Here’s How to Invest in Gold
Gold has always been held in esteem for its unique property and beauty. Used as a currency for thousands of years, gold is still a fallback currency that people turn to when the local fiat currency can’t be relied upon, such as in times of war and political unrest.
Even if you don’t need to consolidate your wealth in order to flee from unrest, gold can be a great investment. Putting some of your money into gold can protect the value of your portfolio during times of inflation. When the stock market dips, gold tends to go up, so gold holdings can keep you from losing everything during market downturns.
But how do you go about buying gold? Where do you keep it? How do you cash it in? Most people buy gold bullion, but you can also buy gold mutual funds and exchange-traded funds (ETFs), gold futures and options, or even stocks in mining and streaming companies. Read on to learn more.
Choose Your Gold Investment Vehicle
The traditional way to invest in gold is simply to buy gold. You can buy gold bullion in the form of bars and coins in a wide range of sizes, from one gram all the way up to 400 ounces (or about 11.3 kilos). If you buy gold bullion, you will need to store it safely somewhere, whether that’s in your own home safe or in a gold storage facility, or even in a safe deposit box at the bank.
The main drawback of buying physical gold is that you’re responsible for storing it securely. It can be hard to sell, too, especially in larger quantities. That’s why many investors choose exposure to gold in the form of mutual funds that have holdings in gold bullion, gold mines, gold streaming companies, and the like. You can sell shares in these mutual funds just as you would shares of stock so that you can easily liquidate your holdings on any day the market is open. Gold ETFs, which track the price of gold, work similarly.
If you’re an advanced investor who’s willing to take on some risk, you can always invest in gold futures and options. Futures are agreements to buy gold in the future at a certain price. Options are similar, but allow you the option to buy a futures contract at a predetermined price and by a certain date. You should avoid trading in futures and options unless you have experience in investing.
Buy Your Gold
You can buy shares in gold mutual funds and ETFs on the stock market through your brokerage account. You can even go right to the source and buy shares in a gold mining or streaming company, though this is not so much an investment in the precious metal itself as it is an investment in a company tied to the industry – and your investment may go south if that company isn’t profitable and well-managed.
If you want to buy gold bars and coins, you should go through a reputable online gold dealer. Check the spot price of gold on the day you buy so you have an idea of what a reasonable price will be. Most gold dealers will charge a premium of one to five percent above the spot price to cover transaction costs.
Once you have bought your gold, you can take delivery of it if you want, although you’ll then be responsible for storing the gold safely on your own turf or in a safe deposit box. You can also store your gold in a storage facility. If you choose to store your gold in a facility, you need never take possession of it. You can leave it in the facility and then sell it straight from there. The unbroken chain of custody this creates will make your gold more appealing to buyers.
Liquidate Your Holdings
You can liquidate holdings in a gold mutual fund, ETF, or gold mining or steaming company simply by selling your shares on the open market. Gold bullion can be a little harder to liquidate. That’s why it’s a good idea to buy gold bars and coins in smaller sizes. Most investors can’t afford to pay tens of thousands for a kilo-sized bar of gold. However, smaller gold bars and coins are always in demand and you’ll find far more buyers for them when it’s time to liquidate.
The price of gold may fluctuate from time to time, but gold is always valuable. Put some of your money into gold bars and coins, and protect your wealth from whatever the future may bring.
Pranab Bhandari is an Editor of the Financial Blog “Financebuzz”. Apart from writing informative financial articles for his blog, he is a regular contributor to many national and international publications namely Tweak Your Biz, Growth Rocks ETC.
