The gold markets beckon investors. And it’s not for nought – the royal metal is a secure way to stay afloat during inflation, when the world’s currencies lose their value. Top advisors advocate for commodities in any portfolio, because they decrease risks.
An individual can invest either directly or indirectly (or both) in gold, in numerous ways, from buying gold earrings to funding mining companies. Of course, all opportunities vary in value and won’t pay out the same.
Let’s start with bullion.
Gold bullion is actual, physical gold. It is any form of pure gold, be it coins, bars or whatever. Large gold bars are quite a challenge for their owner. Firstly, if all your funds are limited to a piece of gold of a large size, your holding is unlikely to produce regular payments. That is, unless you chop off a piece and sell it. Secondly, it’s difficult to find a buyer.
Gold bullion is a headache in terms of storage and insurance. Also, being a direct investment, gold bullion is affected by the dollar. Once the dollar loses its value, so does gold bullion.
Gold coins are much more liquid. In addition to their small size, they are easy to buy. Prices are showcased and available to everyone who is interested. Coins are typically bought through a dealer who earns a commission from each purchase. Don’t chase after rare coins as your possible circle of customers will be limited to collectors only. Instead, concentrate on those in circulation. They are plenty to choose from.
Gold ETFs (exchange-traded funds) are yet another option. Exchange-traded funds are traded just like stocks. Buying into a gold ETF, an investor is entitled to a fixed gold share. This is far more convenient and cheaper than owning a bar of physical gold. Moreover, ETFs don’t charge you sky-high commissions and fees.
Mutual funds are not so cost-effective and often include a variety of other commodities. Still, there are mutual funds that focus entirely on gold. As a rule, they boast low initial investment requirements. Gold-oriented mutual funds operate in different ways. Some of them buy into mining businesses indices, whereas others follow gold prices. Generally, ETFs and mutual funds are extremely good for novice gold investors. They are safe, easy and accessible.
Gold futures and options allow you to agree on a fixed price at which you’ll buy a set amount of gold in future. Futures are good for sophisticated investors. You can buy a large amount of gold with a low commission and with small margin requirements. In the case of gold options investors pay a premium derived from an underlying asset value.
Although gold futures considered quite volatile, they are the most cost-effective way to acquire a large quantity of gold.
Gold mining companies detect and extract gold from underground. There are plenty of experienced investors who put their money in these businesses. But even if such methods may seem totally safe and secure, take them seriously and do preliminary research.
The lion’s share of the world’s gold production accounts for jewellery. Yes, this way of holding gold may be not as profitable as investing. Still, having a gold bracelet or a necklace makes you a gold owner. However, buying jewellery at retail has one substantial downside. Generally, you will have to meet a markup margin and overpay significantly.
What It’s All About
Willingness to invest in gold is not enough. Start with considering all the available options and choose the most suitable for you before jumping into the world of gold. Some prefer to own physical gold; some feel more comfortable and secure holding the royal metal on paper.
From bullion to gold futures, from gold ETFs and mutual funds to mining companies, the choices are plentiful and the choice is up to you.