Gold is often used to spread risk because its price tends to move at different times to other types of investments. But investing in gold and other commodities is not low risk. Wild price swings and the potential for scams mean commodity investing may be best done through managed funds or other more complex financial products, such as futures and options. If you want to invest directly, we strongly recommend you seek financial advice.
Key things to know before you invest
You can buy some commodities (like gold) direct from a dealer, or you can invest in commodities via a managed fund. You can also buy derivatives or shares of listed commodity-producing companies (for example a company that produces oil or crops).
If you want to invest direct through a dealer it’s important to ensure they’re trustworthy. We don’t regulate commodity dealers, so can’t help if things go wrong.
Direct commodity investments don’t pay interest or dividends. Money is only made if the commodity increases in value and you’re able to sell for more than you paid. Prices can be subject to wild price swings so it may be many years before you get the price you want. There will also be costs to consider, such as storage and insurance and you may have to pay tax if a commodity is sold for a profit.
Gold is usually priced in US dollars. Its value is affected by movements in currency exchange rates as well as international demand. This can help you spread risk because prices tend to move at different times to other types of investments but it also makes it harder to predict what the future price might be.
If you’re buying a commodity directly, make sure you know where it comes from. In the case of gold, certain dealers are recognised around the world. Using a local, reputable dealer may make it easier to resolve any issues and to sell the commodity.
Be wary of businesses not based in New Zealand. Scammers commonly try to ‘sell’ gold or other commodities they promise to keep safe for investors. If you’re buying gold, ask yourself how you know that same bar of gold hasn’t been sold to other investors as well?
If you’d like to invest in a fund that includes commodities, read our managed funds page to learn how they work.
If you’re considering commodity futures, options or other derivatives products, only buy through a provider named on our licensed derivatives issuer list.
For more information about direct investment in commodities, such as gold, speak to a financial adviser.