How To Invest in Gold, A Beginners Guide

Plus, is gold a good investment?

Gold has been fascinating humans for about as long as we have been arguing about money. Kings hoarded it, pirates buried it, central banks still keep it behind very thick doors, and your grandmother probably had at least one piece of jewellery she swore was “a good investment”. Gold has survived every monetary experiment we have ever tried, which is impressive. It has also disappointed plenty of investors along the way, which is worth remembering before you start Googling bullion dealers at midnight.

In modern financial circles, the conversation around gold often shifts from "look at this beautiful crown" to "how can this protect my retirement fund?" While the allure of gold is timeless, the reality of investing in it requires a level-headed assessment of its actual utility in a diversified portfolio.

When we consider the movement of capital, many people feel a pull toward gold during times of global uncertainty. It feels solid. It feels real. Unlike a digital entry in a bank ledger, you can drop a gold bar on your foot and feel the consequences. However, before you start digging holes in the backyard or converting your spare room into a vault that would make Scrooge McDuck envious, it is vital to understand the mechanics, the myths, and the mathematical reality of gold.

What Makes Gold Valuable? 

In ancient times, before the first coins were developed, trading was just bartering with items you had for items you needed. Maybe you’d swap a few eggs for some bread? Then, in time, coins and then more formal currencies stopped the need for this. They also provided a convenient way to store value.

Unlike many metals, gold doesn’t corrode. It can be melted over a low flame, so it can be turned into coins easily. It’s hard to dig gold out of the ground, and generally the more difficult something is to obtain, the higher it is valued. Gold is biologically inert, meaning the body generally does not react badly to it, which makes it useful in dentistry, implants, stents, and diagnostic equipment. These features, combined with gold’s unique appearance, lead to its use in jewellery and early coins

What is The Gold Standard?

As formal ‘paper’ currencies evolved, major world currencies were backed by gold in a system known as the Gold Standard. Under the Gold Standard, you could ask a bank to convert your paper money to gold at the legal rate, whatever that might be. For the government to print more money, they had to have the gold to back it.

Britain stopped using the Gold Standard in 1931, and the U.S. mostly followed suit in 1933 then abandoned the remnants of the system in 1973. The Gold Standard had pros and cons, and eventually the troubles with it led to every single nation abandoning the system.

The Modern Monetary System

However, many people dislike the modern world’s monetary system because it's based on fiat currency. That is, a dollar is worth an arbitrary amount because a government authority says so, it's not based on anything solid. A key drawback of this is that the government can add and remove cash from the money supply at will, which affects the dollar's value. For instance, New Zealand is still dealing with the fallout from money printing (“quantitative easing”) in response to the global pandemic.

In contrast, gold is often viewed as a “safe haven” investment. If paper (fiat) money were to suddenly become worthless in some sort of dramatic economic catastrophe, the world would have to fall back on something of value to enable trading to occur. This is one of the reasons that investors tend to push up the price of gold when financial markets are unsettled, and the goldbugs always seize the opportunity to try and sell us all gold!

Does Gold Have Intrinsic (Real) Value?

Some fans of gold like it because they say it has intrinsic value. Goldbugs would have you believe that when disaster strikes paper money will be worthless and we'll all be trading in gold. Because of its intrinsic value, gold will be a form of currency.

The problem is, this doesn’t sound that logical. Let's say you’re in a post-apocalyptic environment filled with looters, zombies, or aliens. In that case, you probably won’t care about a gold bar or some gold jewellery. It'll be just as worthless (or as valuable) as paper money. Why? Because gold is fundamentally a fiat currency too. That is, people have assigned it an arbitrary value. That value vanishes in a crisis, just as the value of paper money does. In this imaginary post-apocalyptic situation filled with looters, zombies, or aliens, you’d more than likely want something real that has practical value. That could be a carton of eggs, some seeds, a cow, diesel to run a generator or vehicle, or some shells for your shotgun!

In other words, assigning value to gold is just as arbitrary as assigning value to anything else. If a real catastrophe strikes, gold probably isn’t going to save the day.

Does Gold Provide Downside Protection?

Despite the comments above, this is one of the key strengths of gold as an investment. It is a diversifier whose price should move differently to the price of other assets and inflation.

But does the data support the "safe haven" narrative? Not always as cleanly as we might hope. Since 1970, gold has often experienced large price swings relative to annual inflation. Over the same period, gold prices showed little relation to fluctuations in the US GDP. Whether gold was up or down doesn’t appear connected to what was happening in the economy. Since markets tend to reflect expectations for the economy in advance, it’s not clear holding gold provides additional protection against adverse economic developments.

Over very long periods, gold has broadly kept pace with inflation. Over shorter periods, it can be wildly volatile. It has delivered long stretches of poor real returns followed by sharp surges that capture headlines and attract latecomers. That cycle repeats with impressive consistency.

If you are looking for a way to manage your emotional response to market volatility, gold might provide a psychological cushion. But if you are looking for a reliable mathematical relationship between economic growth and your investment returns, gold is a notoriously fickle partner.

In plain English, gold can help in some scenarios, disappoint in others, and confuse almost everyone in between. If that sounds frustrating, welcome to investing.

The Utility Problem: Gold versus Productive Assets

A major issue with a direct investment in gold is that there's no growth or income potential. An ounce of gold today will be the same ounce of gold 100 years from now, unless you’re a jeweller and can manufacture the gold into something more valuable. Gold doesn’t produce a product, it doesn’t deliver a service, and it doesn’t pay a dividend. This is one of the key reasons famous billionaire investor Warren Buffett doesn't like gold. It is, essentially, an unproductive asset. Here’s what Buffet once said:

“Gold gets 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.

