Physical investors in gold are generally looking for items with a fine of 0.999.Several products fit this description, and one of the most preferred are gold bullion coins, such as the South African Krugerrand or the American Gold Eagle. Another option is gold rounds, which are similar to coins but are not legal tender. Of all the ways to invest in gold, the riskiest is to trade futures or options contracts, a form of speculative investment. Futures and options are derivatives, meaning that their value is based entirely on the price of an underlying asset.
There are many ways to invest in gold. You can buy physical gold in the form of jewelry, ingots and coins; buy shares in a gold mining company or other gold-related investment; or buy something whose value derives from gold. Each method has its advantages and disadvantages. This can make it overwhelming for beginning investors to learn how best to expose themselves to this precious metal.
Gold exchange-traded funds (ETFs) and mutual funds are accounts that buy gold on behalf of an investor. Each of the shares that make up these funds represents a fixed amount of gold and can be bought and sold as stocks. This is one of the best ways to invest in gold, as ETFs and mutual funds allow investors to work with gold without having to face the costs of physical property (such as securities or gold insurance). There are fees associated with buying and selling gold through ETFs or mutual funds, but they tend to be much lower compared to managing other assets.
Gold bars come in bars ranging from a few grams to 400 ounces, but are usually available in one- and 10-ounce bars. Another way to take advantage of rising gold prices is to own the mining companies that produce the material. Both futures and options on gold are considered to be volatile, making them more difficult to access and manage compared to other forms of investing in gold. Contracts move with the underlying price of gold or the shares of gold-related stocks, exposing the investor to gold without owning the underlying investment.
Due to the high price of gold bars, it is especially important to go to an accredited dealer and pay for delivery with insurance or to fork out for storage in a large vault or safe. Each contract represents a certain amount of gold and, depending on the specifications, can be paid in dollars or in physical gold. Since this means buying stocks from gold mining companies, you can invest using your brokerage account. The ingot is pure gold (99.5% to 99.9%) formed in bars or ingots, usually rectangular in shape that allow easier storage.
The various types of gold investments listed above can serve as a starting point for beginners interested in learning how to invest in gold. The biggest advantage of using futures to invest in gold is the immense amount of leverage you can use. Meanwhile, gold transmission and royalty companies provide capital to gold miners to develop and expand mines. When most people think of investing in gold, ingots are what they think of big, shiny gold bars encased in a vault.
The dollar and the desire of investors to keep gold as a hedge against inflation or currency devaluation help boost its price. As paper coins were developed, banknotes were designed to correspond to a specific amount of gold. Just remember that, like gold stocks, you don't buy gold, only paper that is theoretically backed by the debt or equity of mining companies or physical ingot futures and options contracts. In addition, gold bars can be a difficult asset to buy and sell, since you must identify buyers willing to buy at any bar of the size you have the asset in which you have the asset.