Investing in Gold
There are a many options available if you’re interested
in investing in gold. Here are some basics on how to
invest in gold.
Gold isn’t just a metal that’s used in jewelry. It’s also a commodity that you can invest in. A commodity is
a type of product that doesn’t vary from one producer to the next. For example, gold from China is the
same as gold from Africa. The value of gold doesn’t change based on its origin. Gold prices are driven
by a few other factors including inflation, new discoveries, reserve demands, and investment demands.
Investing in gold has gained popularity in recent years after the U.S. housing market crashed and the
dollar has flattened. One of the things that make gold investments so attractive is that the value of gold
increases as the value of the dollar decreases. Gold investments become particularly attractive after a
stock market crash or economic decline. Even during times of economic success, gold is a good part of
any investment portfolio.
There are several ways you can invest in gold, either directly or indirectly.
Buy the Gold
You can buy gold in the form of coins or bars. Before you buy, check the current spot price since this lets
you know the current price of an ounce of gold. Always compare a dealer-quoted price to the spot price
to tell if you’re getting a good deal. All resellers will charge a premium for the gold, your goal is to buy at
the lowest premium possible. The higher the premium, the more the value of the gold has to increase
before you make a profit.
When you buy gold, remember that you’ll have to pay costs associated with storing and securing your
gold. You can keep gold a safe deposit box or a safe in your home, but you want to protect it again loss,
theft, and other potential damage. Keep the cost of storage and security in mind as you purchase gold.
Depending on where you purchase from, you might also have to pay transportation and shipping costs.
Buy a Gold ETF
You don’t have to buy gold directly to get the benefit of
gold’s changing prices. You can buy an ETF, or
Exchange Traded Fund, that’s based directly on the
current value of gold. Often one ETF share represents
1/10 ounce of gold. So if the current price of gold is
$1,500 per ounce, once share would cost $150. There
are several gold ETFs offered right now:
- SPDR Gold Trust (GLD) one of the most popular
ETF that lets you trade shares for actual gold
- ProShares Ultra Gold (UGL)
- iShares Comex Gold Trust (IAU)
- ETFS Gold Shares (SGOL)
- Physical Gold Trust (PHYS), a more expensive
There are allocated and unallocated ETFs. With allocated ETFs, the bank actually holds the gold bullion.
On the other hand, unallocated ETFs offered by companies who trade gold futures and don’t actually
have the physical gold on hand.
Invest in a Mining Company
Companies are still mining gold and you can indirectly invest in gold by investing in a gold mining
company. These are more risky since there’s no guarantee the company will actually find gold – gold
production has been on the decline since 2001. The top gold mining companies include:
- Barrick Gold Corporation (ABX)
- Goldcorp Group (GG)
- AngloGold Ashanti (AU)
- Newmont Mining Corporation (NEM)
- Kinross Gold Corporation (KGC)
Convert Your Dollars Into Digital Gold
Digital gold is basically electronic gold. You put your money in an account and your balance is shown in
gold. When you withdraw your money, it’s based on the spot price of gold at that time. There are only two
Federally-regulated digital gold currency providers in the United States today: GoldMoney and e-gold
(who recently settled fraud and id theft charges with the Federal government).
As with any investment, always do your due diligence before purchasing gold money or investing in ETFs
or stocks based on gold. Check asset performances and make sure you’re dealing with reputable sellers
and brokerage firms.
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