Ways of How to Invest in Gold
Throughout history, gold has been a popular asset that proves valuable despite any economic or political trouble. Suppose you want to add the stability and sparkle of gold to your portfolio. In that case, you can rest assured it will maintain its value remarkably well in the long term.
Gold is a commodity, and its trading price is based on the supply and demand at any given time. Although in economic downturns, demand for gold jewelry may
decrease, investors such as central banks tend to buy gold when they are worried about the economy. For this reason, regardless of the economic situation, there is usually a demand for gold in one way or another making it a reliable commodity for investment.
However, it is important to note that there is a big difference between the availability of gold for investments compared to the total amount of gold in the world. For example, seawater contains gold, but it would be difficult and expensive to extract it as a commodity. Gold is more commonly extracted from above ground or within the Earth.
The World Gold Council estimates there are approximately 190,000 metric tons of gold above ground that we use. They also estimate around 54,000 metric tons of gold within the Earth can be economically extracted using current technology. Advances in extraction methods are likely to increase this number in the future.
Investing in gold doesn't mean you have to limit yourself to just physical gold, such as coins or jewelry. There are various options for you to be an investor in this precious metal. You can add gold to your digital portfolio through shares of gold mining companies, gold exchange-traded funds (ETFs), or trade options and futures contracts.
To make it easy for you to understand all your options available and how they can benefit you, we've put together this comprehensive guide. Learn about the best ways to invest in gold, including streamlining your investment strategy, purposeful gold investments, and how to diversify your investment portfolio with gold. Read on for everything you need to know before investing in gold.
There are Many Available
Options in Gold Investment
Gold can prove to be an investment safe haven for anyone concerned about future inflation or economic calamities. Though it can be volatile like any investment in the short term, it is very reliable for the long term. However, since there are so many options available for investing in gold, you must first choose the type of investment you want to make.
While all methods can be beneficial, they may not all be the best options for everyone. Depending on your aptitude for risk, you will most likely choose different ways to invest in gold. We will first introduce you to the various options available and explain what they are before diving deeper into their pros and cons later in the article.
You can easily keep track of the ups and downs of the price of gold at the World Gold Council website. This council is an industry trade group backed by some of the world's largest gold miners. The following are the many ways available for investing in gold:
Physical forms of gold come as jewelry or gold bullion that can be coins or bars. The value of gold jewelry is often in the actual content of pure gold rather than the style of the jewelry itself. Gold necklaces of at least 24 karats are pure gold with no other metals mixed in and the optimal form to purchase for investments.
Government-issued gold coins represent some of the purest physical gold that can be bought and has added value for collectors. Their respective governments are the only entities that can issue them, so they are very legal and quality-ensured.
Gold bars are pure gold melted into bars at the size of 8 x 15 x0.4 millimeters. It can be a compact way to store millions worth of investments. You can also easily convert it to cash due to the tamper-proof packaging and reputable sources providing them.
Gold mining stocks are shares of companies that are mining gold deposits. When you invest in these stocks, you will benefit from the changes in the price of gold as well as how well the company does.
ETFs and mutual funds are professionally managed collections of individual stocks or bonds. So, instead of investing in only one company at a time, you have a "basket" combining multiple assets into one. These are generally less risky than individual stocks.
Purposeful Gold Investments
An increasingly popular method of investing gold is through jewelry, especially because it can serve a dual purpose. Not only is jewelry a great way to store wealth over the long term, but you can also gain from the aesthetics of the investment and wear it. This added benefit makes it a convenient way to invest in gold since you don't have to store it away in a dark vault.
One main reason for its popularity is the increase in demand for recyclable jewelry. Even though old jewelry is not fashionable, its gold still holds a lot of value. For this reason, you can always find a dealer willing to purchase gold jewelry even when it isn't stylish or have fancy stones or designs on it.
The dealers are interested in the gold content of the jewelry that can be melted down and transformed. Melted gold can turn into coins, ingots, or new pieces of jewelry. Dealers often hunt for pieces of old jewelry because individuals can often under-appreciate their true value or transformation abilities.
If you recognize the value of your gold jewelry, you should have proper security measures to keep it safe. If you plan to invest in jewelry and keep it at home, you will need to have it insured and fully secured in a proper safe. Although there may be additional fees associated with them, other options for storage include:
- A safety deposit box at a local bank.
- Custodial services to secure your gold in a highly secure vault with the holdings of other investors.
- Instructing your attorney, lawyer, or solicitor to take care of storage arrangements.
When deciding what jewelry to invest in, it is important to understand that only very rare pieces increase in value due to their fashionable qualities. It would be better to invest in gold jewelry that contains a high content of pure gold since this is what will be worth something in the future. Having gold shaped into jewelry can increase the cost of purchasing it, but it comes with an added purpose that most people find worth the investment.
Multiple Benefit Investments
Although it comes with some additional risk, investing in stocks issued by gold mining companies can provide multiple financial benefits at once. You will be benefiting from the rising price of gold and benefit from the growth of companies outperforming their competition. For this reason, you can double your potential profits.
