How to invest in gold in the UK: a complete guide

The history of gold dates back to ancient times: people defined their wealth by the amount of gold they owned and exchanged it as currency. Even though centuries have passed, not much has changed in that regard: gold still has universal value. In addition, it is one of the most stable assets in the world and investors often buy it as a safe haven asset.

If you are looking to diversify your portfolio and mitigate the risk of losses by selecting reliable assets, then you should consider choosing gold. But, like every asset, it has its own advantages and disadvantages.

So what is gold and how can you buy it in the UK? Is it a good investment decision to buy this precious metal? What is its price and what influences its value?

Read on to find out the answers to these and other questions. We'll tell you everything you need to know.

The introduction of gold trading

If you are just starting out in the financial markets, then you have a lot to learn, but don't worry, we are here to help. Even if you are already experienced, increasing your knowledge will benefit you and increase your chances of success.

Let's start at the beginning. As you know, natural resources are finite and the rarer they are, the more valuable they are. The World Gold Council (WGC) reported that humans have mined 90% of the world's gold since the California Gold Rush in the 1850s.

A 21-metre cube would be enough to hold all the gold ever mined. In comparison, the world produces millions of barrels of oil and billions of cubic metres of natural gas every day. Not a huge amount when you consider global resources.

In addition, 50% of the gold mined in the last decade has already been used by companies to make jewellery. Just over a quarter of it has been turned into coins and bullion. The technology sector has used the surplus gold or investors have bought it.

In the UK, all gold is produced by the Royal Mint. Based in South Wales, it distributes mined metals and converts a percentage into coins and bullion.

However, the United States holds the world's largest reserve of gold, with more than 8,000 tonnes in total. On the markets, the value of the metal is determined by its weight. WGC reported that the US supply represents 4% of the total amount mined to date (187,200 tonnes).

The UK currently holds 310 tonnes of the metal, stored in the vaults of the Bank of England. The country sold 400 tonnes between 1999 and 2002, a decision that has been widely debated and criticised, as the sale took place when gold prices were at an all-time low.

How are gold prices determined?

As you can see, gold is a commodity with a limited supply. According to the data, Australia, China and Russia were the largest producers of this metal in 2022. Due to its more or less limited supply, changes in demand significantly influence the price of gold.

Over the past 30 years, its price has increased by £1,640 in the UK, from £220 to £1,860. At one point, in 2024, it reached £1,930, reaching an all-time high.

Currently, bullion prices in Great Britain are determined by the London Bullion Market Association (LBMA). This is a bullion market where precious metals are traded and prices are set.

However, gold has two different types of prices: fixed and spot. Fixed prices are set twice a day by LBMA members through conference meetings. They usually use this price for large orders.

On the other hand, traders use spot prices to buy and sell bullion. Investors sometimes refer to these latter prices as “live” prices.

Why Invest in Gold: For Beginners in the UK

Now that you know the offer and prices of this product, let's move on to the next part: why should you invest in gold? Actually, there are several good reasons for this. For investors, the most important one is the safe haven character of this asset.

Most financial markets are known for their volatility, especially the currency and cryptocurrency markets. Some types of commodities are volatile in their own way. For example, wine or wheat prices depend on the quality of the harvest and other natural and economic factors. Stock prices also fluctuate frequently.

Unlike other assets, the price of gold is determined solely by supply and demand and is not influenced by global politics or a country's interest rate policy. In addition, when markets fall due to political conflict or uncertainty, the price of gold tends to rise, similar to other safe haven assets.

Investors who own this precious metal do not have to worry about market volatility. In fact, investing in gold is a good way to ensure that you have at least one asset in your investment portfolio that will remain stable if the values ​​of others plummet.

The latest statistics only reinforce this fact: take the war in Ukraine as an example. In the first quarter of 2022, when most financial markets closed in deep red, gold defied the bearish trend and soared by a whopping 34%. It continued to rise throughout the year.

The WGC said that thanks to the buying of the metal by retail investors, together with huge purchases by central banks, its annual demand hit an 11-year high.

What are the other advantages of investing in gold in the UK?

