The metal stumbled last year, suffering its worst fall since the early 1980s. But diminished value can open new opportunity.
Gold's 12-year bull run ended dramatically in 2013. Long considered a safe asset, its investors would have lost 28 per cent of their investment. The price finished the year at
1. Physical exposure to gold
For centuries, investors have succumbed to the allure of gold bars and jewellery, partly for the look, feel and touch of the yellow metal.
But gold's attraction has also become increasingly connected to its perceived status as a store of value against volatility and rising inflation. Since the price drop last year, buying opportunities have opened up for people wanting larger exposure in the long term.
"More people are buying 24-carat gold bars rather than jewellery as they're more affordable than they were a year ago and people expect the gold price to rise again in the long term," says
2. Options contracts
Options for trading in gold have swelled in recent years as banks and other financial service providers have sought to meet rising demand from investors for alternatives to owning the physical commodity.
The Dubai Gold and Commodities Exchange (DGCX) allows investors to buy gold futures, in other words giving them the option to buy or sell gold electronically at an agreed price in the future. Buyers can purchase a minimum contract valued at
A typical contract on the DGCX is two and a half months, says
"There has been a pickup in bargain-hunting as prices are 32 per cent from their highs," says
In an effort to further cement the emirate's position as a centre for gold trading, DGCX plans this year to launch a spot gold contract.
3. Gold mining stocks
At a time when the metal's prices are in the doldrums, buying mining stocks might appear an unappetising investment for many.
Investors in gold miners through the S&P/TSX Global Gold Index would have lost 50 per cent of their investment if they had stayed in across the year. That is in comparison to a 28 per cent slide in the metal's price. With the outlook for gold at best mixed for this year, pouring fresh investment into gold mining stocks this year may be unwise.
"Mining stocks are even more risky than investing in ETFs [exchange-traded funds], says
"You have to contend with lots of moving parts like labour and energy costs."
Still, many miners trimmed costs since the end of last year, a move that some analysts say has made them more attractive to investment. Goldcorp is one gold producer highlighted by analysts because of its focus on growing cash flows. The company's stock is up 16 per cent so far this year.
4. Exchange-traded funds
ETFs have risen in popularity in recent years as a convenient and low-fee way for people to trade financial markets. ETFs are a security that track stocks, commodities or bonds but trade like a stock on an exchange.
Gold ETFs aim to track the price of gold. The largest physically backed gold ETF is SPDR Gold Shares, which trades in
Among the advantages of such funds is that they are generally a cheaper way for investors to get exposure to the metal without physically holding it.
But those investing in ETFs have to beware pitfalls. "You have to be careful that the fund has physical gold against the purchase," says
Investors can also choose to gain exposure to gold mining stocks through ETFs. Funds such as the Market Vectors Gold Miners and
The outlook for prices
"We are close to the bottom,"
"But in our view, gold prices could fall further to just below
"With all central banks printing money willy-nilly it is sloshing around the place looking for investment avenues such as gold. It raised price levels, particularly in emerging markets. As central banks end that process, prices have come down.
"In the short term, we face another conundrum as prices are rising again at a low level because of high employment. Despite the trillions of dollars that have been printed most of that money is sitting on corporate balance sheets and not been invested in new capacity and creating new jobs," he says.
As a result, there was a danger of deflation and inflation rates turning negative.
"If that transpires, it is not good for gold. If we do see that, I would start buying gold aggressively as then inflation could rise again. If we do see inflation picking up in the next two or three years as interest rates come up to 8 to 10 per cent that could be supportive of gold,"
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