Should You Invest in Gold Stocks in Canada? 

Gold stocks in Canada offer a way to take advantage of the market when gold prices increase. Exchange-traded funds (ETFs) and stocks for mining or refining companies are available for people who want to invest in precious metals in a convenient way. 

Yes, investing in gold stocks in Canada is convenient. All you need is a brokerage account. Once the account is funded, you can buy stocks online with a couple of clicks.

Most Canadians agree that it's a good idea to invest in gold to store value for the long term, protect against inflation, and manage economic risk. While Canadian gold stocks, especially ETFs designed to track the spot price of gold, are one way to invest in precious metals, it's important to understand the pros and cons of this type of investment. Investors should also research the pros and cons of other types of precious metals, including physical gold coins and bars. 

The Types of Gold Stocks in Canada

Investors have two main choices: mining stocks and ETFs. 

Mining Stocks

Mining stocks are divided into several categories. Each brings different traits to the investment. 

• Major mining companies are well-established and big enough to weather problems like labour shortages or temporary market downturns. Investors often use them as part of a long-term portfolio to track precious metals markets. 
• Mid-cap and small mining companies may have more upside potential. However, since they aren't as established or time-tested, their stocks are riskier than those from larger firms. 
• Exploration and development-stage companies look for gold and develop mines once they find it. These firms are for investors who want to speculate. There's no guarantee that these companies will succeed. 

Major mining companies with established operations are the best way to track the price of gold. 

Exchange-Traded Funds

ETFs are a collection stocks, futures, options, and other types of securities. Overall, the fund is designed to track the price of gold. Because they are actively managed and rebalanced, these funds are often more accurate at following the precious metal market compared to mining stocks. 

There are different varieties of ETFs. Some are leveraged, which means they increase or decrease in value more than the price of gold itself. For instance, an ETF with three times leverage will increase or decrease three times as much as a non-leveraged ETF. 

There are also inverse ETFs that increase in value when the price of gold decreases. 

Needless to say, it's vital for investors to understand the details of an ETF before buying it. 

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Are Gold Stocks in Canada the Best Option for Investors? 

Physical gold coins and bars are alternatives to stocks. Investors who find a legitimate precious metals dealer like Sprott Money selling bullion products can make investments that will track the spot price as it rises or falls. 

To decide which investment type works best for them, investors need to weigh the pros and cons. 

Pros of Investing in Stocks and ETFs

Securities bring some advantages to investors. 

• Stocks are easy to buy and sell. You don't have to worry about storing physical metals. Trades only take a minute and can happen with one or two clicks. 
• Major ETFs and large mining company stocks are highly liquid. It's easy to find someone to buy or sell shares at any time during regular stock exchange hours. 
• Diversification is simple. Investors can balance their portfolio between stocks that track the gold spot price and shares of riskier speculative stocks, such as those issued by exploration or mining startups. With the right balance of stocks, investors can manage risk and get access to potential windfalls if a small company succeeds. 

Convenience and diversification are key positives for investors. 

Cons of Investing in Stocks and ETFs

There are some important drawbacks that stock buyers need to consider. 

• Stocks are tied to the market. Precious metals are excellent stores of value. People buy them for risk management. However, gold stocks could fall if the market falls, even if the price of gold remains high. 
• ETFs have management fees. These fees are paid to the fund manager, who has to constantly rebalance the fund's holdings. This can reduce some of the profits investors get. 
• Stocks and funds do not offer pure gold exposure. Actively managed funds are pretty good at making corrections and tracking the price of precious metals. However, they aren't as accurate as physical gold. 

These may not be dealbreakers, but they are drawbacks investors need to consider.

Pros of Investing in Physical Gold

Bullion offers a unique set of advantages. 

• Investors have direct ownership of precious metals. This means there isn't any counterparty risk. The success of their investment does not depend on the decisions of mining company CEOs or fund managers. 
• It is a long-term store of value. The value of physical metals doesn't depend on the stock or currency markets. Coins and bars are completely separate from these markets. 
• Coins and bars offer protection during major crises. Their value often rises during times of economic uncertainty, disaster, or conflict when currency and stock markets crash or stop functioning completely.

The independent nature of bullion makes it an attractive investment. 

Cons of Physical Gold Investment

There are also some drawbacks to consider.

• Investors have to store bullion. This means getting a safe deposit box or home safe or using a third-party vault.
• Gold doesn't pay dividends like some stocks do. Investors don't get cash until the coins or bars are sold. 
• Buying and selling is less convenient. It's possible to sell gold online, but it generally requires more steps than the one-click transactions of stocks and ETFs. 

Investors can take steps to account for these potential pitfalls when investing in physical metals. One of the most important steps is to find a reputable gold dealer who offers storage and buying services. 

Invest in Physical Gold with Sprott Money

Established bullion dealers like Sprott Money sell coins and bars from reputable mints like the Royal Canadian Mint and the Scottsdale Mint. We also have a convenient process for buying bullion products and offer storage vaults. Such services directly address some of the biggest drawbacks of investing in physical precious metals. 

Whether you are looking to start or add to a precious metals portfolio and get a gift for a loved one, Sprott Money offers a range of gold, silver, and platinum products. Visit our site to learn more about our services and browse our available products.