If you’re here, then you are likely interested in the prospect of gold investments. Whether it’s buying physical gold, going into gold futures, or setting up a precious metal IRA for its benefits down the line, the options seem almost endless.
It’s not a new thing for people to invest in gold. While it was historically a currency, gold investors today are more concerned about its ability to hold its value, be a hedge against inflation, and more!
Here’s a high-level overview of some of the different ways in which you could potentially make gold a part of your investment strategy.
In some investments, you will hold your gold bars and other physical gold bullion directly. In others, you won’t even technically own the precious metal. One of the options that fall into the latter category is that of gold exchange-traded funds (ETFs).
Essentially, they are instruments that represent units of gold and the funds can be purchased or sold. You can think of them as gold stocks in this sense.
Since you don’t need to worry about insurance, security, and other associated costs when you invest in gold this way, it can be seen as a pretty cost-effective way to go about things.
There are also mutual funds. You’ll find that gold companies and gold bullion are often owned by them. One thing to note is that mutual funds are probably not the way to invest in gold if you aim to have a portfolio that focuses on the precious metal exclusively since there is usually a diverse set of holdings at play.
Nevertheless, you get the advantages of ease of ownership, low minimum investment and cost, and more.
Gold futures are contracts to either buy or sell an amount of gold. There must be a date set for the future purchase.
Using futures is popular because the barriers to entry, such as the margin requirements and the commissions are pretty low. Sometimes, dollars are used to settle contracts, while in other cases, gold would be used.
If gold mining stocks or gold ETFs are not direct enough for you, then you may want to purchase physical gold instead, and getting your hands on gold coins is a great way to do it.
Should you decide to invest in gold this way, you’ll find that global financial publications contain the prices and reputable dealers can usually be found without having to extensively search.
Additionally, since gold coins tend to be minted in small sizes, it creates a situation where the investment becomes a bit more convenient than other physical options such as gold bars.
Bear in mind, however, that you will have to think about storage and insurance in addition to the gold prices.
Of all the direct methods that people will use to invest in gold, this is probably the most popular among them. Bullion refers to just about any form of physical gold certified for its purity and weight.
The purity, of course, refers to the amount of gold present. Gold is sometimes mildly infused with other metals such as copper, nickel, etc. This may be to alter its look or to make it easier to work with. Essentially, the more the piece is made up of gold, the higher the purity it has.
You do have to be careful when you purchase gold this way if you aim to liquidate it in the future. It may be difficult to get a buyer for a whole bar in the future, and even if you could, you may only want to sell percentages of your holdings.
Of course, dividing the bars present a whole other challenge.
Gold Mining Companies
Instead of choosing to buy gold directly, you may choose to invest in a mining company instead. Provided that you have done the necessary research, this could provide a safe option. However, it does require an extensive amount of due diligence on your part, which is not always feasible.
When it works out though, it can be very beneficial. After all, if gold prices are appreciating, then gold mining companies are also winning. You may even find that the larger companies that boast a global gold production operation still manage to show a profit in times when the price of the precious metal is either stagnant or falling.
You can buy gold in the form of jewelry, which some people do not necessarily see as an investment. While it’s not the most lucrative method, it can still marginally be viewed in an investment light. Almost half the gold produced in the world is used to make jewelry.
The downside of choosing to invest in gold this way is that it’s not necessarily the most profitable form of investing. Unless you are a jeweler and others buy gold jewelry from you, don’t expect to profit much from jewelry sales, especially if you paid retail price for them.
What’s the Recommended Approach for Gold Investments?
There really isn’t a right or wrong way to invest in gold. Whether you opt for gold stocks or buy physical gold, it should depend on the investment goals you have and your unique situation.
Think about your risk profile too and what matters most. If the most appealing thing is a low minimum investment with a method that sees you not dealing with direct exposure to the precious metals, then ETFs may be a good option.
If owning physical gold is most important, then perhaps buying gold bullion is the way to go for you.
There are clearly a lot of different directions you could go, from a gold mining company to buying bars to ETFs. Even a precious metals IRA can be a gold investment if you go through a gold IRA provider.
You’ll find ETFs and mutual funds to be the easiest and safest routes to gold investing based on the way they work, but perhaps they don’t align with your needs.
It’s always a good idea to do your research and come to the conclusion of which way to go on your terms.