How to Invest in Gold in Canada in 2024

How to Invest in Gold in Canada in 2024: In 2023, gold remains a preferred investment choice among Canadian investors. It is viewed as a means to diversify investment portfolios and hedge against inflation, especially in the context of low interest rates. Being an asset with low correlation to other assets, gold has the potential to mitigate the impact of market downturns and provide stability during times of economic uncertainty.

However, it’s essential to acknowledge that gold does not generate income and its price is primarily driven by investor sentiment and speculation. Consequently, gold investments can be subject to significant volatility and price fluctuations.

Canadian investors typically have four main avenues to invest in gold: purchasing physical gold, acquiring shares of gold companies, investing in gold exchange-traded funds (ETFs), or participating in gold futures trading. Each option comes with its own set of risks and considerations, and investors should carefully evaluate their investment goals and risk tolerance before making a decision.

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Buy Physical Gold from Canadian Banks

Investing in physical gold remains a favored method for investing in precious metals. In Canada, major Canadian banks serve as primary bullion retailers. Notably, gold and other precious metals are exempt from GST and HST. Below is a breakdown of the process for purchasing physical gold from TD Bank and CIBC.

TD Bank

TD Bank provides a variety of gold products available for purchase through online platforms, in-branch services, or at TD Foreign Exchange Centres. Clients of TD Bank may benefit from discounted prices. For orders exceeding $100.00, shipping is complimentary for all physical metal deliveries. Additionally, TD Secure Storage offers customers the option to securely store their gold within a protected vault facility. Customers utilizing this service are subject to a monthly fee of $1.25 per ounce, with a minimum account charge of $9.95 per month. Moreover, all gold products stored via TD Secure Storage are fully insured, covering their market value at the current rate.

Here are some of the gold products offered by TD Bank:

CIBC

CIBC provides a variety of gold products available for online purchase. Customers are required to create an online account, complete payment, and await free delivery directly to their doorstep. Delivery is typically scheduled within 5 to 7 business days, although it may extend to 2 to 9 weeks in certain cases. Unlike TD Bank, CIBC does not offer storage facilities for gold. However, Safety Deposit Boxes are available for rent at most branches. The cost of a safety deposit box at CIBC ranges from $60 to $400 per year, depending on its size. For individuals owning a small amount of gold, opting for a smaller box should suffice.

Below are some of the gold products offered by CIBC:

Product	Price	Storage
CIBC 1/10 oz Maple Leaf coin	$309.60	N/A
CIBC 1 oz gold bar	$2,844.85	N/A

It is important to note that prices are subject to change.

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Buy Physical Gold from the Royal Canadian Mint

For investors preferring physical gold, the Royal Canadian Mint offers gold bars and coins directly through their online store. The Mint features a variety of gold coins, ranging from one gram to one ounce, boasting a purity level of 99.99%. Prices for these gold products span from $288.88 to $99,500.00; however, there exists a daily purchase limit for these items.

Customers can peruse the Mint’s website to discover gold coins fitting their budget. Some available options include the 1 oz. Pure Gold Coin – 50th Anniversary of the Summit Series priced at $4,099.95, the $10 Pure Gold Coin – His Majesty King Charles III’s Royal Cypher at $289.95, and the Pure Gold Coin – Kathleen “Kit” Coleman: Pioneer Journalist valued at $999.95.

Upon purchasing gold from the Royal Canadian Mint, customers can anticipate home delivery within 5 to 7 days, though delivery times may fluctuate based on product availability. For instance, while most in-stock coins are delivered within a week from purchase, it may take several weeks for newly released products. The Mint extends free shipping for purchases exceeding $100.

It’s essential to recognize that storage services for precious metals are exclusively available to business accounts through the Royal Canadian Mint.

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The Challenges of Buying Physical Gold

When purchasing physical gold, two primary challenges arise. The first challenge involves determining where to securely store it. Storing gold at home is discouraged due to increased risks of theft or damage from natural disasters. Consequently, renting a safe deposit box from a bank is advisable. Major Canadian banks like TD, CIBC, and RBC offer safe deposit boxes for an annual fee ranging from $50 to $500, depending on the required space.

