Investing in gold has been a popular and profitable investment for centuries. Gold is known for its stability and long-term potential, making it an attractive asset to own in a portfolio. With many options on how to invest in gold, investors can tailor their investments to pursue the goals they have set out for themselves.
From physical gold purchases to exchange-traded funds (ETFs) or stock options, there are many options as to how to invest in gold and take advantage of its potential benefits. This article will provide an overview of the different ways you can buy physical gold so that investors can decide which one is best for you.
Invest in Gold Jewelry
One of the most common and traditional ways to invest in gold is through purchasing physical items like jewelry. Gold jewelry can be purchased from various outlets, ranging from small-scale jewelers to large chain stores.
Jewelry pieces are available in multiple grades and karat sizes, allowing investors to purchase items that fit their budget and needs. Depending on the market price at the time of sale, they can also be resold for a profit.
It’s worth noting, however, that the resale of expensive gold jewelry largely has to do with the piece’s uniqueness as opposed to its gold content, so jewelry is not a preferred vehicle for serious investors.
Key Benefits of Investing in Gold Jewelry
- Low-cost entry point: Jewelry is often one of the least expensive ways to invest in gold.
- Lower minimum investment: The amount of gold in jewelry is less than 1oz, the smallest common increment of gold bullion.
- More accessible than other forms of investment – Buying gold jewelry is often easier than buying coins or ETFs as it doesn’t involve dealing with a broker.
- Established resale market – Jewelry can be sold at a profit if the market is favorable through many outlets.
- Access to unique pieces – When investing in jewelry, investors can choose pieces that fit their style and taste or make a statement. There is something to be said for an appreciating asset that can also be enjoyed.
Drawbacks of Investing in Gold Jewelry
- Lower returns: While jewelry pieces may appreciate in value, the returns are often lower than those of other forms of gold investment.
- Maintenance costs: Over time, jewelry pieces may require repairs or restoration of their original quality.
- Harder to liquidate: Depending on the item, jewelry pieces may be more difficult to liquidate than other forms of gold investments.
Invest in Gold Bullion
One of the primary reasons investors choose to invest in gold is its liquidity. Gold bullion, such as coins and bars, can be purchased from banks or dealers and is considered a good way to cash out quickly if needed.
They also offer investors the opportunity to own physical gold without worrying about storage costs. Furthermore, many governments recognize physical gold bullion as legal tender, meaning it is easy to buy and sell.
Perhaps most appealing, though, is the purity of bullion. Gold bars and coins are typically 99.99% pure gold and can offer investors the ability to purchase large quantities of gold with a small initial investment.
Plus, the high purity of gold bullion means it is easier to accurately measure and assess the value of each piece’s value and sell it for a profit.
Key Benefits of Investing in Gold Bullion
- Easy to liquidate: Bullion can be sold quickly and easily if needed.
- High purity: Bullion has a high purity level and can be easily measured and valued.
- Tax advantages: Many countries provide tax breaks for bullion purchases.
- Low-cost entry point: Bullion is an efficient way to invest in gold.
- Government recognition: Many governments recognize bullion as legal tender.
Drawbacks of Investing in Gold Bullion
- Commission rates vary: Bullion typically has higher commissions for buying and selling, and it’s important to compare multiple dealers.
- Storage costs: While bullion doesn’t require storage like jewelry, it still needs to be safely stored.
- Counterfeit items: It is essential to ensure the authenticity of any gold bullion purchased, as counterfeit pieces may have little or no value.
Invest in Gold ETFs
Another popular way to invest in gold is through exchange-traded funds (ETFs). ETFs track the market price of gold, allowing gold investors to purchase shares at a fraction of the cost of owning physical gold.
Gold mutual funds and ETFs are traded on major stock exchanges, meaning investors can buy and sell their shares quickly and easily. This makes them an excellent option for those looking to invest in gold but don’t have the time or resources to manage physical assets.
Additionally, ETFs can be sold short, allowing investors to take advantage of downward price movements.
Key Benefits of Investing in Gold ETFs
- No minimum investment: ETFs allow investors to purchase a portion of gold at any precise investment amount.
- Low maintenance: ETFs require little to no maintenance and are easy to buy and sell. There are no storage costs to worry about.
- Low commissions: ETFs trade like stocks and many brokers offer no-fee trading costs when buying or selling Gold ETFs.
