What Are the Risks of Investing in Gold?
11/09/2026Daniel Fisher
Gold has been used as a store of wealth for thousands of years and remains a popular way for investors to diversify a portfolio. But describing gold as a ‘safe haven’ does not mean investing in it is risk-free.
The gold price can fall as well as rise. Physical bullion also introduces practical considerations such as storage, security, insurance and authentication, while gold itself produces no interest or dividends.
Understanding these risks before you buy gold can help you decide whether it is suitable for your objectives, how much exposure you are comfortable with and which form of gold is most appropriate.
This guide focuses primarily on the risks associated with owning physical investment gold, rather than suggesting that gold is either inherently safe or inherently risky.
At a glance: the main risks of investing in gold
No single risk should be considered in isolation. Some relate to the gold market itself, while others arise specifically from owning physical bullion.
Risk
Why it matters
Particularly relevant to physical gold?
Price volatility
Gold can fall in value after you buy it
No
No income
Gold pays no interest or dividends
No
Premiums and spreads
Buying and selling costs can reduce returns
Yes
Storage, theft and insurance
Physical bullion needs to be kept securely
Yes
Counterfeits and authenticity
Fake or misrepresented products can cause losses
Yes
Product and liquidity risk
Some gold products are easier to resell than others
Yes
Currency and economic factors
Sterling gold prices are affected by international prices and exchange rates
No
Tax and regulatory change
Rules can affect the net outcome of an investment
Depends on the product
1. The gold price can fall
Perhaps the most fundamental risk is also the simplest: you can buy gold and subsequently see its price fall.
Gold trades in an international market and its price responds to changing supply and demand, interest rates, inflation expectations, currency movements, investor sentiment and wider economic and geopolitical conditions.
Over short periods, these movements can be significant.
If you need to sell while the gold price is below the level at which you bought, you may realise a capital loss. There is no guaranteed period after which an investment in gold becomes profitable.
This is particularly relevant if you are investing money you may need in the short term. A longer investment horizon gives an investor more time to ride out price movements, but it does not guarantee a positive return.
You can see how the sterling gold price has moved over different periods using our UK gold price chart.
Gold’s long history as a store of wealth can therefore be relevant when considering it as an investment, but it shouldn’t be confused with a guarantee that its price will continually rise.
2. Gold doesn't produce an income
Unlike some other investments, physical gold does not generate an income simply because you own it.
Shares may pay dividends. Bonds and savings accounts may pay interest. A property can potentially generate rent.
A gold coin or bar does none of these things.
Your financial return therefore depends primarily on the price at which you eventually sell compared with the total cost of buying and owning the gold.
This creates an opportunity cost. When interest rates or yields available elsewhere are relatively high, investors may place greater value on income-producing assets.
That doesn’t necessarily make gold a poor investment. Gold is generally held for different reasons, including diversification, wealth preservation and reducing reliance on other financial assets. Our guide to the benefits of investing in gold explores those potential advantages separately.
But if regular income is one of your principal investment objectives, physical gold cannot provide it.
3. Premiums and spreads can reduce your return
The market price of gold is only part of the cost of investing in physical bullion.
When you buy a coin or bar, you will generally pay a premium above the underlying gold value. This can reflect manufacturing, distribution, dealer costs, product demand and the dealer’s margin.
When you eventually sell, the dealer’s buy-back price may be below the prevailing retail selling price.
The difference between buying and selling prices is commonly referred to as the spread.
This means the gold price can remain unchanged and you could still receive less than you originally paid if you sell soon after buying.
Different products can also have different premiums and resale spreads. Recognised investment coins and bars with an established secondary market can therefore make more sense for an investor than simply buying whichever gold product looks most attractive.
The gold price is the underlying benchmark – the price you pay to buy and the price you receive when selling can be different.
4. Physical gold has storage, theft and insurance risks
One of the advantages of physical gold is that you own a tangible asset. That also creates a practical risk: the gold has to be kept somewhere.
Investors broadly have two choices – take delivery and arrange their own security, or use professional storage.
Keeping gold at home provides direct access, but introduces the risk of theft or loss. Investors should also establish whether their existing household insurance adequately covers precious metals, as policy limits and conditions can vary.
Professional vault storage can reduce some of these practical concerns but usually involves an ongoing charge.