The second challenge pertains to reselling physical gold. Unlike selling an ETF that mirrors the gold price, selling a 1 kg gold bar can be more complex. To address this challenge, individuals can visit major banks’ regional resale centers or branches. For example, at CIBC, one can complete a form and provide the original receipt to verify the product’s condition.

It’s important to note that insuring physical gold may increase homeowners insurance costs. Therefore, it’s essential to consider these additional expenses when purchasing physical gold.

In summary, purchasing physical gold presents challenges such as secure storage and reselling. Renting a safe deposit box from a bank is a recommended solution for safekeeping, while reselling can be facilitated by visiting a major bank’s resale center or branch.

How to Invest in Physical Gold… Without Taking Delivery

Investors seeking exposure to physical gold without taking physical delivery have two options: precious metal certificates and Exchange Trading Receipts (ETRs).

Precious Metal Certificates:

Issued by banks, these certificates serve as proof of ownership of gold held by the bank. Both RBC and CIBC offer certificates through their respective wealth management and investor services divisions. Investors can purchase these certificates via an investment account, with the bank holding the gold on their behalf. Upon purchase, investors receive a title deed via email, and certificates may be resold at market value.

Exchange Trading Receipts (ETRs):

ETRs are title deeds entitling investors to a specified amount of gold held by the Royal Canadian Mint. Guaranteeing investors a genuine portion of gold, ETRs allow for either gold delivery or the resale of the title for cash. Traded on the Toronto Stock Exchange under the ticker symbol MNT as Royal Canadian Mint CDN Gold Reserves, ETRs can be purchased through online brokerage accounts or investment advisors.

Investors inclined towards gold mining companies can do so via Canadian online brokerages. These companies oversee gold mining operations and marketing, with their stock prices typically aligning with gold prices. However, investing in gold mining companies carries greater risk compared to investing in gold or royalty companies, as their prices are influenced by various factors beyond gold value, including operational costs and exploration risks.

Gold Royalty Companies:

Royalty companies offer financing to mining firms for mine development and collect a portion of extracted gold as royalties. They also purchase gold from mining companies at favorable rates, resulting in lower operational costs and reduced exploration risks. Notable examples include Toronto’s Franco-Nevada and Vancouver’s Wheaton Precious Metals.

Gold Mining Companies:

Investors can also consider direct investment in gold mining companies such as Barrick Gold, Eldorado Gold Corporation, SSR Mining, Alamos Gold, and Agnico Eagle. Key considerations when evaluating these companies include past dividend payments, financial ratios, and extraction costs per ounce or kilogram. A lower extraction cost per unit indicates better competitiveness and reduced vulnerability to gold price fluctuations.

Investing in Gold-Focused ETFs:

Gold-focused exchange-traded funds (ETFs) offer a straightforward means of gaining exposure to gold or gold mining companies. In Canada, gold-based ETFs fall into two categories: those mirroring gold prices and those investing in gold mining companies. Examples include iShares Gold Bullion ETF (CGL), Sprott Physical Gold Trust (PHYS), and Purpose Gold Bullion Fund (KILO). Investors should consider factors such as management expense ratio (MER) and currency hedging options when selecting a gold ETF.

In summary, investors seeking exposure to physical gold have multiple options, each with distinct advantages and risks. Careful consideration of investment goals and risk tolerance is essential before making any investment decisions.

ETF name	Ticker	MER
iShares Gold Bullion ETF	CGL	0.55%
Sprott Physical Gold Trust	PHYS	0.41%
Purpose Gold Bullion Fund	KILO	0.23%

Investing in gold mining companies via ETFs offers investors exposure to gold prices alongside potential profits from company operations and dividends. The Canadian iShares S&P/TSX Global Gold Index ETF targets the largest global gold mining companies, while BMO’s Equal Weight Global Gold Index ETF presents another option. For investors seeking covered call options, the Horizons Gold Producer Equity Covered Call ETF may be preferable. Additionally, those inclined towards higher potential returns despite increased risk might consider investing in junior mining companies through the BMO Junior Gold ETF.