- Diversification: Gold ETFs allow investors to simply diversify their portfolios without taking on the additional complication of physical gold.
- Leverage: ETFs can be used as a leveraged investment, allowing investors to take advantage of market movements. Furthermore, ETFs are marginable, allowing investors to finance purchases with a margin account if desired.
Drawbacks of Investing in Gold ETFs
- Lack of control: Investors do not have control over the physical gold when investing in ETFs.
- Tax implications: In many cases, investors may be subject to capital gains taxes or other taxes when selling ETFs.
- Market risk: Like any other investment, gold ETFs are susceptible to market risks and can result in losses.
Invest in Gold Mining Stocks
Finally, investing in gold stocks from a gold mining company is another way to benefit from the gold market. Gold mining stocks are shares of publicly traded gold mining companies that produce and mine gold.
Investing in gold mining stocks offers investors access to the potential gains of underlying company performance and rising gold prices. However, as with any stock investment, there is the potential for losses.
Investors should always do their due diligence when researching gold mining companies and stocks and be sure to understand the risks and rewards associated with such investments.
Key Benefits of Investing in Gold Mining Stocks
- Leverage: Gold mining stocks offer investors the chance to leverage potential profits from both the stock and gold. Gold mining stocks often tend to move more aggressively than the price of physical gold itself.
- Diversification: Gold mining stocks allow investors to diversify their portfolios without taking on the additional costs of physical gold.
- Tax advantages: Some countries may offer tax incentives for gold mining stock investments.
Drawbacks of Investing in Gold Mining Stocks
- Market Risk: Like any stock investment, gold mining stocks are subject to market risk and can result in losses.
- Lack of control: Gold mining stocks do not give investors the same level of control as physical gold.
- Volatility: Gold prices can be highly volatile and can lead to significant gains or losses within short periods of time.
Invest in Gold Certificates
Additionally, some institutions issue gold certificates that serve as a digital representation of the physical gold they hold. These certificates are commonly issued by banks and allow investors to purchase, store and trade large amounts of gold without having to physically handle it.
Gold certificates provide an alternative way to invest in gold without worrying about storage or security. They can be sold or traded just like any other security and allow investors to access their investments whenever needed.
While gold certificates are a convenient option for those looking to invest in large amounts of gold, they come with certain risks. Investors should always do research before investing in gold certificates and understand the associated fees and expenses. It’s also important to ensure the issuer of the certificate is reputable.
Key Benefits of Investing in Gold Certificates
- Convenience: Gold certificates offer an easy way to invest in gold without having to worry about storage or security.
- Flexibility: Gold certificates can be sold or traded just like any other security, allowing investors to access their investments whenever needed.
- Low costs: Gold certificates generally have lower associated fees and expenses than physical gold investments.
Drawbacks of Investing in Gold Certificates
- Counterparty risk: Investors are dependent on the issuer of the gold certificate to protect their investments.
- Market risks: Gold certificates are subject to market risks, which may lead to losses.
- Fees: Investors may be required to pay certain fees when investing in gold certificates, such as trading costs or storage fees.
Invest in Gold Coins
In what is one of the biggest gold investments available, some investors choose to buy gold coins directly from the mint. Gold coins are usually produced in 1 oz., half-ounce, quarter-ounce, and tenth-ounce denominations and are made with a high level of purity—typically 99.99%.
Minted gold coins tend to be more expensive than other forms of gold investment because of their quality and scarcity. They can also be more difficult to liquidate quickly than other forms of gold. However, some investors prefer coins for their rarity, collectibility, and potential numismatic value.
Key Benefits of Investing in Gold Coins
- Quality: Minted gold coins are often made with a high level of purity, ensuring investors that they are investing in high-quality gold.
- Rarity: Gold coins may have a higher numismatic value than other forms of gold investments due to their scarcity.
- Flexibility: Gold coins can be purchased for a variety of purposes, including as gifts or investments.
Drawbacks of Investing in Gold Coins
- High costs: Minted gold coins tend to be more expensive than other forms of gold investments due to their quality and scarcity.
- Liquidity issues: Gold coins can be more difficult to liquidate quickly than other forms of gold, resulting in losses if the price of gold drops.
- Counterparty risk: Some investors are dependent on the issuer of the coins to maintain their coins, resulting in counterparty risk. This is not the case for all companies.
