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.

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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 ofgold’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 Gold ETFs
  • ProShares Ultra Gold (UGL)
  • iShares Comex Gold Trust (IAU)
  • ETFS Gold Shares (SGOL)
  • Physical Gold Trust (PHYS), a more expensive
  • ETF that lets you trade shares for actual gold

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.