The appropriate option depends on the size of the holding, the investor’s circumstances and their preference for accessibility versus professional custody.
Our guide to gold storage or delivery explores these options in more detail.
5. Counterfeit and misrepresented gold is a genuine risk
The high value of gold makes it attractive to counterfeiters.
Fake coins and bars can range from relatively crude imitations to more sophisticated products designed to mimic the appearance and weight of genuine bullion. There is also a risk of genuine products being misrepresented in terms of weight, purity or collectable value.
Buying from unknown sellers or private individuals without appropriate authentication can therefore introduce unnecessary risk.
Established bullion dealers should have processes for sourcing and verifying the authenticity of the products they sell.
Recognised refiners normally mark investment bars with important information such as weight and fineness. Modern bullion coins can also incorporate increasingly sophisticated security features.
For example, modern Gold Britannia coins incorporate several visual security features intended to make counterfeiting more difficult.
These measures can reduce the risk of purchasing counterfeit gold, but it would be misleading to suggest that any bullion product is literally impossible to copy.
For this reason, the reputation and provenance of the seller matter, particularly when buying higher-value physical gold.
6. Not every gold investment is equally easy to sell
Gold itself has a large international market, but that does not mean every gold product will have identical liquidity.
Widely recognised bullion coins and bars tend to have established secondary markets and are familiar to precious-metal dealers.
More obscure coins, unusual bar sizes or highly specialised collectable products may have a smaller pool of potential buyers.
There is also an important distinction between bullion and numismatic value.
A mainstream bullion coin is principally valued according to the gold it contains and current market demand. A rare or collectable coin may depend much more heavily on condition, scarcity and collector demand.
That can potentially create additional upside, but it also introduces another layer of uncertainty.
For an investment-focused buyer, simplicity and recognisability can therefore be valuable characteristics.
You can compare the main forms of physical bullion through our ranges of gold coins and gold bars.
Want to reduce the risks of owning precious metals?
Read our guide for practical steps investors can take before and after buying physical bullion.
7. Currency and economic conditions can affect your investment
Gold is traded internationally and is commonly quoted in US dollars per troy ounce.
For a UK investor, however, the sterling gold price is generally what matters.
This means the value of gold in pounds reflects not only movements in the international gold price but also movements in the exchange rate between sterling and the US dollar.
For example, it is possible for the dollar gold price to be relatively stable while the sterling value of gold moves because the pound has strengthened or weakened.
Gold can also respond to factors such as:
- real and nominal interest rates;
- inflation expectations;
- central-bank policy;
- investor demand;
- currency movements;
- economic uncertainty; and
- geopolitical events.
These relationships aren’t fixed. A particular economic development does not guarantee that gold will move in a particular direction.
That unpredictability is itself an investment risk.
8. Tax rules and regulation can change
The tax treatment of physical gold can materially affect an investor’s eventual net return.
In the UK, qualifying investment gold is exempt from VAT, while certain UK legal-tender bullion coins – including Gold Britannias and Sovereigns – can also offer a Capital Gains Tax advantage for UK individuals.
Other gold products may have a different tax treatment.
Tax rules, allowances and regulations can change over time, so investors shouldn’t assume that today’s treatment will necessarily remain unchanged throughout a long holding period.
Product choice can therefore matter.
For a detailed explanation of the current UK position, read our guide to the tax implications of gold and silver for investors.
Thinking of investing in gold but unsure of the best coins or bars to buy?
Use our automated portfolio builder to get suggestions based on various investment objectives.
Does gold protect against inflation?
Gold is frequently described as an inflation hedge, but this requires some qualification.
Over very long periods, gold has demonstrated an ability to preserve purchasing power, which is one reason investors have historically used it as a store of wealth.
That does not mean the gold price will rise in line with inflation every year.
There have been periods when inflation has risen while gold has performed poorly, particularly when measured over shorter investment horizons.
An investor relying on gold to provide a precise or immediate hedge against changes in the cost of living could therefore be disappointed.
It is better to think of inflation protection as one of gold’s potential long-term characteristics, rather than a guaranteed short-term relationship.
Are the risks of physical gold and paper gold the same?
No.
Investors can gain exposure to gold without owning physical coins or bars. Examples include gold ETFs, funds and shares in gold-mining companies.
