Written

For

The

Australian

-

Beginner’s

guide

to

gold

investing

Would you have waited 27 years to break even on an investment? That's exactly what happened to anyone who bought gold at its 1979 peak of $A800 an ounce — the price didn't return to that level until 2006.

Gold is having a moment again. Prices have jumped 25 per cent over the past year to just under $2200 an ounce in Australian dollars, and as an adviser I'm fielding questions about it constantly. The appeal is easy to understand: with cash rates at record lows, the old argument of "why buy gold when I can earn 7 per cent in the bank?" has evaporated. History also shows gold tends to shine when real interest rates are 2 per cent or lower, averaging returns above 20 per cent in those environments.

But here's the catch. Gold's price is almost entirely demand driven, as Perth Mint CEO Richard Hayes points out, and sentiment can turn cold for decades. You can be right on gold very quickly — and wrong for a very long time.

For those still keen, the practical hurdles are real. I recently helped an SMSF client buy several kilos of physical gold and we couldn't find a safety deposit box anywhere in the big four banks in the Melbourne CBD. Waiting lists ran between 12 and 48 months. Once you find storage, insurance runs about $200 a year on a $71,000 kilo bar.

The easier paths are the Perth Mint's depository accounts (unallocated gold has no storage fee), or ASX-listed ETFs — PMGOLD at 0.15 per cent, GOLD at 0.4 per cent, and QAU at 0.59 per cent.

My view? Gold has a place as portfolio insurance against sharemarket falls and geopolitical shocks. Just don't mistake it for a set-and-forget growth asset. And whatever you do, don't buy gold from strangers on eBay.