Ways of Investing in Gold
Everybody loves gold, and most people want to buy gold. Buying actual tangible gold, such as jewelry or coins, is one way to invest in gold.
Although there’s nothing quite the same as being able to admire your investment piece in your own home, there are also many other ways to invest in gold and some of them might be better suited for your portfolio.
Buying jewelry is easy and accessible to most people; there is no need to work with a broker or advisor. Jewelry is art as well as investment, so you will be paying higher than the actual value of the gold.
The markup and the questionable resale value make it perhaps not the best investment in strictly financial terms; however, the pleasure you may get from owning and wearing the jewelry is intangible.
Gold Bullion, Bars, and Coins
Commemorative coins come with some of the same pros and cons as jewelry; they often cost more than the actual value of the gold and you may not recoup that markup if/when you resell, but if the subject of the coin is one that you want to celebrate, it may indeed be worth it to you.
Non-commemorative coins, bars, or bullion are targeted to investors instead of collectors.
They are easy to acquire but can be difficult to liquidate, in part because since they are so easy to acquire, buyers will look toward reputable merchants rather than individuals selling secondhand.
If you are purchasing non-collectible coins or gold bars, be sure to inquire about the “melt value.”
This is the value of the gold itself if it were to be melted down, and it will let you know how much of a markup the merchant is charging.
Gold certificates are an alternative to purchasing and holding physical pieces of gold, which makes them a little bit easier to manage for some investors.
However, they offer the same direct exposure to market fluctuations that physical gold does, and they tend to be very difficult to resell.
A futures contract is a derivative, which means that investors are speculating on what the market will do.
With a futures contract, you are committing to buy a certain amount of gold or any other commodity at a specific price on a specific date.
If the normal selling price on that date is higher than the price on your contract, you’ve made a good investment.
Futures contracts are generally easy to trade or resell (at least administratively; the actual demand depends on the specifics and the market).
Gold Mining Stocks
Buying stocks in gold mining companies means that you essentially own a tiny share of any gold that comes out of the ground.
You are also investing in the company itself, which means that you will have exposure to mine operations and management decisions.
Buying individual stocks is extremely volatile, and this can be either a benefit or a detriment.
ETFs and Mutual Funds
Investing in ETFs and mutual funds that center around gold is a reasonable way to trade in gold and gold futures without having to manage the markets yourself.
Some index funds passively follow the chosen market, and others are professionally managed.