Stocks issued by gold mining companies often follow swings in the price of gold, but you can choose to invest in companies in the market with good foundations and operations. By owning gold mining stocks:
- You own parts of a company that produces gold
- The company you have stocks in also owns the gold that is still in the ground they are mining
- The company's deposit value increases when gold rises in price because it becomes more attractive to investors
However, you must realize that if the company you are investing in experiences an unexpected negative circumstance, such as a mine collapse, the value of your investment could diminish. On the other hand, if the company performs unexpectedly well because they discover rich gold deposits, your investment value can quickly increase. This high-risk, high-reward situation of investing in stocks issued by gold mining companies makes it more suitable for people who are comfortable with the risks.
Suppose you properly time your investments and purchase stocks from the right gold mining companies. In that case, this option can prove to be a very lucrative one.
Multiple Options to Invest
Having multiple options to invest in gold means this commodity can be a great option for any investor. Suppose you wish to give your portfolio exposure to the gold markets but don't want the high risk associated with gold mining company stocks or the costs and security challenges associated with physical gold. In that case, you still have the option to invest in ETFs (Exchange Trade Funds) or mutual funds.
A gold exchange-traded fund (ETF) is a bundle of stocks in a package. It is an attractive option if you are looking for a simple way to gain exposure to the gold market since it's like buying a publicly traded stock. While you don't get any physical ownership of gold, you will still benefit from gold's value, and your investment portfolio can increase with the price of gold.
You can purchase gold with greater ease and fewer hassles, especially since you don't have to deal with the secure storage of the gold. However, it can come with higher risks than physical gold because you may be relying on a financial institution managing your portfolio. If the institution encounters issues, it can impact your portfolio.
Additional Physical Gold Investments
Even if jewelry is not a physical gold investment you are interested in, you can still invest in gold bullion. A great aspect of investing in gold bullion is the variety of options you have that comes with various benefits. Bullion can come in the form of coins or bars.
Government-issued gold coins should be at the heart of every investment portfolio. When you buy a gold coin, you are receiving the cash value of the coin combined with the value of the gold within it. For this reason, the amount of pure gold contained in them makes their overall value greater than their marked face value.
The rarity of the coin also increases its price, especially for collectors. By investing in rare gold coins, you can benefit from the increase in gold prices and the increase in demand for the type of coin you choose to buy. To take advantage of this, you will have to time your investments based on the market rate of gold as well as research the quantities of coins governments are issuing.
Gold bars are a popular investment option because it has been a method to store wealth throughout human history. This reason indicates that the product will be in demand in the future as well and makes it an invaluable quality of gold bars. People value gold bars for the pure value of the gold they contain, not the intangible or sentimental reasons associated with coins or jewelry.
Since gold bars are made purely of gold and often issued by highly reputable organizations, it is also a highly liquid investment. You can easily sell gold bars to dealers when you want to cash in on your investment. Dealers will usually purchase them, no questions asked, because they are confident that they can resell the bars.
Highly liquid gold bars will include tamper-proof packaging to ensure their purity is secured until it's time to exchange them. Security when storing the gold bars is also crucial because collectors and dealers want you to assure them the bars are in the same condition as when they were originally cast.
Gold bars are also compact, with a single once of gold packed into a bar that is only a few millimeters thick. A single brick of gold can be worth hundreds of thousands of dollars since you can turn this investment into cash based on the current market rate of gold at the time. Its size makes it an efficient way to store millions of dollars worth of gold in small spaces, even a broom closet. Of course, we recommend a good quality safe for home storage.
Diversifying your Investment Portfolio
All investments come with a certain level of uncertainty, so it is best to practice diversifying your portfolio. Diversifying reduces your risk by ensuring you're not "putting all your eggs in one basket." If one of your investments is doing poorly, another may be able to cover the losses in the short term.
When it comes to gold, you can easily diversify your portfolio by investing in different forms of gold. This method of investment is especially true for physical forms of gold. For example, gold bullion comes in the form of bars or coins.
By choosing to have investments in both coins and bars, you can minimize the risks that come with the fluctuations in the values of individual coins. Investors seek gold bars for the amount of pure gold they contain. For this reason, it is less likely to change in value based on a collector's reasoning like with coins or based on fashionability like with jewelry.
If you invest in stocks of gold mining companies, it can be optimal to purchase stocks from more than one company. This method allows you to spread the risk, so if one company has an unexpected circumstance, it doesn't wipe out your entire gold investment. Choosing to mix your portfolio with ETFs (Exchange Trade Funds) and mutual funds too can further provide a safety net.
In the short term, gold can be a volatile investment, so it's best not to put all your assets exclusively into it. Most advisors will recommend that you allocate up to 10 percent of your portfolio in gold. Regardless of what percentage of your portfolio you choose, it can also be good practice to purchase gold over time slowly.
As you build your gold position and buy more of it, make sure to balance your portfolio periodically so your relative exposure remains the same. There are also many companies and advisors that can support you in deciding what mix of investments to have depending on your risk levels and goals. People seeking investments for a retirement plan will most likely require different assets compared to someone seeking lucrative short-term returns.
