For hundreds of years, gold has been the favorite precious metal for both making beautiful and valuable jewelry and also as a store of value for the investor. If you want to invest in gold, there are many possibilities available. Some people like the feel of the gold in their hands, while others want to own it, but not have to worry about storing it safely.
For hundreds of years, gold has been the favorite precious metal for both making beautiful and valuable jewelry and also as a store of value for the investor. While gold jewelry remains popular as a decorative art, it fails as an investment for the most part due to the large markup buyers pay. There are exceptions, but those are mostly limited to those people who can afford to have unique gold jewelry pieces designed and made, rather than the mass produced items usually seen.
If you want to invest in gold, there are many other possibilities available. Some people like the feel of the gold in their hands, while others want to own it, but not have to worry about storing it safely.
For those who don't want to hold the physical gold, buying shares in an Exchange Traded Fund (ETF) is one way to go. You will need to have an account with a stock broker, since ETF's trade like a stock. You will also need to do some research, because not all gold ETF's invest the same way. Some buy gold bullion, store it and sell shares based on some fraction of an ounce of gold. SPDR Gold Trust (GLD) is set up this way.
Others, like ProShares Ultra Gold (UGL), use financial instruments like futures and options contracts to try and match the movement of the gold market. UGL actually attempts to move with twice the return of gold's price movements.
Still other ETF's invest in gold mining shares. These will tend to fluctuate in a different manner than spot gold, since mining stocks can go up or down depending on many factors rather than just the price of gold.
Gold Mutual Funds are another way to invest in gold without physically holding it. They may invest in multiple gold mining companies as well as ETF's, options and futures. Mutual funds are a bit different than stocks and ETF's. You can't just go online and buy immediately. When you place your order, your buy price will be the fund price at the end of that trading day. Once again, do your homework. Some mutual funds also charge a "load", which is a fee either when purchasing, when selling or even both ways. There are many "no load" funds as well so chack carefully before investing.
Of course, you can purchase shares of gold mining companies directly on many stock exchanges. Once again, you need to do your homework, because companies range in size from a Barrick Gold (NYSE: ABX) which produces and sells millions of ounces per year to smaller companies which may own some claims, but have not yet produced an ounce of gold. Some of these smaller companies trade very few shares, so if you own them, you may not be able to sell them at a reasonable price in a hurry.
Stored gold is another way to purchase gold without the problems of storage. Companies like the Perth Mint and Bullionvault allow you to purchase gold which is then stored in your name in their vaults.
Gold futures contracts are still another way of investing in the price movement of gold without actually taking possession of it. Putting down as little as 10% of the value, you are able to control a large amount of gold. The problem with futures is that even though you can make a lot of money if gold is going in your direction, you can lose a bunch if it goes against you. Since you are only putting up 10% of the value, if the price of gold goes down 5-10%, you may lose some or all of your investment. Futures are NOT for the inexperienced.
If you want to hold your gold in your hands, then you have a couple of choices. First, rare gold coins have value not only as gold, but also as a collectible. You can expect to pay much more than bullion value for scarce gold coins, but you should also be able to sell them at a premium. There are a couple of things to take into consideration here. Counterfeit coins are common. If you are going to be purchasing rare gold coins, make sure to buy only coins that have been certified by an independent grading company like ANACS, PCGS or NGC. Next, you should be aware that you will be purchasing these coins at retail prices and selling them at wholesale, so buying for the long haul is best when thinking about collectible coins.
Last and most popular is physical gold. Many countries and companies produce and sell gold bullion bars and coins. These are usually priced to sell at a small (1-5%) markup over the bullion value. Depending on your budget, you can buy from one gram to a kilogram. The most popular sizes are the 1/10th ounce up to the one ounce coins/bars. The smaller the weight, the larger the percentage markup, so you may pay 2-3% on a one ounce coinScience Articles, but up to 10% one a 1/10th ounce coin. You will certainly save money buy saving to purchase a larger size.
Most financial advisors recommend placing 5-10% of your investments into precious metals like gold. Just make certain you are aware of the issues before committing your cash.
