Topic: Mining Stocks

Gold investing: If you want to hold gold bullion….

If you are interested in gold investing, we recommend staying away from buying gold bullion, coins (unless you collect them as a hobby) or certificates representing an interest in bullion. Unlike stocks, commodity investments like gold bullion do not generate income. Instead, they come with a continuing cash drain, for management, insurance and so on.

However, if you do want to hold bullion as part of your gold investing, then SPDR Gold Shares are a relatively low-cost and liquid way to do it.

SPDR Gold Trust, symbol GLD on New York, is an investment trust that aims to reflect the performance of the price of gold bullion, less the trust’s expenses. SPDR’s sole assets are gold bullion, and, from time to time, cash. Expenses for SPDR Gold Shares are 0.4% of assets per year.

Gold investing and RRSPs

The 2005 Canadian federal budget made investment-grade gold and silver coins, as well as gold or silver bullion bars, eligible to be held in an RRSP.

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To be considered investment grade, gold coins must have at least 99.5% purity and silver coins 99.9% purity. As well, only legal-tender bullion coins produced by the Royal Canadian Mint are RRSP-eligible.

Bullion bars can also be invested in an RRSP as long as they are produced by a metal refinery accredited by the London Bullion Market Association. This includes the Royal Canadian Mint and Johnson Matthey. You can also buy bullion bars from the Bank of Nova Scotia.

However, to hold the coins or bullion bars in your RRSP, you need to find a third-party custodian of your coins or bars who will verify that you hold the amount of bullion claimed, and to report that to the Canada Revenue Agency on your behalf.

Your best gold investment option

If you are interested in gold investing, we think you should do it through gold-mining stocks. Like bullion, gold-mining stocks benefit from increases in the price of gold. But they also have the potential to generate income, rather than just incurring costs.

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