Streamline your Investment Strategy
Sometimes investments can end up complex and overwhelming to manage. You may find yourself shying away from opportunities that are difficult to understand, such as purchasing exchange-traded funds or gold mining stocks. Still, there are strategies you can use to simplify the process, including the following:
- Contacting an advisor for support
- Setting realistic and specific goals, including what you want to earn from your investments over time
- Evaluating your investment portfolio to ensure it's diversified and at a risk level you are comfortable with
- Partnering with online gold dealer companies
Partnering with experts in the industry, such as through an online gold dealing company, is crucial if you want to easily manage the process of buying gold. Lack of understanding about the gold market can make investing in it challenging even for most skilled professionals. By investing in gold alone, you can easily face various, complex risks that even experts in the industry can struggle to understand.
For physical gold investments, you may be uncertain about what jewelry styles will remain popular or have difficulty ascertaining the value of the gold contained within each piece. Similarly, you may not know what variables make a specific gold mining stock valuable and have the potential for growth in the long term. In both these scenarios, a partner with extensive expertise on the subject can help significantly.
While some online gold dealers have only a platform to sell gold online, some come with a comprehensive service package.
Online gold dealers can help you purchase gold easily online, similar to purchasing anything else through an online store. Most novice investors can purchase high-quality gold available by identifying the pieces they want and adding them to a cart. This process reduces the complexity of purchasing gold and streamlines your investment activities.
You can rest assured the items you are purchasing are quality since these companies deal with gold daily. For example, the company personally finds valuable coins that investors seek the most globally. With so many transactions occurring through them, they have a reputation to maintain and ensure the quality they provide with every purchase.
When you partner with online gold dealing companies, you can also receive access to quality storage and professional custodial services since these companies have many connections in the gold industry. Not only will you get support securely storing your gold, but you can also have custodial services such as:
- Account administration
- Transaction settlements
- Collection of dividends and interest payments
- Tax support
- Foreign exchange management
Last but not least, these companies can support you with liquidating your gold assets when you want to sell. Partnering with an online dealer company connected within the gold industry can help make the whole process of investing in gold safer and easier for you.
Best Ways to Invest in Gold
It is best to choose the investment option that best fits your experience and needs. For example, if you are accustomed to trading stocks and bonds online, you may find investments in physical gold challenging. The dealers you interact with will typically be outside of traditional brokerages. Additionally, if you want to benefit from the increasing price of gold, you may want to consider ETFs, but if you want guaranteed financial security no matter what, you may prefer physical gold.
It is extremely important to go with a reputable, trusted, and highly recommended Gold investment advisement company that is committed to helping their customers with simple and effective options to protect and grow their investment and assure their portfolio is diversified and their investment in Gold and other Precious Metals is safely secured.
It is also important to note that the best way to buy gold is a little at a time, as often as possible. By buying small amounts of gold over time, you can dollar-cost average into the position even when gold prices are high. The value of gold doesn't diminish in benefit over the long term.
Now that we have covered the different types of gold investment options, below is an overview of the pros and cons, so deciding what's best for you is easier.
Gold Mining Stocks
Gold Exchange-Traded Funds (ETFs)
Don't Go At it On Your Own
Before finalizing which methods are the best for you to invest in gold, it is important to note that having support through the process can make it much easier. You can face more risks by attempting to purchase gold on your own.
For physical gold investments, you will need to start by identifying a reputable supplier to purchase the gold jewelry, coins, or bars. Next, you will need to have a secure way to store the gold throughout your investment. Storing gold requires a secure storage facility that your home safe may not qualify.
Generally, a professional-grade vault available through third-party suppliers is more secure. It also comes with around-the-clock security. Choosing the right security company can seem overwhelming without assistance from someone well-versed in the industry.
Once you are ready to sell your physical gold investments, you will have to find someone interested in purchasing your assets at a reasonable rate. Some dealers are trying to find the best prices for themselves. Ensuring your gold is not being undervalued is crucial.
Many experienced companies within the gold investment industry can handle these previously mentioned tasks on your behalf. By partnering with them, you can invest in gold without the added challenges typically associated with the process. Just let them know your investment goals, and they will help deliver the most low-risk options for you to pursue.
If you are not comfortable purchasing stocks, ETFs (Exchange Trade Funds), or mutual funds, it is important to have a financial advisor guide you on the right options. There are even Robo-advisor options available through companies that automatically manage your portfolio for you. For anyone looking for additional investment opportunities as a hobby, having this support can prove risk-reducing in the long term.
Gold is a valuable commodity where demand will continue to exist over time. It offers a reliable way to diversify your portfolio and comes with various investment methods. While there is no one-size-fits-all for how you should buy gold, the benefit over the long term of having it as part of your portfolio makes it worth investing in. By understanding the gold industry and what your options are, you can better make an informed decision. With this guide, you can easily use the information provided to decide which option for investing in gold is the most convenient and lucrative one for you.