How to Buy Gold
Today there has been a significant increase in investing in gold in light of the way gold prices have dramatically increased as well as concerns regarding the economy. Gold is often viewed as a safe haven investment, providing an alternative method for protecting and growing wealth over the long-term while protecting against inflation. There are actually many different ways in which you can invest in gold, including gold coins, gold bars, gold mining stocks, EFTs, mutual funds and gold futures. Deciding which gold investment vehicle is best for your needs involves understanding the different characteristics associated with each investment method and determining which investment method will best meet your needs.
One of the most conservative methods for protecting and preserving wealth is through the ownership of gold bullion or gold coins. One of the main advantages to investing in gold coins is that they are available in a variety of different sizes that range from 1/20th of an ounce to one ounce and even larger. Many people find this to be a beneficial investment method because it is tangible; meaning you can actually see and touch it. Gold bullion can be purchased relatively easily either online or through a local dealer.
Mints from different countries around the world produce gold coins in many different sizes and weights. Along with these different national coins, there are also many numismatic coins that can become collector’s items as well. In some cases, these coins can have a value that is much more than the value of gold. There is often concern among gold investors in the United States regarding confiscation of gold. This concern is based on the fact that ownership of significant amounts of gold was banned by President Franklin D. Roosevelt during the Great Depression. Numismatic coins were exempt from that; however. While gold bullion coins do offer many advantages, there are also some drawbacks to consider, including insurance costs and storage.
One of the advantages of investing in gold bars is the fact that they are available in many different sizes. If you plan to invest in gold on a large scale, gold bars can be an efficient and simple way to invest in gold. Larger gold bars are typically available at premiums that are lower compared to the intrinsic value of the gold, meaning you can get more for your monetary investment. Smaller bars of gold are also available; however, the downside is that you will usually need to pay more for them. The trade-off is that larger gold bars tend to be not as liquid or flexible when the time comes to sell. The pool of buyers tends to be smaller for larger gold bars, meaning you would usually need to plan to sell to a large scale dealer. When purchasing gold bars, it is important to make sure that you only purchase bars which have a mark or a seal from a refiner that is internationally recognized. Without that important mark, it can be difficult to resell gold bars.
Gold Mining Stocks
Yet another option for investing in gold is through the purchase of gold mining stocks. The main advantage of purchasing gold mining stocks is that they can be easily purchased through a brokerage account. The key to keep in mind is that this investment form can be risky. It is important to make sure you have thoroughly investigated the company to decide whether they are efficient in their business transactions. You should also know that the stock price can vary based on the location of the mines. Also, in some cases it is possible for the price of the gold stock to decline even if the price of gold has actually increased. A company that is efficiently operated; however, there is the opportunity for profit and evening gaining an increase in stock price over the actual price of gold.
Gold Mutual Funds
Another option for investing in gold that is sometimes viewed as being less volatile than investing in gold mining companies is the gold mutual fund. A mutual fund often involves a group of different mining companies or sometimes a group of mining companies that mine several types of precious metals, including gold. As is the case with any mutual fund, when you purchase shares you are actually buying a segment of that market. You are not actually investing in one particular company. As a result, there is more risk involved in this type of investment than when purchasing and investing in actual gold such as gold coins or gold bars.
Gold Exchange-traded Instruments
Exchange-traded instruments, which are also sometimes known as ETFs are sometimes seen as being advantageous because they can reduce concerns associated with the purity and authenticity of investing in actual gold. ETFs work like this: the fund will purchase physical gold on the behalf of an investor. The gold is then stored in a secure vault. The advantage to this investment option is that you do not have to worry about such logistics as where you will store the gold or having to insure it. All of that is handled by the ETF. The costs of those services are included in the management fee that you pay for the ETF.
An ETF makes it possible to buy as well as sell gold bullion just as you would stocks. With just the click of your mouse you can buy or sell gold. This can take place within just a few minutes or even less. Basically, investing in an ETF is investing in the price of gold. The disadvantage to this investment vehicle is that it is an asset that is gradually depleting. Storage vault fees, insurance fees and accounting fees all must be paid from your gold investment. Also, just as with any other type of stock or bond you will also need a broker to purchase and sell exchange-traded instruments. That involves an additional expense that you need to keep in mind regarding your investment.
Another way to invest in gold is through the purchase of gold futures. If you are an investor who is looking for an easy method for gold investment, gold futures can provide that. What must be kept in mind is that gold futures are not like buying physical gold or even purchasing gold mining company stocks. There is a finite life span involved with gold futures. If the price of gold does not rise as you anticipate it will within a specified time frame, it is possible to lose all of your investment. As a result, this type of investment in gold is often seen as being the most risky of all types of gold investments.
Regardless of which option you choose for investing in gold, this precious metal remains a fairly stable and secure investment choice. Over the last couple of years, the price of gold has substantially increased. During the last two decades, the average rate of return from gold has been approximately 7%. In comparison to other investment options, gold is known for retaining its value as it is not dependent upon the state of the nation’s economy; regardless of whether the economy is experiencing a downturn or an upswing.