If you took all the gold in the world, it would roughly make a cube 67 feet [20 metres approx.] on a side… Now for [the price of] that same cube of gold… you could have all the farmland in the United States, you could have about 7 ExxonMobil’s, and you could have a trillion dollars [US] of walking-around money… And if you offered me the choice of looking at some 67 foot cube of gold and looking at it all day, and you know me touching it and fondling it occasionally… Call me crazy, but I’ll take the farmland and the ExxonMobil’s.”

This highlights a core principle of wealth creation: ownership of productive assets, such as businesses (which could be via a KiwiSaver Scheme, which typically invest in diverse shares of businesses via stock markets). When you invest in a company, you are investing in human ingenuity and the ability to solve problems for profit. Gold, by contrast, relies entirely on the hope that someone else will pay you more for it later than you paid for it today.

How to Buy Gold In New Zealand

If you have weighed the risks and benefits and still want to allocate a portion of your wealth to gold, here are several ways to go about it.

1. Physical Bullion

This is the most traditional method. You can buy coins or bars from reputable dealers like the New Zealand Mint. The benefit is total control; you have the asset in your physical possession. The downside is everything else. You have to pay a premium over the "spot price" to buy it, you will likely receive less than the spot price when you sell it, and in the meantime, you have to worry about someone stealing it.

Insurance companies are also notoriously grumpy about covering large amounts of bullion kept in a standard home safe. Unless you enjoy the adrenaline of wondering if your floorboards are secure, professional storage is usually required, which adds an ongoing "carrying cost" to an asset that already produces no income.

2. Gold Exchange-Traded Funds (ETFs)

For most people, this is a more logical route. A gold ETF allows you to gain exposure to the price of gold without the logistical nightmare of protecting your metal. You buy shares in a fund that holds physical gold in a secure vault. It is liquid, meaning you can sell it at the click of a button, and the transaction costs are significantly lower than buying physical coins.

3. Gold Mining Stocks

This is a different beast entirely. When you buy shares in a gold mining company, you aren't just buying gold; you are buying a business. This business has management teams, debt, operational risks, and environmental regulations to deal with. If the price of gold goes up, the miner’s profits might explode. If the mine collapses or the government changes the tax laws, the stock could plummet even if gold prices stay high.

4. Jewellery

The retail mark-ups in the jewellery industry generally make this a bad choice for investing in gold. That said, eagle-eyed buyers with experience in the field sometimes report that second-hand jewellery can be found at prices below the meltdown value. Of course, this will be costly if you don’t know what you’re looking for, and with this approach you’ll still need somewhere to store it.

The "Do Your Own Research" Trap

In the age of social media, "do your own research" has become a rallying cry for those sceptical of mainstream financial advice. While the sentiment of self-reliance is admirable, the execution is often flawed. Many people "research" gold by watching YouTube videos produced by companies that, coincidentally, sell gold. This is like asking a barber if you need a haircut.

To truly do your own research, you must look at objective data. Research from institutions like the Federal Reserve regarding the history of the gold standard and its impact on price stability can provide a much-needed reality check. Genuine research also involves assessing the opportunity cost of gold. Every dollar you put into a non-productive metal is a dollar that isn't earning compounding interest somewhere else, for instance, in a well-diversified portfolio of global companies.

New Zealand Gold-Buying Specifics

In New Zealand, the "Gold Office" or local bullion dealers are the standard ports of call for physical purchases. It is worth noting that New Zealand does not have a general capital gains tax for individuals, but the Inland Revenue Department (IRD) is very interested in "intent." If you buy gold with the primary intent of selling it for a profit later, any gain you make may be deemed taxable income. Professional accounting or taxation advice is important here, particularly if gold forms a meaningful part of your investments.

Furthermore, the New Zealand dollar (NZD) adds a layer of complexity. Because gold is priced globally in US dollars, your return as a local investor depends on two things: the price of gold and the NZD/USD exchange rate. A falling NZD can boost NZD gold prices even if the USD gold price is flat. The opposite is also true.

Does Gold Have a Role In An Investment Portfolio?

For some, a small allocation (typically fiver percent or less) can act as a form of "financial insurance." It provides a sense of security that, should the digital world fail, they have something tangible. However, it should never be the engine of your wealth.

Wealth is built through the ownership of assets that work while you sleep. Gold doesn't work. It just sits there, looking pretty and occasionally getting more expensive because people are worried. As an investor, your focus should be on things you can control: your savings rate, your costs, and your emotional discipline. You cannot control the price of gold, nor can you control the global economy.

If you find yourself obsessing over the "spot price" of gold every morning, you might be speculating rather than investing. True investing is a marathon, not a sprint, and it certainly shouldn't involve checking the price of your assets with the frequency of a teenager checking TikTok.

The Bottom Line: How to Invest in Gold

Gold is a fascinating commodity, rich in history and psychological weight. It can play a role in a diversified portfolio, but it is rarely the "silver bullet" (pun intended) that its most ardent fans claim it to be. The price spike in 2025 served as a reminder of how quickly sentiment can move prices, but it also highlighted the lack of a linkage between gold and actual economic health.

The path to financial independence isn't paved with gold; it is built on the steady, disciplined acquisition of productive assets and a commitment to a long-term plan. Do your own research, remain sceptical of "doom and gloom" sales pitches, and remember that your greatest financial asset is often your own ability to remain rational when others are losing their heads.

Invest in things that grow. Invest in things that produce. And if you really must have some gold, perhaps start with a nice watch, at least that tells you the time while it sits there.

Are you ready to take control of your financial future with a plan built on evidence, not emotion? If so, book a complimentary initial consultation with our team, today.