How to Invest in Gold

Date Published: 07/05/2022

If you're looking for a solid investment that's been around for thousands of years, look no further than gold. In this post, we'll cover the different types of gold investments and how they work so, you can decide which one is right for you.

1. Gold Bullion

The first way to invest in gold is through bullion. Bullion is simply gold with a minimum purity of 99.5%. The spot price of gold determines the price of this product, but sometimes you may pay a premium if you purchase it from a dealer or an online retailer instead of buying it directly from an exchange.

Bullion is your best bet if you're looking to make a long-term investment. No commissions or other fees are associated with owning this type of investment vehicle; all that matters is how much one troy ounce costs at any given time.

2. Gold ETFs

Gold ETFs trade on the stock market, so if you're looking for an easy way to invest in gold, this is a good option. Gold ETFs sell under ticker names such as GLD (SPDR Gold Shares) and IAU (iShares Gold Trust).

The benefit of investing in gold ETFs is that they are more liquid than physical bullion, which means it's easier to sell them at any time without having to wait for someone who wants to buy gold bullion from you. However, Gold ETFs often come with management fees that will degrade your investment return. Be sure to read the fine print before investing in these.

3. Gold Futures

Gold futures are a way to buy and sell gold for future delivery. They allow you to buy or sell a specific amount of gold at an agreed-upon price in the future. This makes them very similar to options, except they trade on the futures market rather than the stock exchange.

A futures contract is a legally binding agreement to deliver gold or silver at an agreed-upon price in the future. An exchange standardizes these contracts as to the quantity, quality, time, and place of delivery (as well as other details). You can buy and sell gold futures contracts just like any other financial instrument—you'll need a broker licensed by your state regulator or federal agency such as FINRA (Financial Industry Regulatory Authority)

4. Mining Stocks

Mining stocks are risky and can plummet during periods of low gold prices. However, when gold prices rise rapidly, mining stocks tend to rise even faster. This is because miners have to build mines, maintain them, and pay employees while waiting to sell the gold they've extracted from the ground.

When you buy shares in a gold miner, it means you're buying into their business model: A company will extract precious metals from the earth, convert them into shiny bars or coins, sell those bars/coins for money—and then hopefully repeat that process over again with more success than failure each time around. To make money from investing in mining companies, you need two things: spot prices above costs (which aren't always easy) and good management teams who know how to run mines and turn profits on an ongoing basis (which may require some luck).

Conclusion

Gold is an excellent investment for those who want to protect their wealth and increase their returns over the long term. But before you invest in gold, make sure you understand what kind of investment it is, how much risk it requires, and whether or not it's right for your financial goals.