How to invest in gold as price hits record

• Precious metal hits $3,500 an ounce for the first time ever
• Gold has massively outperformed the S&P 500 this century
• Gold mining stocks finally starting to shine after long period of neglect
• Selecting a gold mining share to buy is not as easy as it looks

"Gold is trading above the $3,500-an-ounce mark for the first time ever and gold mining shares are starting to really shine as well after a long period in the doldrums," says AJ Bell investment director Russ Mould.

"Endeavour Mining is the third-best performer in the FTSE 100 in the year to date, with silver-and-gold miner Fresnillo on top, while five gold producers are among the ten leading gainers in the AIM 100 in 2025. Meanwhile, Stateside, Newmont Corporation ranks third in the S&P 500 this year behind only AI darling Palantir and Seagate, with NVIDIA trailing in the wake of its 103% share price gain.

"This is looking like the third major bull run in gold since President Richard M. Nixon withdrew America from the gold standard on 15 August 1971 and, in the process, pulled the rug from under the Bretton Woods monetary system that had prevailed since the end of the Second World War.

Source: LSEG Refinitiv data

"Each of those bull markets has been explosive.

Source: LSEG Refinitiv data

"Gold bugs will therefore argue that there could still be more to come, given how the advance in this third bull phase still pales compared to the previous two.

"They will also note how the metal has beaten the S&P 500 hands down this century, despite investors' enthusiasm for equities, which leaves not just the S&P 500 but the Dow Jones Industrials and NASDAQ trading near to all-time highs after strong, post-Covid gains.

"Sceptics will point out the prior two runs both lasted for about a decade and how this one is almost ten years old, too, if you take the December 2015 low as the starting point. They may also take Warren Buffett's line on the metal and assert its value can be no more than the cost of production, given its almost inert chemical nature, limited industrial use and inability to generate any cash or yield.

"As the Sage of Omaha succinctly put it in a speech that he gave at Harvard in 1998, 'Goldgets dug out of the ground in Africa, or someplace. Then we melt it down, dig another hole, bury it again and pay people to stand around guarding it. It has no utility. Anyone watching from Mars would be scratching their head.'

"As such, gold is not likely to be suitable for all investors. Some will assert that cryptocurrencies are a modern-day, digital haven that merit closer attention, while others may feel they have simply missed their chance.

"Those investors who do feel that gold, at least, may offer some useful diversification in a balanced portfolio still have to address the question of how best to address the asset.

"It is possible to buy physical bars or coins, although there are frictional costs here that include insurance, storage and security, so this approach may not appeal to everyone, especially if they are looking to shield any capital gains by using a government-approved, tax-efficient wrapper such as an ISA or SIPP.

"Should they feel that gold fits with their overall investment strategy, time horizon, target returns and appetite for risk, investors can glean exposure to the metal in a variety of different ways.

"They can do so directly, or through individual mining stocks or baskets of them, via actively or passively managed funds. Each approach each comes with a different risk-reward profile.

Gold tracker

"The first option is to pick an exchange-traded commodity (ETC), or gold tracker fund, as investors may not wish to go to the trouble of storing and insuring their own gold bars or coins or risk-taking physical delivery if they seek exposure via futures.

"It is possible to track the gold price in dollars or sterling and do so via the physical metal or futures prices, according to investors' preference. Options to research include iShares Physical Gold. It seeks to track the day-to-day movement of the price of gold, less its fees, by holding gold bullion. This provides investors with the exposure they seek without the need to take physical delivery or trade commodity futures contracts.

Passively run fund of gold miners

"For those who believe gold miners are cheap relative to gold - and who are prepared to take on the additional risk posed by miners' operational gearing to the metal's price - there is the option of a tracker fund which is designed to deliver the return generated by a basket of miners, minus the instrument's own running costs. VanEck Gold Miners and VanEck Junior Gold Miners are both quoted on the London Stock Exchange and can be bought and sold in dollars or pounds. They come with annual total expense ratios of 0.53% and 0.55%, respectively.

Actively run fund of gold miners

"There is a select number of active funds where a professional money manager will seek to pick out the best-performing gold mining stocks and avoid any duds, to maximise returns from the industry. Investors will pay a fee for accessing this expertise. BlackRock Gold and General may be the best-known fund in this field and it has around £1.3 billion in assets under management. Key holdings include Newmont Corp, Barrick Mining, Agnico Eagle and Endeavour Mining.

"There are also a number of London Stock Exchange-quoted investment trusts which dedicate themselves to gold (and also silver and platinum and palladium) miners, while Personal Assets Trust carries an 11% weighting toward gold bullion as part of its remit to protect and increase value per share for its investors over the long term.

Individual gold stocks

"Intrepid investors who do not wish to pay fees for funds can pick their own stocks and although this route could bring the highest returns if gold does well, it comes with the highest risks if gold retreats. There is also the danger that the mining stock goes down even if gold rises owing to company specific issues.

"After several takeovers, notably of Randgold Resources, Barrick Gold, Centamin, Shanta Gold, Condor Gold and Hummingbird Resources, the UK does not offer as much exposure as before. There is still one gold mining stock in the FTSE 100, Endeavour Mining, while Fresnillo produces gold even if silver is its main commodity. Resolute Mining has a London listing, to accompany the one it has in Australia, and AIM offers a selection of gold miners, of varying degrees of maturity, from mining licence-holders to prospectors to established producers.

Source: Company accounts, Marketscreener, analysts' consensus forecasts, LSEG Refinitiv data

"The world's biggest gold miners by stock market valuation are however listed in the USA. Newmont is the biggest, with a stock market capitalisation of $83 billion. It is a member of the S&P 500 and also the largest company, by stock market value, in the 31-strong NYSE HUI Gold Bugs index, where other leading constituents include Agnico Eagle, Barrick Mining, Franco-Nevada and AngloGold Ashanti.

Source: Company accounts, Marketscreener, analysts' consensus forecasts, LSEG Refinitiv data

"Not all gold miners are equal, and investors must patiently research them and apply six tests to see whether they may be suitable for portfolio inclusion or not.

• Whether a gold miner is already producing, in the exploration phase or is in the process of obtaining (and making the most of) a license.
• If it is in the production phase, the next task to is to assess the size of its resource and the production profile of existing mines. There is little or no point buying a gold miner if it is about to exhaust its reserves and deplete its mine.
• Where the company operates, and the risk (or otherwise) of difficulties with local governments over mining rights and taxes, as well as the susceptibility of individual mines to problems posed by difficult conditions, such as extreme weather. Mali remains a particularly difficult place in which to operate, in the wake of a military coup at the turn of the decade, as Barrick Mining and Resolute Mining can both attest.
• The miner's all-in sustaining cost (AISC) of producing an ounce of gold, as this will reveal how profitable (or otherwise) the firm will be relative to the prevailing metal price. Some miners publish a cash cost figure, but this may not include third-party smelting, refining, transport costs, local taxes and office running costs so it may not give the full picture. Key cost variables include staff and diesel and fuel, and they can be affected in turn by local currency movements in the countries where their mines are situated.
• The experience and skill set of the management team and executive board.
• The miner's balance sheet and how much cash or debt it has. The more of the former and the less of the latter the better, especially if gold prices drop.

"Finally, having assessed the miner's operations, investors must study the valuation currently attributed to its stock. This can be done using earnings or yield-based metrics, but both can be deceptive, especially if the gold price starts to swing around a lot. A further option is to look at net asset, or book, value. This will not move around so much, and should grow over time, at least if the gold price remains firm and profits start to pour out of the ground."