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Ways to Invest in Gold

These are the 10 best ways to invest in gold in 2018 and beyond!


Whether you are a seasoned, professional trader, or just opened up your first saving accounts, you should always be on the lookout for the best ways to invest your money. When it comes to value storage and assets, none beat out the king of precious metals, gold. Shiny and sleek, the value of gold always moves steadily, and has the least fluctuations when compared to other types of assets. It protects you against global uncertain, inflation, and currency debasement. Even though the gold market is subjected to volatility and speculation, it is still the best possible way to store value.

Investors see gold as not only an excellent way to store value, and as a way to diversify their portfolio. For starters, it is important to avoid buying gold at a premium so as to store as much value as possible out of your investment. Another tip is that many investors buy in monthly to average out the price and mitigate risks associated with the fluctuation of prices. Many managers would suggest storage of 3-10 percent in gold. On the other hand though, you will find many investors allocate gold investment up to 20 percent. In this article, we will list ten different ways to invest in gold, so you can make the most out of your investment!

Gold Jewelery

Jewelry is one of the most popular ways to invest in gold. Jewelry, in itself, accounts to half of the world’s gold usage. You can get diverse gold purity, ranging from 10 to 24 karat depending on the ratio of other precious material used in the jewelry.

However, before you buy jewelry, you need to understand how much karat you are buying along with your gold. You also need to understand the durability and price for the jewelry you are buying. Ensuring that the gold jewelry you are buying is authentic is vital to long term returns on your purchase. Just make sure to have a safe place in mind for storage!

Gold Receipts

Another easy way to buy gold is to get gold receipts. So, how does it work? Let's say you bought gold bullion (99.5 percent purity) from a merchant. Instead of giving you the gold, he can give you a verified gold certificate that is redeemable in the future. The benefit of this to you? You don't have to take care of the gold physically, or worry about misplacing it.

Merchants, on the other hand, can issue out more gold receipts than the gold reserves have. This is possible only because not everyone will liquidate their gold receipts for actual gold.

Forward Contract—Derivatives

Now that you have understood what gold receipts are, it's time to learn about derivatives. The derivative market works by issuing gold contracts, and promises to pay the bearer in gold sometime in future. Instead of being able to demand gold from your gold receipts, derivatives ensure that you obtain a forward contract that promises you a certain amount of gold at the today’s price. Each contract is unique in its own way, and is completely customizable according to terms put on by the seller and the buyer because they are traded over-the-counter (OTC).

Futures Contracts—Derivatives

Future contracts are a branch of derivatives. It is similar to the forward contract; but instead, the future contracts are traded on an exchange, and the terms and conditions are pre-determined. This provides more security for a futures contract compared to a forward contract.

Call Options—Derivatives

Call options are entirely different from the forward and futures contracts. Both in a futures and a forward contract, the buyer has the option to buy gold in the future. In the call options, the owner maintains the right to own gold, but does not have the obligation of buying it. This means that a call option will only be executed if the price of gold is favorable to the owner. If it is not desirable, it is left to expire.

In short, you invest a premium in the hope of making a profit. If it doesn’t happen, you will lose the premium and the deposit.

ETFs

As an investor, a good way to get started is by purchasing ETFs, and if you're looking to invest in gold, you're in luck. At the time of composing this article, 33 ETFs allow you to invest in gold. Some of the most popular ETFs include GLD, DUST, and the AGOL or SPDR Trusts.

Gold ETF can be bought online. So, what exactly is a gold ETF? Gold ETF is an open-ended mutual fund. It collects the money from investors and then later invests it in gold that has 99.5 percent purity. So, once you decide to buy gold ETF, that said amount of gold will be purchased and added to the repository. But be warned: As an investor, you will not be receiving gold at all; and on top of that, the funds charge anywhere between 0.5 to 1.2 percent per annum.

Closed-End Funds

Now, that we discussed open-ended funds such as ETF, it is now time to read about closed-end funds. Closed-end funds work differently than open-end. The first difference you will notice is the fees associated with it. They are 1-2 percent higher compared to ETFs or mutual funds. The second difference is how they function. These closed-end funds trade gold at either a premium or a discount. As an investor, you can buy closed-end funds if you think the price is going to go higher.

Gold Coins

Gold coins are yet another way to invest in gold. They offer an easy way to store value compared to jewelry. Presently, 500,000 gold coins were sold by the United States' Mint.

Gold coins are also available from different authorized dealers; including, banks, brokerage companies, wholesalers, and others.

If you are looking for the best option, then my recommendation is acquiring liquid, one-ounce coins from American Eagles, Canadian Maples, and Krugerrands.

Single Stocks

Stocks have massive range in the financial world, and an investor can buy into gold indirectly through gold-mining companies. These gold companies offer stocks which you can buy. However, this is a risky option, as there is additional volatility when this type of work comes into play.

This way of investing in gold is only recommended to those who know what they are doing, especially traders or seasoned investors. It is always a good idea to invest in gold-mining companies that have strong portfolios and production levels. You should also look out for added caveats in these companies such as good inventory support and management. The price of a single stock can be leveraged at 3:1 upside up or upside down to the price of gold.

Gold ETNs

Another way to invest in gold is gold ETN’s. It is a high-risk investment where you, as an investor, pay a bank money to invest in gold. After maturity, banks pay you back based on the performance of the asset.

Gold ETN’s are similar to the futures market. The only difference here is that you don’t have to buy contracts. Also, ETNs are more flexible and provide the investor a way to trade both short and long-term. ETNs are high risk, and the possibility of losing all your money is real because there is no principal protection. Some of the more popular ETNs include DN Gold Short ETN, UBS Bloomberg CMCI Gold ETN, and so on.