Investing in bullion and coins
In practice, there are two types of gold you can physically own: bullion and coins. Gold bullion is a bar of pure gold, while coins have government-backed face values. Either way, the price of gold is always quoted in troy ounces (1 troy ounce = 31.103 grams).
Both coins and bullion are considered to be a physical asset that you can hold onto—as opposed to holding paper assets like stocks or mutual funds which are only holdings on paper. Bullion or coins are considered tangible assets because they’re worth something intrinsically; even if the entire financial system collapsed, their value wouldn’t go away.
In addition to being intrinsic assets, they’re also known as hard assets. This means they’re not easily affected by inflation or deflation; their prices will not fluctuate wildly with market movements like those of stocks or bonds. A good way to think about it: if the stock market tanks tomorrow morning, investors will panic and sell their shares; bond investors will sell too since no one wants low-yield bonds when yields are falling all over.
Buying stock in mining companies
A good option is to invest in stock in a gold mining company. But be warned: not all gold stocks are high-quality investments. As with any investment, it is important to do your homework and make sure you understand how the company does business and if their current share price accurately represents its value.
It’s worth noting that investing in gold stocks can be a higher-risk, higher-reward strategy than investing directly in physical gold or ETFs. Gold mining companies‘ operations are subject to various operating costs and the price of gold, so investing directly in the production of the precious metal means you’re also exposed to many of the same headwinds as miners themselves. However, if you’ve got an appetite for risk, choosing relatively safer companies can provide significant growth over time.
Investing in gold ETFs
Investing in gold ETFs (exchange-traded funds) is another way to experience the benefits of investing in gold without actually owning physical coins or bars. These are traded like stocks on major exchanges. You can buy and sell them at any time throughout the trading day. Gold ETFs are often a popular choice for investors looking to take advantage of gold’s market value without having to physically own it.
As with gold mining stocks, there’s no need to worry about theft, insurance, or storage costs when you choose an ETF as your investment vehicle. To invest in an ETF, you only need to open a brokerage account online with a company that offers them. The popular SPDR Gold Shares ETF is one example of a top-tier option for those looking for an easy entry point into the world of gold investments.
Investing in gold futures
Futures are contracts in which you agree to buy or sell some amount of a product on a specific date at a set price. Futures are often used by companies who need to lock in prices for products they will be buying and selling in the future (thus the name). Suppose you’re a farmer who grows beans and your main customer is a bean manufacturer. You can guarantee yourself steady income by entering into futures contracts with the manufacturer, which specify that you’ll sell them X bushels of beans at price Y on date Z. That way, even if prices drop, you’ll have locked in an income stream when your beans are sold.
There are also financial futures, whose subject matter is not physical goods but currency exchanges and assets like stocks and bonds. In gold futures trading, you don’t actually trade gold itself—you trade contracts that state the future value of gold. The idea behind it is pretty much the same as with any other kind of futures contract: you want to lock in the cost of something now so that you know what it will be later when it comes time to buy or sell.
There are many ways to invest in gold, but not all of them are safe.
There are many ways to invest in gold. You could buy jewelry and sell it at a profit later. You could also hoard gold coins and bars for the same purpose. The best way is to purchase stocks of companies that mine gold, like Newmont Goldcorp, Agnico Eagle Mines, or Kinross Gold Corp., as well as exchange-traded funds (ETFs) such as the SPDR Gold Trust ETF. A simpler option is to purchase shares in an investment company that will do this research for you and make decisions on your behalf.
In times of economic uncertainty—such as now—gold has proven to be a good investment because it holds its buying power better than other asset classes over time.
