Mutual funds and ETFs are generally the easiest and safest way to invest in gold. Each share of these securities represents a fixed amount of gold, and you can easily buy or sell these funds in your brokerage or retirement account. Of all the ways to invest in gold, trading in futures or options contracts, a form of speculative investment, is the riskiest. Futures and options are derivatives, meaning that their value depends solely on the price of an underlying asset.
Gold bars have no artistic value, which distinguishes them from jewelry or numismatic coins. To buy gold bars, you must pay a premium on the price of gold, which can range from 3 to 10%. You must also use a safe or safe deposit box to store it. You can buy physical gold online, at a jewelry store, or at another gold store.
To invest in futures or options, you’ll need an account with an online broker that offers these vehicles. Investing in stocks of companies that mine, refine, and trade gold is a much easier matter than buying physical gold. You may want to trade in bars rather than coins, as you’re likely to pay a price for the collector value of a coin and not just its gold content. This is in contrast to owners of a company (such as a gold mining company), where the company can produce more gold and therefore more profit, which drives up investments in that company.
You can also choose to buy gold that you can wear or that someone has worn once but was damaged, in the form of gold jewelry. Many online brokers allow you to trade these securities but may require account holders to sign additional forms confirming the risk of investing in these derivatives. This makes gold ETFs and mutual funds the safest bet for most investors looking to add some stability and sparkle to their portfolios. When it comes to physical gold, you’ll usually be dealing with dealers outside of traditional brokerage firms, and you’ll likely need to pay for storage and take out insurance for your investment.
Depending on your own preferences and risk tolerance, you can choose whether to invest in physical gold, gold stocks, gold ETFs and investment funds, or speculative futures and options contracts. Instead of holding a liquidity position, you could buy gold when you expect a recession, geopolitical uncertainty, inflation, or a currency depreciation. The investment information contained in this table is for informational and general educational purposes only and should not be construed as investment or financial advice. Dock David Treece is a former licensed investment advisor and a member of the FINRA Small Firm Advisory Board.
If you choose to invest in gold along with gold bars, it’s also a good idea to stay up to date on the price of gold so you can choose the right time to buy. Most retailers update their prices based on current spot prices. However, jewelry tends to be more valuable to the wearer than an investment, as the precious metal is converted into jewelry and then sold at retail.
