The price of gold has been on a tear this year; it had gained a fifth by the start of September. But its recent stellar performance notwithstanding, for many investors, gold is a vital piece of insurance in their portfolio. As the old saying goes: “Gold is money, everything else is credit.”
Gold is the only monetary system that has been with humanity for most of its history on earth. Therefore history and stability are the key reasons you buy and hold physical gold. Historically, if investors wanted exposure to gold, they would have had to purchase physical bullion themselves. This can be complicated and makes buying and selling to maintain a target weighting in a portfolio tricky.
Many investors now use physically-backed exchange-traded commodities (ETCs). Investors can buy shares in an ETC, just as they would in an exchange-traded fund (ETF), to gain direct exposure to the price of gold. The Royal Mint was established in 886, over 1,100 years ago, and has been intimately involved in gold markets since. Alongside its coin and bar offering, the Mint has produced an ETC to leverage gold’s history and stability: the Royal Mint Responsibly Sourced Physical Gold ETC (LSE: RMAU). Below I will outline three of the key features of RMAU.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Firstly, as the name suggests, this is an ETC held in custody by The Royal Mint, one of the world’s oldest companies. Its origins stretch all the way back to Alfred the Great. Since then, the scope of The Royal Mint has drastically changed, now ranging from producing commemorative coins to offering gold-based investment options. The RMAU ETC is one such offering.
Using a gold ETC managed by The Royal Mint means tapping into that long and storied history, while the gold you have gained exposure to is stored in The Royal Mint’s vault in Llantrisant, Wales, one of the world’s most secure. This is in contrast to the vaults of a financial institution, as is the case for other gold ETCs. As a result, the gold is outside the financial system and away from big cities.
Gold goes green
Another key point about the RMAU ETC is sustainability. In 2022, the RMAU ETC was the world’s first to ensure it was partly backed by certified 100%-recycled gold bars. At present, around 60% of the gold backing the ETC is 100% certified recycled. Gold mining is energy-intensive. But recycled gold can be more than 90% less carbon-intensive than mined gold. We’ve seen electronics firms such as Sony and jewellery brands including Pandora commit to using recycled gold. Why should investments be any different? At the same time, all of the bars are 100% backed by the LBMA (formerly named the London Bullion Market Association), the independent precious metals authority, and responsibly sourced. This sustainability focus is part of a wider sustainability commitment across The Royal Mint.
Finally, physical gold ETCs are physically backed. But RMAU actually allows the investor to get their hands on the gold they are investing in. An investor in the RMAU ETC can exchange their shares in the ETC for gold itself. If an investor wants to do this, they can select from the various gold cuts available from The Royal Mint, from Sovereign and Britannia gold coins to multiple-size bars, depending on the value of their investment. Gold is supposed to be a safe-haven asset, so knowing you can physically call in the actual gold, should you so desire, offers great peace of mind.
This article was first published in MoneyWeek's magazine. Enjoy exclusive early access to news, opinion and analysis from our team of financial experts with a MoneyWeek subscription.
-
House prices rise 2.9% – will the recovery continue?House prices grew by 2.9% on an annual basis in September. Will Budget policies and ‘higher-for-longer’ rates dent the recovery?
-
Nvidia earnings: what to expectNvidia announces earnings after market close on 20 November. What should investors expect from the semiconductor giant?
-
Three gold mining stocks with strong green credentialsPersonal View Tom Bailey of HANetf highlights three gold and precious metal miners to consider.
-
Why is gold looking attractive on Wall Street?Wall Street is taking to gold. What's pushing the commodity to be attractive?
-
Gold or silver: which is the better bet?Should you invest in gold or silver? Or should you own equal amounts of the precious metal?
-
Gold expands its horizons – but is it enough to drive prices?Gold is increasingly being used in industry, be it for nanotechnology, cancer therapy or fighting malaria. But is this demand enough to boost prices?
-
The end of China’s boomLike the US, China too got fat on fake money. Now, China's doom is not far away.
-
A West African empire built on goldMansa Musa the Ninth loved gold – and knew how to use it, says Dominic Frisby
-
Gold: a metal with magical powersGold is indestructible and has outlasted all other forms of money, says Dominic Frisby
-
Gold shows its mettle as a safe haven at lastNews Gold has proved its worth as a safe haven, gaining 9% since the start of the year and recently finishing its best quarter in nearly two years.