Below is a summary of gold mining company-focused ETFs available in Canada, along with their ticker symbols and MER (Management Expense Ratio):

ETF name	Ticker	MER
BMO Equal Weight Global Gold Index ETF	ZGD	0.60%
BMO Junior Gold Index ETF	ZJG	0.61%
iShares S&P/TSX Global Gold Index ETF	XGD	0.61%
Horizons Gold Producer Equity Covered Call ETF	GLCC	0.79%
Horizons Gold Yield ETF	HGY	0.90%
CI First Assets Gold+ Giants Covered Call ETF	CGXF	0.71%

Before choosing a gold-focused ETF for investment, investors should thoroughly evaluate their investment objectives, risk tolerance, and investment timeframe.

Investing in Gold Futures

Experienced investors may find investing in gold futures contracts appealing. This involves opening a margin account with an online broker and committing to purchasing a specified amount of gold at a predetermined price on a future date, known as maturity. Futures contracts typically mature within 1 to 3 months, with a standard gold quantity of 100 ounces per contract. Should the price of gold surpass the futures contract price, investors can sell the contracts and realize a profit. However, it’s crucial to sell the contracts before maturity to avoid being obligated to purchase physical gold.

Furthermore, investors can access gold futures through ETFs like Horizons Gold ETF (HUG), which seeks to mirror the performance of the Soloactive Gold Front Month MD Rolling Futures Index. It’s imperative for investors to thoroughly assess the risks and potential rewards associated with investing in gold futures.

Top Online Brokers to Invest in Gold

Qtrade

Qtrade Direct Investing is a platform renowned for its cost-effective approach catering to independent investors. It’s acclaimed for its prompt and efficient customer service. The platform permits users to trade 100 ETFs without any charges. For other transactions, there’s a base commission of $8.75 per trade. As of October 31, 2023, investors can avail up to $150 cashback using the promo code OFFER150.

Wealthsimple Trade

Wealthsimple Trade offers a user-friendly app enabling investors to trade stocks and ETFs sans any brokerage commissions. It boasts an attractive fee structure with no transaction fees, commissions, annual fees, or account maintenance fees. Users can receive a $25 cash bonus and enjoy commission-free trades upon opening a Wealthsimple Trade or Crypto account and depositing and trading at least $150. Additionally, investors can benefit from a bonus of up to $150 waived when transferring $5000+ to Wealthsimple from another brokerage or bank.

Questrade Trading

Questrade Trading delivers a comprehensive experience catering to investors interested in diverse assets beyond stocks and ETFs. The platform entails a minimum commission of $4.95 and a maximum of $9.95 per trade. ETF purchases are commission-free, and Questrade Global facilitates trading on the foreign exchange market (Forex) and precious metals market across approximately 15 international stock exchanges. Investors can utilize the code “Hardbacon” to avail a $50 trade commission rebate or manage $10,000 free for a year.

BMO InvestorLine

BMO InvestorLine presents registered (TFSA, RRSP, RESP, RRIF) and non-registered accounts sans any minimum balance requirement. Investors gain access to stocks, ETFs, options, bonds, GICs, and mutual funds. While the platform features 80 commission-free ETFs, gold ETFs are not included in their list.

BMO Investorline Self-Directed

BMO Investorline Self-Directed provides registered (TFSA, RRSP, RESP, RRIF) and non-registered accounts sans any minimum balance stipulation. It allows investment in stocks, ETFs, options, bonds, GICs, and mutual funds. The platform offers 80 commission-free ETFs, excluding gold ETFs, with a flat fee of $9.95 per trade. Investors can also utilize the platform across various accounts like TFSA, RRSP, RESP, and more, accessing some of Canada’s popular ETFs sans commission fees while leveraging industry-leading research and real-time quotes. Moreover, investors can utilize user-friendly analysis tools to benchmark, customize, and track their performance.

These online brokers offer investors diverse avenues to invest in gold, enabling them to select the platform aligning with their needs and preferences.

The Path to Wealth is Paved in Gold

Gold investment is a favored method for portfolio diversification and inflation protection. Several avenues exist to invest in gold in Canada. For individuals seeking physical gold ownership, purchasing gold coins or bars is a viable option. Major Canadian banks offer precious metal certificates for those averse to physical storage responsibilities. Online brokers present investment opportunities in gold stocks, gold-focused ETFs, or gold futures. It’s imperative to weigh the pros and cons of each investment avenue and opt for the one aligning with your investment objectives and risk tolerance.

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FAQs – How to Invest in Gold in Canada in 2024