Owning gold is a good way to preserve wealth. Inflation is one of the biggest problems facing the world economy and central banks are fighting it relentlessly. Because of inflation, the real value of the currency decreases over time. Today, you can buy much less with £100 than you could 30 years ago.

Unlike currencies, the price of gold is not subject to inflation. The latter has no influence on this raw material. You can therefore protect the real value of your capital by investing in this precious metal.

Typically, when inflation reaches particularly high levels, investors start buying this asset – after all, money is just paper and can be devalued. On the other hand, gold is a physical asset with its own value, which it maintains despite market developments. Moreover, when inflation rises, the increased demand for this product also causes its price to skyrocket.

If you're wondering how to invest in gold in the UK, consider the historical context and current trends. In the UK, average annual inflation has reached 3% over the past 20 years, the Office for National Statistics reported. The WGC also announced that the average price of gold rose by 10% per year over the same period. This means that the real value of the metal has soared by an average of 7% year-on-year (minus 3% inflation).

Another good reason to buy this product is to diversify your portfolio. The first rule of investing is not to put all your eggs in one basket. If this basket collapses, where would you be?

It is always a smarter option to diversify and buy different assets. And while it is easy to invest in stocks, currencies, cryptocurrencies, property or even other commodities, precious metals are always the safest and most reliable option.

After all, stocks can lose their value, commodities can deteriorate or run out, but gold knows no time limits, it lasts longer than any other asset.

How does gold correlate with other assets?

Analysts say that this precious metal has an inverse correlation with other investments. For example, if the value of a stock decreases, the price of gold increases. And let's not forget its greater stability. That's one of the reasons why central banks fill their vaults with it in times of uncertainty.

However, holding this asset is not entirely risk-free. In fact, it can have several disadvantages. The main one is price volatility. Sometimes, investors have to wait several years before the price of the commodity increases enough to make a profit from its sale.

If you want to make big profits and you want them quickly, you may prefer to choose another asset. Gold works best as a long-term safe haven asset. Also, unlike bonds, savings accounts, or dividend-paying stocks, this commodity does not offer investors yield or income.

Finally, buying or trading in physical gold can be difficult for those with limited funds. And if you do, you'll need to verify the authenticity of the metal and store it in a safe place. If you choose a bank (which is an obvious choice these days, rather than burying the gold on some far-off island or in your backyard), you may have to pay fees for its protection.

Finally, although this commodity is not affected by most geopolitical events, some of them can influence its price. The G7 banned gold imports from Russia in 2022, as a sanction due to that country's invasion of Ukraine. This definitely influenced the price of the commodity.

Now that you know all the pros and cons of investing in gold, let's move on to the next part: how to invest in gold and silver in the UK.

Steps to take to invest in precious metals in the UK

Gold investment in the UK can be approached in a number of different ways, depending on your goals and available funds. You have the option to choose between direct and indirect methods, similar to most other types of investments.

If you decide to buy gold directly, you should check the karat number. 24 karat means pure gold and the higher this number, the purer it is. However, as we have mentioned, gold is often combined with other metals to achieve greater durability.

You can buy coins, bullion, or jewelry from banks or precious metal dealers, but be careful to make sure the product is authentic. Of these three, jewelry is the worst choice because its price is often boosted by the price of crafting, and you get a smaller amount of gold for a higher price.

If you decide to store your purchases at home, make sure you install a good safe and lock.

The second way is to buy exchange-traded funds (ETFs) or invest in gold mining companies. Buying shares in the latter is a good way to get indirect benefits from this product.

Major gold mining companies include Newmont Corporation, Barrick Gold Corporation and AngloGold Ashanti. The London Stock Exchange offers access to Rio Tinto, BHP Group and Glencore.

Overall, investing in precious metals is a good option, but they do not offer significant returns in the short term. If you decide to add this asset to your portfolio, you should prepare to hold gold for many years. But the wait is worth it, especially in times of market volatility.

Now you know how to invest in gold in the UK. But that is just one of the possibilities in the vast financial world. Read our other articles to learn more about good investments!