Invest in Gold Futures
Finally, investors can choose to invest in gold futures contracts. Futures are a type of derivative that allows investors to agree to buy or sell a certain amount of gold at an agreed-upon price and date in the future.
Futures can offer investors access to leverage, which means they only need to put down a small percentage of the total contract value. However, it’s important to understand the risks associated with futures, as they can be very volatile and involve a high degree of risk.
Investors should do their research before investing in gold futures and understand the terms of the contract, including expiration dates and margin requirements.
Key Benefits Of Investing in Gold Futures
- Leverage: Investors can access leverage with futures, allowing them to control a large contract size with only a small initial investment.
- Liquidity: Gold futures are highly liquid, offering investors the opportunity to enter quickly and exit positions.
- Low costs: Investors may be able to access futures contracts with low associated fees and expenses.
Drawbacks of Investing in Gold Futures
- Volatility: Gold futures can be highly volatile, and investors may face significant losses if the price of gold moves against them.
- Counterparty risk: Investors are dependent on the counterparty to protect their investments, which can result in losses.
- Leverage: While leverage can be beneficial, it can also be risky due to the potential for large losses if the price of gold moves against them.
Investing in gold can be a smart and strategic move for savvy investors. Whether looking to buy gold coins from the mint, certificates from a financial institution, or futures contracts through an exchange, investors should understand the benefits and drawbacks of each option before making a decision.
With careful planning and research, investors can ensure they are well-positioned to take advantage of the potential opportunities offered by gold investments.
Expert Tips for Investing in Gold
Now that you know the most common methods of investing in gold, here are some expert tips to maximize your return on this precious metal.
Diversify Your Holdings
Don’t put all of your eggs in one basket. Investing in various forms of gold, such as coins, bars, and ETFs, allows you to spread out the risk across different areas.
It’s easy to want to invest in one specific area, but diversifying your holdings can help reduce the risk associated with any one investment. Plus, it can provide you with more potential opportunities for returns.
Gold is a long-term investment. Often, new gold investors get in a hurry to make big returns right away. But this isn’t the ideal approach, especially for a conservative investment such as gold. Instead, take your time and be patient as you learn about gold investments and understand any specific risks and rewards associated with each option.
Do Your Research
Before investing in any form of gold, do your research on the particular product or company you are looking at. Understand the risks associated with the investment and ensure you have the correct information before investing.
Invest with a Plan
Before investing in gold, it’s important to set an investment strategy and timeframe for when you want to invest. This will help keep your investments on track, as well as prevent impulse decisions that can be costly.
Be Aware of Market Volatility
Gold prices can be very volatile. Make sure you are aware of market trends and pay attention to supply and demand levels, so you don’t get caught off guard if the price drops suddenly.
By taking the time to understand how to invest in gold and following these expert tips, you can ensure that your investment strategy is sound and that you are well-positioned to maximize returns over the long run.
Final Thought on Investing in Gold
The final takeaway is that gold can be a profitable investment if you do your homework and understand the risks associated with investing. With careful planning and research, investors can position themselves to take advantage of the potential opportunities that gold investments offer.
Josh is a financial expert with over 15 years of experience on Wall Street as a senior market strategist and trader. His career has spanned from working on the New York Stock Exchange floor to investment management and portfolio trading at Citibank, Chicago Trading Company, and Flow Traders.
Josh graduated from Cornell University with a degree from the Dyson School of Applied Economics & Management at the SC Johnson College of Business. He has held multiple professional licenses during his career, including FINRA Series 3, 7, 24, 55, Nasdaq OMX, Xetra & Eurex (German), and SIX (Swiss) trading licenses. Josh served as a senior trader and strategist, business partner, and head of futures in his former roles on Wall Street.
Josh's work and authoritative advice have appeared in major publications like Nasdaq, Forbes, The Sun, Yahoo! Finance, CBS News, Fortune, The Street, MSN Money, and Go Banking Rates. Josh currently holds areas of expertise in investing, wealth management, capital markets, taxes, real estate, cryptocurrencies, and personal finance.
Josh currently runs a wealth management business and investment firm. Additionally, he is the founder and CEO of Top Dollar, where he teaches others how to build 6-figure passive income with smart money strategies that he uses professionally.