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How to Invest in Gold in Canada

Written by Jessica Steer
When it comes to investing, it’s difficult to know where to start. There are so many stocks to choose from, you don’t always know which stocks are more volatile than others. Because of this, many investors choose to invest in gold. While, like any stock, gold is volatile, it is also more stable than other stocks. If you are looking to invest in gold, there are plenty of ways to invest in the gold market.
Table of Contents

    Ways to Buy Gold

    Gold is one of those investments that have more than one way that you can invest in them. You can invest in gold:

    • by purchasing in physical form
    • by purchasing gold stocks or gold ETRs
    • by trading gold in the financial markets as CDFs, also known as contracts for difference

    Purchasing Gold in Physical Form

    Purchasing gold bars and gold coins in a popular form of investing in gold. This is because your assets are tangible, making it much less risky than investing in the stock markets. That being said, how you choose to invest in gold will depend on how much you are willing to spend.

    If you choose to invest in physical gold bullion bars, it is likely that you will be spending a lot more. This is because they are larger. The larger the size of the bar, the more expensive. If you are looking to spend less or anticipate liquidating some of your assets, gold coins are the better choice. They are much smaller than gold bars.

    If you do decide to invest in physical gold, it is important to remember that there are limits on what you are able to purchase. If you are purchasing from a bank, most only allow you to purchase up to $10,000 worth every 24 hours. There is no limit on how much gold you can own in total though. Physical gold investment isn’t monitored by the government.

    Purchasing Gold Stocks/ ETFs

    Purchasing gold stocks or ETFs is different from purchasing physical gold. Instead of investing in the product itself, you are investing in the performance of the gold industry or the mining industry.

    When it comes to investing in gold, you have the option of investing in companies with gold exposure or gold themed exchanged traded funds (ETFs). That being said, you don’t actually own the gold. The company you choose to invest in does.

    While you don’t have to store the gold and worry about insuring it, there is a bit more risk involved. This is because you are no longer in control of the money you invested. You risk the price falling and the company going under. This would result in you losing everything that you invested.

    Investing Through CFDs

    Investing through CFDs is a much riskier investment than the other two options. It doesn’t matter what you are investing in. How it works is, investors make profits on bond price movements, no matter what direction the price moves. With CFDs, you are investing in the futures market and, while you can make money even if prices go down, it’s risky. Unlike stocks, ETFs and physical god investing, usually experienced investors choose to invest in CFDs.

    Banks in Canada That Sell Gold

    If you are looking at buying physical gold in Canada, you can purchase it at some of the main Canadian banks.

    You don’t have to go into the branch when buying gold either. You can purchase gold online or through your online banking. As we previously mentioned, you can purchase up to $10,000 worth of gold in 24 hours at most major banks. The only bank out of these five that is different is TD. You can only purchase up to $2,999.99 worth of gold in 24 hours. If you are looking to purchase more than these amounts, you must purchase in person at the branch with 2 valid pieces of ID.

    After you have purchased the gold, you can either choose to have it stored at the bank, or you can store it yourself. If you choose to store it at the bank, it is stored in a custodial account at no extra charge. It is important to keep in mind though that all the gold will be stored together so you may not get the exact pieces that you purchased, but you will get what you paid for. If you wish for the bank to store your gold separately, then there will be an extra fee involved. The bank can choose to charge you an annual charge, a flat fee, or a percentage of the gold's value for the separate storage.

    That being said, no matter where you store your gold, you will want to insure it. These banks provide insurance for any of the precious metals that they sell. Be sure to check directly with your bank to find out what their insurance policy is. Is it included or does it come at an extra cost? What does it cover?

    Taxes on Gold in Canada

    Paying taxes on gold works like any other commodity. You don’t have to pay taxes on what you own, you only have to pay tax when the gold is bought or sold.

    Places to Buy Gold Other Than the Banks

    If you don’t want to purchase your gold from a traditional bank, or are just wanting to look at your options, you can also purchase gold from other sources. That being said, if you are wanting gold bars, also known as gold bullion, those are normally purchased from a bank.

    If you are looking for gold coins, there are a lot more places that you can buy those, like:

    • Pawnshops
    • Individual sellers
    • Private dealers
    • Canada Post
    • The Royal Canadian Mint

    Is Jewelry Considered a Gold Investment?

    It definitely can be, especially if the jewelry is antique. In the case of jewelry, though, you are likely to pay more than what the gold itself is worth. Sometimes gold jewelry is also mixed with other alloys so it isn’t always pure gold either.

