How to invest in gold using ETFs: A beginner’s guide

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Originally published at: https://blog.investengine.com/how-to-invest-in-gold-using-etfs-a-beginners-guide/

Choosing to invest in gold has, historically, been something of a safe haven. In times of market volatility or inflation, investors often turn to gold for stability.

Holding physical gold, however, can be costly and inconvenient. That’s where gold ETFs come in – they offer a flexible, low-cost way to invest in gold without the hassle of storage or security.

In this article, we’ll explore what gold ETFs are, why they might be a worthwhile addition to your investment portfolio, and how to buy them step-by-step through a DIY portfolio on InvestEngine.

What is a gold ETF?

A gold ETF (Exchange-Traded Fund) is an investment fund listed on a stock exchange that aims to track the price of gold. It allows you to gain exposure to gold prices without owning the physical metal.

There are two main types:

  • Physically-backed gold ETFs – These funds hold real gold bullion in secure vaults. Each share represents a portion of that gold.
  • Synthetic or futures-based gold ETFs – These use financial contracts such as gold futures to replicate gold price movements. These funds may be more volatile and less closely linked to spot gold prices.

Why invest in gold through ETFs?

Gold has a unique role in investing. It’s not just a commodity; it can also act as a hedge against inflation, a store of value, and a way to diversify your portfolio. 

Here’s why gold ETFs are the right choice for some investors:

1. Cost-effective

Buying gold ETFs is cheaper than buying physical gold. There are no storage, insurance or delivery fees. Most gold ETFs have low annual charges, too – they’re typically (though not always) under 0.30%.

2. Liquid and flexible

Because ETFs are traded like stocks, you can buy or sell anytime during market hours. Unlike gold bars or coins, you don’t have to worry about selling costs or wait for a physical buyer.

3. Diversification

Gold doesn’t tend to move in line with shares. In fact, it has often historically risen when markets are down. So, it can (in theory) help smooth your portfolio’s performance during market turbulence.

Is gold right for you?

Gold isn’t generally a go-to for investors looking for high income or fast growth. Instead, it’s often seen as a wealth preserver. You might consider investing in gold ETFs if:

  • You want to hedge against inflation or currency devaluation
  • You’re looking to diversify a share-heavy portfolio
  • You’re nervous about market volatility and want a stabilising asset

That said, gold can be volatile. It doesn’t pay dividends or interest, and its value can fluctuate based on global demand, interest rates, and investor sentiment.

How to invest in gold ETFs with InvestEngine

If you’re ready to add gold to your portfolio, here’s how to get started with InvestEngine’s DIY portfolio option.

Step 1: Choose your account type

You can buy gold ETFs through any InvestEngine account, including:

  • Stocks & Shares ISA – Invest up to £20,000 each year tax-free
  • SIPP – Ideal for long-term retirement investing, with tax relief
  • General Investment Account (GIA) – A flexible, no-limit account
  • Business Account – Invest surplus cash from your limited company

Note: Tax treatment depends on individual circumstances and is subject to change.

Step 2: Set up a DIY portfolio

To select your own ETFs, including gold, choose the DIY portfolio option. This gives you full control over which ETFs to invest in and how much to allocate to each one.

You’ll also benefit from:

  • Zero platform and dealing fees
  • Access to Savings Plans, which make regular investing on your terms a breeze
  • One-click rebalancing, which means you can realign your portfolio to your targets with minimal effort
  • Tools to help you see exactly what you’re invested in, from the geographies to the individual companies or assets.

Step 3: Search for a gold ETF

Once your portfolio is ready, use the ETF search bar to find gold ETFs. Look for:

Of course, remember to compare fees and structure before you make a decision of which to invest in. 

Step 4: Make your investment

Thanks to fractional shares, you can buy into a gold ETF even if the full unit price is high. This means you can invest from as little as £1 in any given ETF and build your exposure over time.

All ETF trades on InvestEngine are commission-free, though ETF providers charge a small ongoing fee (known as a TER, or Total Expense Ratio) — usually between 0.10% and 0.30% for gold ETFs.

Step 5: Set up a regular Savings Plan (optional)

InvestEngine’s Savings Plans allow you to automate your gold investing. Choose a weekly, fortnightly, or monthly schedule from as little as £20.

Combine this with InvestEngine’s AutoInvest feature and your money is automatically allocated according to your chosen ETF weights, including gold.

What to watch out for when you invest in gold

Like any investment, gold ETFs come with risks. Keep these in mind:

Volatility

Gold prices can swing sharply. It’s important not to treat gold as a guaranteed safe bet.

Currency risk

Many gold ETFs are priced in US dollars. If they are, this means that when the pound strengthens against the dollar, this can reduce returns for UK investors — even if the gold price rises.

Tax

While any returns made by gold ETFs held in an ISA or SIPP are tax-free (within the annual limits), gains made in a General Investment Account (GIA) may be subject to Capital Gains Tax.

Important: Capital at risk. The value of your portfolio can go down as well as up, and you may get back less than you invest. ETF costs also apply.

How much gold should you hold?

There’s no one-size-fits-all answer to this question. Some investors hold 5–10% of their portfolio in gold, while others use it as a short-term hedge during times of uncertainty. 

As with any ETF in your portfolio, the right amount to allocate to it depends on your goals, time horizon, and appetite for risk. 

In summary

Gold ETFs offer a simple, cost-efficient way to get exposure to gold. 

With InvestEngine, you can start small, automate your strategy and avoid the complications of owning physical gold, all within the tax-efficient wrapper of an ISA or a SIPP. 

Related reading:

What is an ETF and how does it work?

How to build a portfolio using ETFs

How ETF asset pricing works

Important information

Capital at risk. The value of your portfolio with InvestEngine can go down as well as up and you may get back less than you invest. ETF costs also apply.

This communication is provided for general information only and should not be construed as advice. If in doubt you may wish to consult a professional adviser for guidance.

Tax treatment depends on personal circumstances and is subject to change, and past performance is not a reliable indicator of future returns.