That, together with the fear of a stock-market correction, has prompted a lot of Canadians who never considered owning the precious metal before to wonder whether this age-old asset should be part of their portfolios. After all, Canada’s largest robo-advisor, Wealthsimple, allocates 2.5% of its clients’ accounts to gold—and 10% in its halal portfolios.
Should it be part of yours? Or would you just be buying in at the peak? There’s no way to know, except in hindsight. There will always be “gold bugs” out there urging you to sell everything and buy gold before the world goes to pot. Their advice is best avoided.
Here instead are some important facts around investing in gold that will help you make a better-informed decision.
Why is gold so valued?
Gold is used for a wide range of products—such as jewellery, dental fillings and electronics—but most of it is simply stored in vaults, in the form of gold bars. Like money itself or cryptocurrency, gold is valuable because people have decided it is. But unlike the other two, it’s immune to manipulation.
As of mid-October, all the refined gold in the world, an estimated 212,582 tonnes, was worth a staggering USD$18.3 trillion. Mines around the world poured another 1,788 tonnes in the first half of 2024. So, the supply of gold is increasing, but slowly. And there’s little anyone can do to change that.
Why do investors buy gold in Canada?
As an investment, gold is classified as a commodity. That is, it’s a standardized and graded substance that trades globally. But unlike, say, soybeans or Brent crude oil, you can store a meaningful amount of gold in your jewellery drawer or safe deposit box. It’s also uniquely non-perishable; part of its appeal in ancient times was the fact it didn’t corrode like other metals. So, you can hold it indefinitely.
If you own gold as an investment, it won’t generate any income; it’ll just go up and down in value according to supply and demand. Over the very long term, its price tends to track the rate of inflation.
Most importantly, gold has a history as a store of value and unit of exchange. Many central banks still hold it to help stabilize their currencies. In developing countries like India and China, many people consider it more trustworthy than paper or electronic money. This is why it continues to hold a privileged place in investment portfolios.