    A good way to verify if the jewelry you're purchasing is pure gold, is to purchase it from a verified dealer. They will be registered with the Canadian Jewelry Association. Jewelers with this certification have signed a code of conduct that requires them to be honest about the nature of their jewelry.

    Gold Stocks

    If purchasing gold isn’t for you, you may be interested in investing in stocks. To do this you would buy gold stocks from gold mining companies. That being said though, you aren’t investing in gold itself, you are investing in gold companies. There are plenty to choose from and they will be listed on the Toronto Stock Exchange (TSX).

    When you are looking to purchase gold stocks, or even ETFs, it is recommended that you start a brokerage account. As you probably know, there are plenty of brokerages to choose from. They allow you to keep a close eye on your investment. There are plenty of online brokerages that allow you to trade and buy for low to no cost, keeping your fees low.

    That being said, purchasing stocks in a gold mining company does have more risk than owning physical gold. This is because you have no physical assets and, while gold is a more stable investment than others, it still comes with risks. You also have to remember that gold mining stocks don’t reflect the price of gold, they reflect the company that mines the gold. While gold prices may have an impact on gold mining stocks, there are other factors in play.

    If you are looking to invest in stocks, there are a few top gold mining companies to consider when investing. There are too many to mention, but included in this list are:

    • Barrick Gold
    • Newmont Mining Corporation
    • Franco Nevada Corp.
    • Agnico Eagle Mines Ltd.
    • Kirkland Lake Gold

    Gold ETFs and Mutual Funds

    Instead of investing in individual companies, you can invest in EFTs. Also known as electronic traded funds (ETFs) or mutual funds. When you invest in either of these, you are investing in shares that are already put together as a bundle. Depending on the ETF or mutual fund that you choose, they will either track the price of gold, stocks of multiple gold mines and refineries, or they might even track exposure of gold futures and options.

    If you are looking for certain ETFs and mutual funds to invest in, there are far too many for us to list. That being said, let’s take a look at some of the ones that are most commonly mentioned.

    • iShares Gold Bullion ETF
    • BMO Precious Metals Fund
    • CIBC Precious Metals Fund
    • TD Precious Metals Fund
    • iShares S&P/TSX Global Gold Index ETF
    • BMO Equal Weight Global Gold Index ETF

    Best Way to Invest in Gold

    When it comes to investing in Gold, the best way to invest depends on how much you have to invest and what you are looking for in return. Investing in gold bullion bars is the purest way to invest in gold. It is also more expensive but you pick and choose the size of bars you wish to purchase. Gold coins and jewelry have a high risk of having fillers and less gold content.

    Investing in stocks and ETFs/Mutual funds are another great way to invest in gold but you should do your homework before investing. ETFs are often the preferred method of investing for beginners because they are already assembled portfolios. Individual stocks are a little riskier because all of your money goes into one company. If that company's shares fall or the company goes under, then you could lose all of your money.

    Should You Invest in Gold?

    As we mentioned before, gold tends to be more stable than other investments. While the price of gold does fluctuate, it is one investment that has the potential to maintain its value, and even increase it over time.

    Risks of Investing in Gold

    No matter which way you choose to invest in gold, it comes with risks. There are a few different factors that contribute to that risk.

    1. Inflation: When it comes to inflation, there is no guarantee that the price of gold will rise when inflation does. That being said, many investors will risk it anyways. Sometimes the risk is worth the reward. That is because inflation doesn’t predict the price of gold.
    2. Politics: There are a lot of factors that contribute to the price of gold. One of those is political events. These include things like wars, elections as well as new government policies being put into place.
    3. Volatility: The price of gold changes over time. It constantly rises and falls. That doesn’t mean you can’t make money anyways. You just need to be careful when you buy and when you sell. That being said, it is difficult to determine what the price of gold will be.
    4. Insurance and Storage: If you choose to buy physical gold, you have to keep in mind that there are some extra fees involved. Depending on how you choose to store the gold, there may be some storage fees. There is also the cost of insurance to consider. Because gold can be very valuable, insurance protects you from loss and damages.

    Overview of Investing in Gold

    Investing in Gold isn’t for everyone. There are so many different ways to invest in gold, but they all come with their own risks. There is no guarantee when it comes to any form of investment, but it is important that you do your research so you can make the most informed choice. Whether you choose to invest in gold bullion, coins, jewelry, ETFs, mutual funds, stocks, bonds or even gold futures contracts, you can always get a second opinion before you purchase anything.

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