But these aren’t simply interchangeable versions of the same investment.
Physical gold vs paper gold: how the risks differ
Risk type
Physical gold
Gold ETF / similar product
Direct ownership of bullion
Yes, where you own allocated physical metal outright
Depends on the structure
Gold price risk
Yes
Yes
Personal storage responsibility
Yes if taking delivery
No
Theft/loss risk
Relevant if personally storing bullion
Generally not personally held
Counterparty/structure risk
Lower where bullion is owned outright, although custody arrangements still matter
Depends on fund and product structure
Ongoing fees
Possible storage and insurance costs
Typically management/product fees
Ease of trading
Requires physical sale or dealer transaction
Usually traded electronically
Additional risks
Authentication and physical security
Fund structure, tracking and counterparty considerations
Gold-mining shares are different again because their value is influenced not only by the gold price but by the performance, costs, management and financial position of the underlying company.
Our guide to gold ETFs explains this form of gold exposure in more detail.
So, is physical gold a high-risk investment?
There isn’t a single useful label that applies to gold in every circumstance.
Gold does not have the same business-failure risk as shares in an individual company, but its market value can still fall significantly. Physical ownership can reduce reliance on certain financial intermediaries, but it introduces storage, security and authenticity considerations instead.
Risk also depends on how the gold is bought.
Someone purchasing recognised bullion at a competitive premium from an established dealer and holding it as part of a diversified long-term portfolio faces a different set of risks from someone paying a large premium for an obscure coin in the hope of making a short-term profit.
The important point is not to assume that gold is risk-free simply because it has historically been regarded as a store of wealth.
Can the risks of investing in gold be reduced?
Understanding the risks is only the first step. Our guide to reducing the risks when investing in gold and silver explains the practical measures you can take when choosing, buying, storing and eventually selling physical precious metals.
Careful product selection, buying from an established dealer, understanding premiums, arranging appropriate storage and avoiding overexposure to a single asset can all address particular risks associated with physical bullion.
But risk cannot be eliminated altogether.
Market prices remain outside an individual investor’s control, and future investment returns can never be guaranteed.
Frequently asked questions
Can you lose money investing in gold?
Yes. The gold price can fall after you buy, and physical bullion also has a difference between its buying and selling prices.
If you sell for less than your total purchase cost, you can make a loss.
Gold’s historical role as a store of wealth does not guarantee that an individual investment will be profitable.
What is the biggest risk of investing in physical gold?
For many investors, the principal financial risk is that the gold price falls and they need to sell at a loss.
Physical bullion also introduces risks associated with premiums, storage, theft, insurance, authenticity and eventual resale.
Which matters most will depend on how much gold you own, what you buy and how long you intend to hold it.
Does gold always protect against inflation?
No. Gold has historically been used as a long-term store of wealth and potential inflation hedge, but its price does not move in line with inflation over every period.
It can underperform inflation, particularly over shorter time horizons.
Is storing gold at home risky?
Keeping gold at home introduces risks including theft and loss.
Anyone choosing home storage should consider physical security and establish whether their insurance provides adequate cover for the value and type of assets being stored.
Professional vault storage is an alternative but normally comes with an ongoing cost.
Are gold coins or gold bars less risky?
Neither is inherently risk-free.
Both provide exposure to the gold price. The practical differences include premiums, divisibility, storage and ease of resale.
Recognised bullion coins can provide flexibility because an investor can sell individual coins rather than an entire larger holding. Larger bars, however, can sometimes offer a lower premium per ounce when buying.
The appropriate choice depends on the investor’s objectives and the size of the investment.
Balancing the risks and benefits of gold
Gold can offer characteristics that are difficult to replicate with other assets. Physical bullion is tangible, internationally recognised and can provide diversification away from traditional financial assets.
But those benefits should be considered alongside the risks.
Gold prices fluctuate. Physical bullion doesn’t generate an income. Buying and selling involves premiums and spreads. Secure storage needs to be considered, and choosing the wrong product or seller can create avoidable problems.
The aim shouldn’t be to pretend those risks don’t exist. It should be to understand them before investing.
For the other side of the equation, read our guide to the benefits of investing in gold.
If you’re considering an investment and want to understand the buying process first, our complete guide to buying gold provides a useful starting point.
Browse and Buy Our Full Range of Gold Products
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