

It turns out that gold might be ok at storing value over the long term. Some market historians will make the interesting claim that adjusted for inflation, gold will purchase the same amount of goods today that it did two thousand years ago.  

The problem is that it doesn’t do much. It just sits there looking shiny.

Companies make profits, pay dividends, own physical assets, invent new more productive technologies, and generally are really good (as a group) at building value.

That’s enough to retain value, but not enough to build value.

Here’s how gold has done versus the average in the Canadian stock market – and remember, this includes the juicy dividend payments that our Canadian dividend kings churn out year after year.

Gold Investing FAQ

Should I Invest In Gold Today?

If you’re still not convinced that investing in gold is a bad idea for the long term, then you should consider the risk that even its one redeeming investment quality – its ability to store value – is quickly losing steam due to rival Bitcoin. Folks that advocate for buying bitcoin are using the exact same arguments that gold bugs have been using to argue for investing in gold for years!

For me, precious metals lost their investment lustre a long time ago.  

That said, if you’re looking for a short term bet on instability and market chaos – a place to “weather the storm” until markets resume their upward swing – then investing in a gold ETF makes far more sense to me than buying physical gold.